When’s the right time to hire a CRO?

Jul 18, 2023 | blog

Here’s a great piece from Paul Foster at Skylan Consulting (edited). It focuses on when to hire a CRO and what to expect when you do.

MBCS specialise in working with tech companies currently with an ARR of $20m or less. According to Paul and others this is probably too early for a CRO and yet many companies are looking for the experience they could bring to scale the business. This is where we come in – we provide that experience on an interim/contract basis giving you all the benefit at a fraction of the cost.

If you’d like to find out how we could help your business scale please email Mike Bromilow at mike@mbconsultingservices.net or call on +44 (0) 7813 583844.

“Here’s the average CRO tenure in SaaS startups according to three different studies:

  • 1.9 years (Bridge Group Inc.)
  • 1.5 years (SaaSup)
  • 1.5 years (CSO Insights)

No wonder the CRO is sometimes called the ‘C-level ejection seat’. If you’ve had a CRO for most of 2022 then chances are they’ll be out the door in 2023. 

The sudden loss of a CRO hits hard. A CRO exit means the CEO or Founder filling gaps beyond their hyper-busy schedule. It can mean a six-month wait as you hire a replacement. And it sows seeds of doubt for the rest of the business about the company’s ability to meet targets.

Even worse – losing your CRO can derail fundraising rounds as VCs and PEs get cold feet. So how will you cope if your CRO quits your SaaS company in 2023? Do you go all-out to keep your CRO on board? Or could a change in mindset see a low CRO average tenure work out in your favour?

The answer depends on what stage of growth you’re in. Below, I’ll outline the top reasons why CROs quit SaaS companies, how to stop the turnover, and how to make low CRO tenure work in your favour.

Why CROs will quit your SaaS company in 2023
1. Impossible Sales Goals

If your startup is still in early growth stages ($0-$20 million ARR) then sales are unpredictable and pricing is flexible. That’s why many SaaS startups don’t even hire a CRO until ARR hits $10-$20 million ARR. Top CROs triumph on predictability. Experienced CROs probably wouldn’t go for a role in an early-stage startup, there’s too much risk and volatility discovering product-market fit and prices clients are willing to pay.

So this leaves you with three solutions to combat CROs quitting over in this scenario:
  • Don’t hire a CRO until you’re at around $10-$20M ARR
  • Don’t give high sales targets until your service, onboarding and customer success is ready for scaling and revenue predictability
  • Give your CRO the Rev Ops, sales enablement, coaching and support they need to be confident in hitting their targets

2. Goals Change of Direction

In early growth, a startup can pivot on their product or change goals. A round of VC funding might lead to new advice and new directions. 

This is great for the CEO and great for the board – but the CRO?

Maybe the CRO doesn’t believe in the product anymore. Maybe they don’t have the experience for the new product or change in strategy. Maybe they don’t like the change and don’t like the risks involved.

It’s another case of CRO low average tenure as a symptom of hiring too early.

There are a few things to do:

  • Again, don’t hire a CRO until you’re at around $10M-$20M ARR
  • Understand your CRO’s motivations and experience so you can act before a sudden exit

3. Headhunted

Contrary to popular belief, CROs aren’t headhunted on salary alone. 

The pressure of sales goals and changes in direction all set the stage for a CRO exit when an opportunity comes along. Headhunters might tap into frustrations or obstacles to growth and find better opportunities for the executive.

But still, having a firm grasp of industry-standard compensation packages is important.

Here’s how much CROs earn on average according to three profiles:

  • Emerging CROs (SaaS startups with <$20M ARR) – $340K/£285K OTE and 1.9% equity stake
  • Commercial CROs (SaaS companies with $20-$250M ARR) – $400K/£335k OTE and 1.3% equity stake
  • Enterprise CROs (publicly-traded SaaS companies with $250M+ ARR) – $445K/£370k OTE and 0.6% equity stake

There’s usually a 55%-45% ratio of base Salary-to-OTE.

Change your growth mindset – make CRO turnover work in your favour

Given what we’ve discussed, are you surprised to know that commercial CROs have a longer average tenure (2.2 years) than emerging CROs (1.5 years)?

CROs are strategic leaders brought in when it’s time to scale. Until your SaaS has reached a stage where you can predict revenue targets, it’s probably too early to hire a CRO. If you do hire a CRO in early growth stages then there’s opportunity for upsets.

That said, there are situations when bringing a CRO in earlier can help:
  • Fast growth – if you’re growing ARR at 150% or above, you might need a CRO’s help ASAP
  • Specialisation – if you’ve a need already for a VP of sales, a VP of accounts and a VP of customer success, you might need a CRO’s help to manage them all
  • Veterans – CROs typically graduate after having 6-10 years’ experience at the senior sales level (VPs, SVPs, CxOs) so if you have a big hitter who wants to move up, you can carve out a role for them as CRO before they get poached
CROs come with different expertise, which can help you if you think about SaaS growth in stages:
  • $0-$10M ARR – You probably don’t need a CRO yet. But if you’re growing fast or need to manage VPs effectively, hire a CRO with the experience or hunger to get you to $20 million ARR.
  • $20-$100M ARR – Now you need predictability and repeatability. If you already have a CRO, they may not be experienced at this level. So you either hire your first CRO or look to hire a new one. Going from $0 to $20 million ARR is nothing like going from $20 million to $50 million or $100 million. Most top CROs don’t want the risk and experimentation of ‘startup life’ so there’s a divide in the skillset between CROs operating at this level, and those with no experience or specialised in early growth phases.
  • $100M+ ARR – You can’t afford to hire a CRO who doesn’t know how to manage senior leadership, run a tight ship, and hit growth targets. CROs at this level don’t like the risk of earlier stages, and CROs without prior experience might struggle to hit sales goals.
Between each stage – and up to $250M ARR and over – there are sub stages. While it makes sense to promote a VP of sales to CRO at the early stages, it would make sense to hire a new CRO when the goals change. So be prepared for that.

The best way to cope with a CRO quitting is to map these stages out in your mind in advance. Your needs are going to change, so be clear in your mind about the most likely – and ideal – average tenure of your CRO.

If you’d like to find out how we could help your business scale please email Mike Bromilow at mike@mbconsultingservices.net or call on +44 (0) 7813 583844.