How to Calculate Cost Per Hire to Keep SaaS Sales Recruiting Costs Down

Hiring top-tier talent is one of the most essential parts of running a successful SaaS company. But of course, that takes money, and often a lot of it.

To keep SaaS sales recruiting costs down, one of the first things you need to do is figure out what your average cost per hire is and where your money is going. From there, you can determine how effective your efforts are, your recruiting strengths and weaknesses, and what adjustments need to be made. 

In this post, I’ll explain exactly what cost per hire is, offer a simple formula for calculating it, and provide actionable advice for reducing SaaS sales recruiting costs. 

What is Cost Per Hire?

“Cost per hire,” simply put, “is a recruiting metric that measures the costs associated with the process of hiring new employees,” writes AIHR. There are two main types of costs involved here — internal and external. 

Internal costs can include:

  • In-house recruiter salaries, benefits, and performance bonuses
  • Referral bonuses for employees who recommend candidates
  • Interviewing expenses
  • Money spent on onboarding, training, and development
  • Administrative costs, including office equipment and software 
  • Compliance costs for ensuring laws and regulations are met

External costs can include:

  • Recruiting agency fees
  • Job advertisements (posting ads on job boards or social media)
  • Marketing expenses (SEO, social media marketing, and company branding)
  • Candidate screening costs (time spent contacting references and performing background checks)
  • Technology expenses such as an applicant tracking system
  • Job fair expenses

How Do You Calculate Cost Per Hire?

The formula is quite simple. Add up your internal recruiting costs and your external recruiting costs within a particular period (e.g. a year). Then divide it by your total number of hires during that same time period. 

Here’s what the formula looks like. 

Say, for example, you spent a total of $40,000 on recruiting, including internal and external costs, during the course of a year. If you hired 10 salespeople during that time, your cost per hire would be $4,000.

And while making calculations is pretty straightforward, gathering information on all the costs isn’t always so easy. In fact, it can be quite time-consuming, especially if there are a lot of moving parts involved with your recruiting. To streamline the process, I suggest first identifying all of your internal and external costs during a specific period of time and writing them out in two separate columns. Then, go through it one by one working with your finance and accounting team to pinpoint each cost as accurately as possible. 

From there, it’s just a matter of figuring out how many new salespeople you’ve brought on board during the same time period.

What’s the Average Cost Per Hire?

Now that you know how to calculate cost per hire, you may be asking, “How does it compare with other brands?” While there’s a lot of data out there from countless studies, the average cost per hire for SaaS companies across the board is $4,425

Keep in mind that it costs significantly more to hire someone in a higher-ranking position like a sales account manager as opposed to an entry-level salesperson. But when you crunch the numbers, it comes out to just north of $4,000. So that’s a good benchmark to shoot for. 

If your cost per hire is significantly less than that, you’re doing great and probably don’t need to make any major changes. On the other hand, if it’s significantly more than that, changes are likely in order, and you’ll want to analyze your SaaS sales recruiting process to identify inefficiencies. This brings me to my final point. 

How to Lower Your Cost Per Hire with a Sales Recruiting Platform

Let’s say your cost per hire is more than it should be. How can you lower it?

While there are numerous strategies that can help, pound for pound one of the best is using a sales recruiting platform like HireDNA. This utilizes cutting-edge technology and a proven methodology to connect with leading SaaS sales candidates and successfully hire them while dramatically streamlining the process.

Here’s how it works:

  1. Create an account and work with a talent advisor to develop an ideal candidate profile based on specific hiring criteria.
  2. HireDNA then uses intelligent matching and science-based assessments to find a pool of active and passive SaaS salespeople that possess critical core selling competencies and that match your unique hiring criteria. 
  3. Candidates are screened to narrow it down to the best of the best and ensure they’re the right fit for your company. 
  4. Qualified candidates are sent to you for approval and feedback.
  5. You then interview and hire the candidates you like best. (HireDNA even offers onboarding and training).

This provides a straightforward framework that allows you to save money by shaving off many expenses like recruiting agency fees, job advertisements, marketing costs, and candidate screening costs. And because this platform looks so closely at key data points and core selling competencies, you know for certain all candidates match your role and hiring criteria. In fact, 92% of SaaS salespeople recommended by HireDNA reach the top of their sales team within a year. 

Final Thoughts

Cost per hire is one of the most fundamental yet important metrics in SaaS sales recruiting. It tells you how much you’re spending on average to hire a salesperson and provides key insights into your strengths and weaknesses. If your cost per hire is on par with the industry benchmark of $4,425, you should be in fairly good shape. If, however, it’s considerably more than that, you’ll want to look for ways to lower it, and using a sales recruiting platform is one of the most effective ways to go about that. 

Learn more about HireDNA and book a live demo here

SaaS Sales Recruiting Stats in 2022: A Complete Bird’s-Eye View

The New Year is upon us! It’s always an exciting time for SaaS sales recruiting because there are new patterns, new trends, and new opportunities. 

In this post, I’ll share with you the latest SaaS sales recruiting stats in 2022 to guide your strategy and give you a competitive edge. Let’s jump right in. 

98% of Today’s Top Companies Use Recruiting Software

While you may not surprised that a lot of companies use recruiting software to streamline the process and find quality candidates, you probably didn’t expect it was this many. But according to recent data, nearly all of today’s Fortune 500 companies now use this technology — a stat that shows how ubiquitous and effective it is. 

Platforms like HireDNA take the guesswork out of SaaS sales recruiting, helping you attract elite candidates based on a wide range of core competencies, fill open positions faster, and reduce hiring mistakes. The key is using cutting-edge technology like intelligent matching that analyzes 20 key data points and science-based assessments to predict success. 

And with 33% less turnover, you can build a stronger, more loyal team of salespeople that are in it for the long haul.

88% of Companies Now Use AI for Recruiting

Another form of technology that’s rapidly expanding in SaaS sales recruiting is AI. Studies have found that, globally, 88% of companies are currently using it, with a staggering 100% of Chinese companies doing so. 

In terms of specific applications, some of the most common include “using chatbots to engage with candidates during recruitment (41%)” and “screening and assessing candidates during recruitment (40%).” For an in-depth list of other ways to leverage AI for recruiting, check out this resource

86% of HR Experts Say Recruitment Has Become More Like Marketing

SaaS industry growth is a bit of a double-edged sword. While it means increased opportunities and a larger customer base, it also means more competition. And with widespread talent shortages, the competition will be even more fierce in 2022. 

To keep up, 86% of HR experts say you need to approach recruitment like a marketing campaign. In other words, it’s no longer sufficient to haphazardly put out job ads and expect an overflowing pool of qualified candidates. Rather, you need to strengthen your brand and work on growing your presence across multiple mediums. 

This brings me to my next point. 

68% of Millennials, 54% of Gen-Xers, and 48% of Boomers Say They Evaluate a Prospective Employers’ Brand on Social Media

One of the main mediums in which candidates evaluate SaaS brands is social media. Over two-thirds of millennials do so, as well as many Gen-Xers and Boomers. And while this particular study doesn’t include Gen Z (candidates 24 and under), it’s safe to assume they use social media to check out prospective employers as well. 

The takeaway here is that SaaS companies need to have a strong social media presence, and it’s key for winning the competitive battle. As for the most popular social networks, here’s how that breaks down.

The main networks to focus on in 2022 are Facebook, YouTube, Instagram, and LinkedIn. 

Having a Strong Brand Image Can Reduce Your Cost-Per-Hire By as Much as 50%

Piggybacking off that, research has found having a strong brand image can dramatically lower your cost-per-hire, with some estimates being as much as 50% lower. Why?

This naturally helps you acquire higher-quality candidates and spares you a lot of recruiting expenses that SaaS brands with a poorer brand image have to deal with. If, for example, you’re an industry stand out like HubSpot, many top-tier candidates will come to you organically rather than constantly having to funnel money into recruiting. 

That’s why it pays to always look for ways to strengthen your brand image and provide a great employee and candidate experience.

Including a Video in a Job Posting Increases the Application Rate By 34%

I’m always a fan of simple recruiting techniques (hacks, if you will) that have a huge impact. If you’re looking for a straightforward way to significantly increase your application rate that doesn’t require an exorbitant amount of effort, including a video in your job posting is it. In fact, studies have found this results in a whopping 34% more applications on average. 

And that’s not surprising given the massive success of video platforms like YouTube. As of 2021, it had 1.86 billion users, and that number should only continue to increase into 2022 and beyond. 

52% of Applicants Say a Lack of Response From Employers is Their Number One Frustration 

Finally, it’s important to know the biggest sources of friction in the SaaS sales recruitment process. According to recent data, the main issue candidates have is not receiving a sufficient response from employers, with over half citing this as their main frustration

This shows the importance of being as communicative as possible throughout recruiting and not leaving candidates hanging. While you don’t necessarily need to fill them in on every last detail, it’s nice to let candidates you’re passing on know when you’ve decided to move on and keep those who’ve been shortlisted in the loop. Doing so sets the tone for a positive candidate experience and should help improve your brand equity as we discussed earlier. 

Starting 2022 Out on the Right Foot

From leveraging technology like recruiting software and AI to approaching SaaS sales recruiting like marketing to building a strong brand image to lower cost-per-hire, these stats paint a clear picture of what to expect in 2022. By making the right adjustments and focusing on core objectives, your SaaS company can start out on the right foot in the New Year. 

Want to learn more about how HireDNA can optimize your sales recruiting? Get the full details and see how 92% of recommended candidates reach the top of their sales force after working with HireDNA.