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

Published on Jan 17, 2022

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

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