Do sales hiring sprees end in cuts?

Hiring a lot of salespeople fast is the default move after a raise, and the fear is that it ends in layoffs. At software and IT companies it mostly did not. Of 4,514 companies that grew their sales team by 50% or more in a year, 28.7% had cut that team by a fifth or more within the next 18 months. More than half, 51.8%, still had a sales team at least 10% larger than at the end of the spree.

Companies that grew sales steadily cut at least as often. In a matched comparison, 29.1% of spree companies and 31.6% of similar steady growers made a cut that size.

What we measured

We rebuilt quarterly headcount for every company in Kenso's internal data from the start and end dates of people's roles. Salespeople include SDRs, account executives, account managers, sales leaders, sales engineers and sales operations, but not customer success or interns. The data covers people who live in the US, the UK, Canada, Australia, Ireland and New Zealand, so every headcount here means staff in those six countries.

A spree is the first time a company's sales team was at least 50% larger than a year earlier, with at least 5 people at the start and at least 10 at the end. We kept spree years ending from 2017 Q1 to 2024 Q3, so every spree has a full 18 months of history by 2026 Q1, the last complete quarter. A cut is a sales team 20% or more below its size at the end of the spree year, at any quarter end in the next 18 months.

Most spree teams were bigger 18 months later

Cuts built up steadily after the spree: 10.0% of spree companies had made one within 6 months, 20.4% within 12 and 28.7% within 18. At the 18-month mark, 51.8% were growing (a team at least 10% larger than at the end of the spree), 19.0% were flat and 29.2% had shrunk by 10% or more. The median spree company had 10% more salespeople than at the end of its spree.

Steady growers cut at least as often

Fast growth tends to slow down on its own, so we matched each spree company with up to three companies from the same quarter, industry and age band, with about the same headcount and sales team at the start of the spree year and similar growth in the year before, whose sales team grew only 10% to 30% that year. 3,446 sprees found matches among 4,356 steady growers.

Against them, sprees look slightly better, not worse. 50.3% of matched spree companies were still growing their sales team 18 months later, against 43.5% of steady growers, and 30.0% had shrunk, against 37.6%. The cut rate was 2.5 points lower for sprees (95% interval 0.7 to 4.4 points lower).

Part of that edge is team size: steady growers ended the year with smaller teams, where a couple of departures make a 20% cut. Matched on team size at the end of the spree year instead, the cut rates were 28.0% and 27.5%. No edge for sprees, and no penalty either.

Spree teams lose more people, and hire more

Spree teams did lose people faster. Of the people in sales at the end of the spree year, 66.4% were still at the company 18 months later, against 70.7% at matched steady growers. But spree companies kept hiring. For every person on the sales team at the end of the spree, they added 0.60 people to it over the next 18 months, against 0.42 at steady growers.

The extra hiring went to account executives and account managers. AE headcount grew 27.9% at spree companies against 13.2% at steady growers, and account managers 20.7% against 8.4%. SDR and BDR teams grew about the same at both, 37.8% and 37.1%.

Timing mattered more than the spree

The market set the cut rate. 37.0% of the sprees that ended in 2022, whose next 18 months ran into the downturn, were followed by a cut, against 25.6% of those that ended in 2017 to 2019. Steady growers in the same quarters cut about as often: 36.1% of matched 2022 sprees against 35.9% of their steady growers.

Bigger sprees cut a little more. Sprees of 50% to 74% were followed by a cut 26.5% of the time, sprees of 75% to 99% 30.3%, and sprees that doubled the team or more 32.1%.

Small teams swing most. Companies that started the spree year with 5 to 9 salespeople cut 31.2% of the time, those with 10 to 24 cut 18.1%, and those with 25 or more 11.2%.

A recorded raise made no clear difference. US sprees that followed an SEC Form D filing, a record of a private raise, cut 30.3% of the time, against 28.0% for other US sprees, on only 165 raise-backed sprees.

What we expected

We wrote down seven predictions before reading any data. The main one, that sprees would end in cuts at least 5 points more often than steady growth, was wrong. So were the predictions that most sprees would stall and that sales growth would lag. Three held: the cut rate rose with spree size, sprees after a recorded raise cut more often (on few cases), and sprees ending in 2022 cut most.

What this data cannot show

• Cause. Spree companies were already different. In the year from three to two years before the end of the spree year, which the matching did not cover, they grew their sales teams 6.2% faster than their matched steady growers. A spree marks a fast-growing kind of company as much as a hiring decision. Matching on that earlier year too, a check we added after seeing the first results, leaves the picture the same: cuts at 29.3% against 29.9%, still growing 48.1% against 42.4%.
• Other industries. Across all industries, spree companies cut 1.7 points more often than matched steady growers (28.0% against 26.3%). The result is specific to software and IT.
• Six countries only. Sales jobs moved abroad look like cuts.
• Profiles, not payroll. People add new jobs late and leave short jobs off, so recent quarters undercount hiring.
• A cut is a fall in headcount. It includes people who left and were not replaced, not only layoffs.

What it means for sales leaders

• A spree is not a layoff warning on its own. At software and IT companies, sprees were followed by cuts no more often than steady growth.
• Plan for the market, not the spree. Cuts were common for sprees and steady growers alike when the spree year ended in 2022 or later.
• Budget for replacement hiring. A third of the people on the team at the end of a spree are gone 18 months later. Holding the team's size takes continued recruiting, and growing it takes more.