When SaaS companies go through layoffs recruiting teams are usually among the first to get cut. Operationally—and objectively—this makes sense if hiring slows down or stops altogether.
That said, it’s easy to think that instead of laying recruiters off, moving them into sales, marketing, and other revenue-supporting roles is a better/smarter move for the business. But due to market dynamics, this doesn’t make any sense from a business perspective.
Often in market downturns, SaaS companies find themselves in a situation where their existing customer's budgets shrink. As a result, Saas businesses experience user seat contraction instead of the relied-upon key account expansion that usually provides a predictable increase in annual revenue. At the same time, net new sales are also decreasing due to overall budget restrictions in the market.
Meanwhile, their cost to acquire a new customer (CAC) stays the same.
How this translates into less money: It costs these businesses the same amount to acquire a new customer while revenue is rapidly decreasing. For example, CAC paybacks (the time it takes to break even on acquiring a new customer) that used to be 18 months are now 60 months.
When this happens, tech companies commonly chop away at their CAC by laying off large swaths of their sales, marketing, and other revenue-supporting teams.
Bottom line: You can’t move people (recruiters in this case) to a department that largely doesn’t exist anymore.
Cutting expenses allows the company to live another day. Moving people around keeps expenses the same. (Not to mention the internal costs of retraining, onboarding, ramping, and team culture adaption for these existing employees.)
This is where agreeable ideas on LinkedIn quickly diverge from boots-on-the-ground operational decision-making.
Look, you don’t have to like layoffs. Hell, you don’t have to like the reality of this post. FTR, I hate that people lose their jobs when the market turns. Regardless of personal feelings, we have to remain objective and stop throwing out baseless ideas that clearly show no understanding of how markets and businesses are intimately connected.
Note: What I’m describing is not the case with every SaaS company. And static CAC + less revenue is not the only factor causing layoffs in SaaS. But it’s certainly one of them.
If you want to promote an idea or opinion about layoffs, please do your research to understand why this stuff happens. Context is everything. And from what I’m seeing on LinkedIn, very few people are willing to do the work to learn why these events occur.