benchmarking Rippling's product market fit

Good morning Predictable Revenue community,

tl;dr

• Matt Plank’s (CRO @ Rippling) talk at SaaStr gave me the idea of using their sales development efficiency numbers as a benchmark for their product market fit

• 50% of their revenue has come from outbound and they’re forecasting 60% for the future

• If my assumptions are correct, Rippling gets 138% more revenue from a BDR than Outreach and a large part of that is stronger product market fit

I attended SaaStr this week and wanted to share some observations from my favourite talk. Sam Blond (former CRO at Brex) interviewed Matt Plank (CRO at Rippling) about Rippling’s early growth and what they’re doing now. The two comments that stood out for me were “outbound produces 50% of our revenue today and we’re forecasting it to be 60% moving forward” and “programmatic outbound produced a .5% - 1% conversion to meeting”. It was refreshing to hear when it feels like everyone has been dunking on outbound for the past few years. The second stat blew me away, they’re hitting conversion rates for programmatic emails that we were seeing 10 years ago. Given the publicly shared data on their growth, I thought that calculating their sales efficiency and comparing it to another company's could serve as a proxy for measuring the strength of their product-market fit. What follows is my attempt to do just that. I’ll use Outreach as a comparable because I know the company well enough to say they have a very strong sales organization. 

Some context before we dig in. Rippling sells tools for HR managers, they have a broad platform and offer over 30 different individual products. A large percentage of their deals are small to medium dollars and tend to be a fast moving sale. The market they sell into is quite large, most HR managers will find something that Rippling can help them with. As a comparable, Outreach sells to sales teams which is an equally large market, their platform is a little more focused than Rippling’s, and their deal sizes are likely similar from what I can tell. This is not an ad for either, I just thought the context was important before we look at their outbound strategy.

Outreach’s Outbound

I’ve interviewed 4 sales leaders from Outreach over the past few years and most were focused on outbound. Outreach followed a similar path from programmatic to personalized sales development and while there are differences their processes and team quality are similar enough to act as a comparable. Check out this interview with Steve Ross for more. 

Rippling’s Outbound

Rippling has used two different styles of outbound, programmatic and personalized. They started outbound around 2017 with programmatic outbound, where marketing was writing the email templates, orchestrating the sends, and an inbound rep was handling the replies. This is the playbook Parker used at Zenefits so effectively so it’s not that surprising. What was surprising was that it was generating a 0.5% to 1% conversion rate to a meeting as late as 2022. These are numbers that teams with SDRs personalizing each email are achieving and Rippling is doing it with fully automated emails. 

How?

The next question that came to mind was “how are they getting such great meeting booking rates”? There are three possible explanations, the market is huge, their team is incredible, or they have incredibly strong product market fit. I’ll use the 

Huge Market Hypothesis 

Most companies won’t be able to replicate Rippling’s results because they aren’t selling into a market that’s big enough to support an email campaign of this size. Matt shared that they relied on programmatic outbound for 50% of their growth since founding. There are hundreds of thousands of HR leaders that could be targets, depending on how they define their ICP. 

In 2020, they were close to $36m and in 2024 they were reported to have $350m. I’m going to assume their current average customer value is $30k / year because they reported 2000 customers on $36m in the first article ($18k ACV) and they’ve nearly doubled the number of features on their platform since then. This means that leading up to 2020, outbound had brought them 1000 paying customers. I’m also going to assume a higher than normal close rate (33%) because of the low price (compared to incumbents) and the general excitement behind any company Parker seems to start in the space. 

To create 1k customers Rippling needed to contact 606k people to book 6k meetings, to create 3k opps, which turned into 1k customers (check my math here). Matt called out that in 2022, they realized they couldn’t continue on this path because they were running out of accounts to reach out to. While growth using programmatic outbound is only possible in a big market like this, having a big enough market does not mean you’ll get it is not clear that it is the reason they were getting strong conversion rates. 

Their Team is Incredible 

While I don’t personally know Matt, I have had the pleasure to interview 3 people that worked at Zenefits in the early days and I can say with confidence that they were all top tier sales people and leaders. You shouldn’t take my word for it so we’ll use their response to the growth roadblock in 2022 as a proxy for team quality. A low quality team would keep doing more of the same and get worse results whereas a high quality team would find a way to push through and make it better. 

In 2022, realizing their programmatic outbound weapon wouldn’t be able to continue driving the growth they needed, Rippling hired Ashley Kelly to run their sales development rep (SDR) organization. Since being hired, Ashley has built a SDR organization with over 150 people. Keep in mind, these are not all SDRs, there will be many layers of support folks within those ranks but my rough guess is 110 SDRs and 40 management, director, and support roles. When Ashley took over the SDR team, they moved to a personalized approach, adding more human time into their process. 

The result was a much more expensive organization (estimated $20m annual cost) but an increase in effectiveness to 3-7% conversion to meeting and an SDR organization they are now forecasting to generate 60% of their $350m in revenue. It’s clear that this team is incredible at their jobs. So the question is, if this team was selling a less competitive product into the same market, would they generate the same results? While I think they deserve a lot of credit, I don’t think it’s fair to attribute all of the glory to the revenue organization. 

Incredibly Strong Product Market Fit

I can’t comment strongly on the product itself because I’m not a user, nor have I spent any time in the HR tech space. However, we can learn a little by comparing Rippling’s results to Outreach’s benchmarks. 

Sales Nerd Stats, Feel Free to Skip

Outreach.io, a company I know has a strong sales development program and strong product market fit, seems like a good comparison. Outreach expects 17 meetings a month from its SDRs which turn into 12 sales accepted leads (SAL). The average conversion from meeting to closed from an outbound opportunity was 23% in 2019 (source: salesloft study, PDF) which has likely gone down by at least 50%. This means each Outreach SDR is producing 1.38 meetings each month or 17 closed-won deals each year. The average Outreach install is around $20k so this means each SDR is producing $340k per year.  

There’s a breakdown in language here because it’s impossible to tell if Matt was using meetings booked, meetings held, or accepted into pipeline. As a CRO, I’m going to assume he only cares about the number of meetings accepted into pipeline and assume his 3-7% conversion rate meant conversion to SAL. We know that Rippling had $350m in revenue in 2023, which represented 100% year over year growth, and their growth rate has been roughly halving every year for the past 3 years. So we can assume that they are targeting $500m in revenue for 2024, which is net $150m in growth, or $90m in growth from outbound (at 60% mentioned above).  With $90m in growth from outbound, each of their 110 SDRs are producing an average $810k in revenue each year. Using my same quick math from above, that means they’ve produced 3k customers, 9k opportunities, and 18k meetings by reaching 363k customers. 

Head to Head

When we compare an SDR at each organization an Outreach SDR is producing $340k whereas a Rippling SDR is producing $810k, meaning Rippling is getting 138% more out of their SDR team. When compared head to head with a company with an equally large market, strong product market fit, and a strong sales development program, Rippling beats them by 138%. A big part of the reason must be the strength of their product market fit. 

Measuring Product Market Fit 

Sales efficiency isn't a perfect way of measuring the strength of product market fit but I do believe it is directionally correct, especially when you have good comparables. It's certainly less valuable as a measure for companies with less revenue because they won't have the sales maturity yet. The default method seems to be asking users how they'd feel if they could no longer use your product. I don't have anything against this model other than it's extra work and at scale companies don't seem to do it consistently. 

There, I did the thing and I'm happy we got there together. Thanks for reading and let me know what you think. Is this a worthwhile mechanism? Was this a total waste of time? 

Collin