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Help
Salespeople Be More Productive, Sell More,
and Cost Management Less - Part 1 of 2
Managing and growing a sales team is
expensive. In a market where base salaries range
from $50,000 to $120,000 per year (plus
commission and bonuses), hiring a salesperson
who fails or does not meet their quota is an
expensive issue that most managers must deal
with in their career at some time.
When salespeople do not hit their quota . . .
it is not always their fault.
Selling successfully requires an integrated
team approach. It is then up to the individual
to succeed or fail based on his or her own
initiative.
To increase individual salesperson success,
firms must integrate and align internal support
systems. The average non-selling salesperson
costs a firm OVER $1,000,000 a year.
That's right, over a $1,000,000 a
year.
To calculate the cost of a non-producing
salesperson, you must include the lost gross
margin contribution you expected from them
during their selling year.
Additionally, a first-time sale with a new
prospect should generate three times more
revenue (lifetime value of the prospect) over
the next three years (through add-ons,
maintenance, upgrades, new projects,
etc.).
To accurately determine what the lost revenue
effect is to your firm caused by the non-selling
salesperson, you must multiply their lack of
gross revenue capture by a factor of 3.
Lost
Sales Analysis Calculation Example
Using an example quota of $1,000,000 and
calculating gross margin on quota at 30%:
|
Cost of Salesperson Base Salary
|
$ 70,000
|
|
Cost of Benefits (Estimated at 30%)
|
21,000
|
|
Estimated Cost of T & E
|
12,000
|
|
Cost of Headhunter Fee
|
18,000
|
|
Lost Gross Margin ($300,000 x 3)
|
900,000
|
|
Annual Cost of Non-Productive
Salesperson
|
$1,021,000
|
So, each month that a salesperson does not
hit quota, they are costing you $85,000.
Instead of writing off this amount, why not
invest in an internal business structure that
minimizes the failure of salespeople and
increases your firm's ability to hit your
corporate goals.
This internal structure is based on aligning
your sales hiring and sales training process
with corporate revenue objectives so that all
departments work in unison to help the
salesperson succeed.
Corporate
Sales Performance Alignment Chart
Through the above graph, you can see how
internal systems should be created to support
the individual as well as the team's performance
based on corporate goals.
Yes, this analysis looks at salespeople over
a 12 month period and salespeople may hit their
sales quota on some of their available months
during a fiscal year. But when a salesperson is
hired, it is a one-year commitment by management
to their fiscal forecast. So, isolating an
individual's monthly performance is not truly
reflective of the true cost of a salesperson.
Next week, we will talk about how to use the
Corporate Sales Performance Alignment Chart
above to hire the right salespeople and manage
their success path to reduce the high cost of
failure.
To help your sales team sell more, you should
reduce your focus on individual performance
evaluations. Instead, focus more on the synergy
between performance and the internal support
systems you have designed for them.
Every month you don't support your sales
account manager, it is costing your firm
$85,000!
To read Part 2 of this
article, please
click here.
P.S. If you
are serious about increasing your success in
2009, call us right now and ask about our CEO
Business Success Scorecard assessment.
Rick Erling
President The CxO Group, LLC and
Publisher of The CxO News
www.thecxogroup.com
info@thecxogroup.com
(972) 727-6880
Recommendations provided are to be used at your
discretion and are provided solely as an
independent opinion.
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