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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!
Writers Resource Box
| Paul DiModica is the author of the best-selling
books: Value Forward Selling, Value Forward Marketing, and Sales Management Power Strategies.
He is founder of Value Forward Group and addresses
thousands of executives each year on the subjects
of sales, marketing and strategy, including
executives and staff of Wells Fargo, Lanier Corporate, Adobe, IBM, Tyco/American Dynamics, Navitaire and many others. His content-rich
workshops and strategy sessions on leadership, sales, management
and marketing bring about immediate changes
and long-term results. For more information, visit http://www.valueforward.com |
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