We’ve all been there, your sales team is down one or more members due to planned – or unplanned attrition. (Usually the attrition is of the planned variety). The sales person was not making their number, their pipeline was deficient, activity might have been evident but the results were not, so action had to be taken.
You now have an open position with quota associated with it so you must act quickly to fill the slot. Hopefully you began the recruiting process well before the attrition took place. If so, you probably spent 40 hours of management time refreshing the job requisition and position description, meeting with Human Resources and external recruiters to get the recruiting process underway and wading through the stack of “qualified” applicants that were presented to you. You were very lucky and found two candidates that have the experience and the track record you need. These candidates went through the corporate interview process and you settled on one of them as the final candidate. The offer was made, accepted, and the new hire is on board. It only took a total of eight weeks and the problem is solved, right? Well, maybe not.
It may have only taken eight weeks to get the new rep on board but it will likely be quite some time before the sales person achieves any meaningful results. For all practical purposes this person is starting from scratch, even if they come with “Rolodex.” Qualified sales pipeline will need to be established which can take several quarters of prospecting and presenting. Once the pipeline is established, based on your sales cycle it could easily be 1-3 more months before any opportunities begin to close. That means it’s probably too late in your plan year to have a meaningful impact on quota attainment.
What did that cost you? Your cost of sales started on day one with the new hire. You incurred salary, draw, benefits, and overhead costs well in advance of generating the first sales dollar. We tell ourselves that’s the way it’s always been, we need to make investments in sales before we see results. It is true that we need to invest in sales to see results, but there are new methods that can yield better and quicker results. Based on the scenario above and assuming a solution sales environment, total compensation, fringe benefits, and overhead load can easily exceed 300k annually for a rep at 100% of plan. If a new rep becomes productive in month 6-9 your fixed cost before sales contribution is in the 150K-200K range.
Let’s consider the costs and benefits associated with bringing on a new sales person versus raising the performance of the existing in-place sales team through the use of new tools, inbound/outbound demand generation programs, and business intelligence tools that allow for precise prospect targeting.
This alternate approach would be to use that same 150-200K in expense dollars and use them to make investments in both your existing sales team and the processes you employ to ensure their continued success. This approach not only yields better results it also ensures that you reduce the risk of non-planned attrition. A sales team making good commission is less likely to seek other green fields.
In part two of this post we will explore what investments make sense and yield the most in sales increases. In part three we’ll provide a more metrics based model to help define when it is time to get back to growing the team.