Real Sales Growth – (or What to Do When Hiring Reps and Raising Quotas Isn’t Working)
Here’s a simple question we like to ask CEO’s in our sales readiness workshops. “If hiring sales reps equals revenue growth, why not hire as many as you can possibly find?” Seriously, if the model is that reliable then you are foolish not to hire every rep you can get into your office. Borrow money if necessary, but just keep hiring because more sales reps equal more sales revenue. (Yes, starting to sound a bit like stock market investing gurus in the 90’s, but hang in there a little longer).
Back to our workshop. By now someone raises their hand and points out that not all reps make their numbers so that wouldn’t make sense. OK, true. But if your sales plan that tells you 10 reps is a good number (to pick an arbitrary point) then isn’t 100 better? Either way some make it, some don’t, so shouldn’t the formula hold?
Sometimes it takes an extreme example like this to prove a point. In this case, if the size of the sales team determines revenue, then hiring any fewer reps than all you can find says you are satisfied with growing less than possible. Right? The real question CEO’s should ask their sales leader (or themselves if applicable) is, “How did you determine the appropriate size of the sales force in the first place?”
The truth is far too many sales managers don’t really how many reps they need, so they default to common approaches like span of control ratios – or even worse – dividing total team quota by what they believe/guess a sales rep can close each year. In reality, most sales managers just try to hire as many reps they think the boss will allow, then they spread the quota across the final headcount, hold a kick off meeting and charge off into the year without an honest clue as to how it will all turn out.
Need proof it’s a broken model? Barely 50% of reps are making their quota right now – yet 85% of companies are raising quotas this year. (And both those measurements separate further every year). That’s great management, eh? I’m not succeeding at this process but I’m sure I’ll do better if I set a higher goal next year. We call that a “Looks Good on Paper” sales plan.
CEO’s, here are two inside secrets your sales vp won’t tell you. First, quotas have absolutely nothing to do with how much is sold. They are simply the primary component in the sales compensation formula. Successful reps will sell as much as they can. Unsuccessful reps only fail more miserably against a higher quota than a lower one. Second, sales team size has far less impact on revenue sold than you are being led to believe.
Want to know what truly does reliably and consistently impact sales success? It is three basic elements too many companies think about last, if at all. 1. Marketing. 2. Lead Creation. 3. Sales process. Want proof? Ask your top performing sales rep to list what your company could do right now so they could sell more. Bet we know the answer.