Our firm is often engaged by sales leaders to help them properly size their sales force. These sales leaders are seeking to increase their rate of revenue growth and to do so they must correctly deploy the right amount of resources into the marketplace. If not, they will fail to meet the demand for their product and/or services, and mostly likely miss their number.
There are four fundamental questions you need to ask if you’re going to get headcount right. They are…
Do I have a business rationale for current sizing by role?
Is the number of accounts in my sales territories based on selling capacity?
Have I calculated the breakeven cost of an incremental sales rep?
Do I use any sizing tools or models?
Let’s look at each of these more in depth.
Business Rationale for Current Sizing by Role - Is there a financial justification for how to add or subtract certain types of sales heads? In other words, if you want to add a sales rep, how much business do they need to generate in how much time to cover their costs and also to cover gross margin requirements.
Number of Accounts in Territories based on Selling Capacity - A typical sales rep works 2000 hours each year (8hrs/day x 5 days/wk x 50 weeks). If you are following best practices, your reps should be spending 65%-75% of their time selling. That’s roughly 120 hours per months or 28 hours per week. Including travel time, how many accounts can a typical rep cover in any given month? Understanding the selling capacity needed to cover your territories will provide insight into whether you have enough or too many reps to cover the patch.
Calculating Breakeven Cost of an Incremental Sales Rep - In my last blog post, When is the next new sales rep too many?, I discussed the point where the gross contribution (margin) of each additional sales rep begins to taper off. Once you calculate the point of diminishing returns, you know the breakeven cost of an incremental sales rep.
Sizing Tools & Models - We find that many sales leaders determine headcount based strictly on cost and affordability, and completely ignore market dynamics. World class sales organizations use sizing tools and models that account for cost without ignoring market potential. Some of these models include…