Right-Size Your Sales Staff

In a perfect world, you’d have the time to start the company, develop products and services, do the marketing and advertising, sell, handle the paperwork and accounting, etc. But in the real world, the boss usually doesn’t have the time to run the company and do all the selling, too. By making smart decisions regarding how many and what type of salespeople to hire, you can hit or exceed your goals, grow your business and put a few dollars in your pocket, too.

An Honest Estimate

The obvious method to figure out how many salespeople a company needs is to take the total desired revenue and divide it by the average amount of revenue generated per salesperson. So, if you want $2 million in sales and each salesperson can bring in about $400,000, you need five salespeople. The problem with this method is that it doesn’t take into account that salespeople differ in skills and abilities, not to mention the fact that any salesperson (even a top performer) can occasionally have a slump. If you’ve got five producers and four of them bring in $400,000 for the year, but one has a bad year and only brings in $200,000, you’ve missed your goal.
Since a sales rep’s quota is typically based on previous performance, of that rep or others in your department, it’s imperative that you carefully monitor their actual performance. Track how many phone calls result in a contact, how many contacts result in an appointment, how many appointments it takes to close a deal, average deal size and more. If you estimate that the average deal size for a rep is $20,000, but don’t track this, you might discover at year end that the actual average deal size was not on track with your estimate and you will miss your goal. Tracking can help you identify problems that can be fixed. I’m a huge fan of metrics, as long as the reporting doesn’t get ponderous. Be prepared to adjust quotas on-the-fly as the actual numbers come in each week, month and quarter. The longer you wait to make adjustments the harder it will be to meet your end goal.
A more honest assessment of what you expect each salesperson to bring in would be to take the average dollar volume per salesperson, and then take 15%-20% off the top of that number. However, this honest assessment should not affect your sales goal. A smart boss cuts a percentage off the top of each salesperson’s projection to set accurate expectations for himself and does not tell the sales staff that he expects less. Keep that knowledge to yourself.

Consider hiring at least one more rep on your team than the previous method deems necessary. Having additional reps can help you meet goals despite vacation, sick time and slumps. If each sales rep does what they’re supposed to do, you’re ahead of the game. If not, by having an additional team member, you’re covered. It’s rare that a company can’t use the extra business if everyone on the team actually hits their goal.

Desirable Experience

The experience level of your salespeople will affect the number of reps you have on staff. More experienced people will usually sell more volume and do so more profitably than less experienced salespeople, meaning you can hire fewer salespeople. More experienced people can “hit the ground running,” need less training, and quickly bring in more dollars. However, there are other considerations. In addition to being more difficult to find, experienced salespeople can be more difficult to manage and tend to be set in their ways. They also may have inflated egos — most great salespeople have a highly developed sense of self that is necessary to face the massive rejection that comes with any sales job. It’s much tougher to convince them that you might have a better idea of how to do things, and they may resist training. But, they may be right. That’s why you hire them — because they know how to sell. The decision to hire very experienced salespeople can come down to your own company culture and management style.

Less experienced salespeople are easier to manage, but they have a longer ramp-up time and won’t bring in the same dollar volume, unless they get lucky. Less experience means you can pay them less – both salary and percentage commission. But the pay disparity is typically more than made up for by an experienced salesperson’s greater productivity. With less experienced reps, you have to hire more bodies to produce the same number of sales and that could end up costing you in benefits and other expenses that come along with taking on additional employees.

It’s often a good idea to hire a combination of experienced and less-experienced reps. Having younger reps on board tends to keep the senior team members on their toes as they know there is someone “waiting in the wings” to take their place. Also, junior reps tend to have a lot of enthusiasm since they aren’t jaded, which helps keep the team thinking positively. The experienced salespeople often become role models for their junior counterparts and can be called upon to help with training and mentoring. Be cautious, though, that the experienced reps don’t teach bad habits to the less experienced team members. My personal preference is to hire someone with only a couple of years of experience and a burning desire to be the best.

Train at All Levels