Industrial Sales

Think twice before you grow your B2B sales force!

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With the economy picking up, you may be contemplating ramping up sales operations by taking on more sales staff.

Some food for thought

Depending on the additional costs of hiring a new salesperson (in real terms, probably about double his/her salary), you might instead consider investing that money in a professionally run lead generation and qualification campaign to maximize your existing sales force’s productivity.

For example – using only one sales recruit as an example (and you can play with the numbers as they may apply to your business):

  • Salary – $60k + commissions. Assume $75k (low by any standards for most B2B industries.)
  • Overhead x2 (travel, recruitment, training, social costs, management, etc.). Actual costs are probably in the range of $150k.

 

Suppose you assume that the cost of identifying a qualified sales opportunity is $1,000, then for the same $150k. In that case, you could deliver 150 newly minted, highly qualified sales opportunities to your existing sales force. And if the cost were $500 per qualified opportunity, that’ would present 300 new opportunities.

Looking at this conservatively (@$1k per), let’s say your sales team can convert 20% (1 out of 5 of those qualified opportunities) into a new client. That would generate 30 additional sales at your average sales value. If each average sale was worth $50k in revenue, that’s an additional $1.5 million in new revenue. (Not to mention the potential recurring value of that new client relationship).

Let’s take a more optimistic tack. If the cost per qualified opportunity was actually as low as $500, and the resulting 300 additional sales opportunities converted at a better rate, such as 25%, this would net you 75 sales (to new clients). And using the same $50k average per initial sale would earn $3.75 million in additional revenue.
Not chump change!

So, in place of investing in new sales reps who need to be recruited, trained and mentored and who will take some time and effort to hit the street running, it may be more lucrative to increase the productivity of the existing sales force. Also, consider your recruitment success metrics.

How many new recruits succeed out of the block. What is your cost of failure? And will an investment of $150k net you between 30 and 70 new customers with between $1.5 and $3.75 million in new net incremental revenue? It isn’t very confident.

Of course, your company might be among the very few that have a sales force that is really productive and has no need for additional qualified sales opportunities to work with. But, in the 25 years, we’ve been in business, I’ve never come across one.

Remember that for every minute your high-cost field sales people are not out there selling to prospects and customers who need your solutions, you’re losing a selling opportunity!