You probably know that sales people are needed to support your growth – but we found that high growth businesses are approximately 50% under allocated (50% fewer sales people than needed in their plans). They’re kidding themselves! When you get this wrong, it can really hurt. Let me show you how to calculate the number of sales people needed for growth within your business.
Conclusions from the data
After stack-ranking all of the customer plans in our database (approx. 2,000 currently) from those planning higher growth to those planning a more modest growth, we’ve found:
- Plans targeting the highest growth averaged 66%.
- Plans targeting the slowest growth averaged 15%.
- Salesforce growth for the fastest growing plans averaged 33% only. Is this a 47% efficiency gain, or a delusion?
Let’s dive into the data and find out what’s going on, and I’ll show you how to calculate your ideal sales force capacity
How to calculate your salesforce
Let’s start by setting clear objectives. Then we will look at channel size and velocity.
As an example we:
- Set our objectives to 1,000 euro in the first year.
- Plan to obtain 20 deals.
- Expect 100% growth next year.
Of note, what is required is your sales target for the first year, and not your revenue target. This is because with most businesses, some of the revenue comes from the sales they’ve already made. Subsequently, revenue and sales are not the same number. This is in contrast to a business where 100% of their revenue this year will come from sales that they need to make for this year.
In looking at the salesforce size, we’ve allowed for 2 sales people, as this is what the business has currently. As we’re growing at 100% per year, we’re going to double it next year to 4, and again the following year to 6 sales people. This may seem very obvious, but in all of the plans that I’ve studied, most businesses are not doing this. Doubling may not be the right answer but it’s a good place to start. If you’re growing at 100%, the odds are very good that you’re also going to need to grow your salesforce at 100%.
In this section I am going to place the number of sales people, and how many meetings they will have every week. Importantly, this is meetings per salesperson per week. Don’t change both the sales people number and the number of meetings. Also pay careful attention to the fact that this is week in and week out, and not at burst. You may be able to have 10 meetings in an unusual week, but in the following week, you’re probably going to have no meetings because it’s all follow up. We want your sustained average. So, 5 meetings per week, per staff member, is a good place to start.
In calculating the utilisation, it shows that other than the first month (very low) and Q4 (very high), we’re close to 100% utilisation which is what we would like to achieve. Therefore, we need to have 2, then 4, and then 8 sales people for the first, second, and third year respectively.
Before we make any minor corrections to fix the anomalies, let me show you the velocity page which is critical in this calculation. Why? This is because the amount of salesforce you need is a function of your objectives, in terms of how many deals you need to make, and your effectiveness at moving buyers through the funnel. It is the combination of the aforementioned two factors that determines the number of sales people required. There’s no point in changing your salesforce size if you haven’t set the right effectiveness ratios.
There are two things, I will flag with this particular plan.
- 75% of all leads will result in a proposal.
- They’ll win one in four.
I think that this is back to front. I’d rather see you qualify out very early, and win more. So, I’m going to enter some changed ratios. For a start, we’re going to drop to only 25% of our leads resulting in a proposal, but we’ll win 50% of them. Furthermore, instead of 8 meetings, I want to drop this to 6 meetings. Subsequently, I’ve got fewer meetings and a higher closure rate. I’ll show you what I need to change in more details for this to be affected.
The number of meetings allocated, in further detail, through the funnel includes:
- No meetings from positioned to interest. Essentially, I will not use my sales people to get my customers or my prospects interested. Rather we use marketing to achieve this.
- I’ll use my sales people to trouble the prospect. So I’ll allocate 1 meeting at this point of the funnel.
- 2 meetings at collaborating with the prospect to determine their need, as I want to work hard at obtaining a clear need.
- I’m only going to have 1 meeting at the offer understood point.
- Every second prospect needs a meeting between offer and preference, and so I’ll allocate 0.5 meetings at this point.
- Every second prospect needs a meeting to move from preference to decision, and so I’ll allocate 0.5 meetings here.
In the above example, we’ve dropped to only 5 meetings. Do I have enough? Maybe, I will need 2 meetings at the offer understood point. One to present to my coach, and another to present to all the other buyers. This takes the number of meetings up to 6. Remember, however, that we started at 8 meetings with a low closure rate. This above example has given us 65% utilisation. The net effect is that I require less salesforce because I’ve increased my closure rate and have used marketing for the heavy lifting at the front end.
Before moving into the detailed stage of month by month, and quarter by quarter channel effectiveness, we need to look at the utilisation for the whole three years. When this is right, we’ll return to change the figures month by month, and quarter by quarter.
Moving forward into the “channel” section, I am going drop the salesforce size. I know that I only need two thirds of this salesforce, and so I’ll change the salesforce to 3.
Let’s take a look at what utilisation this gives us.
More realistically, I now have 6 people in the third year, 3 in the second year, and I’ll start with only 1 salesperson in the first year but move to 2 sales people by Q2. At the start, if I already have 2 sales people, I could place one of these into a process documentation role for the next three months, as I don’t need as much capacity. This may even be the case for as long as six months to ensure that all the processes are right and to hit real momentum towards the end of the year, as well as into the second and third years.
Long story short, the above is how to calculate sales utilisation, and how many sales people you need.
Here are my essential tips on calculating the number of sales people needed for growth within your business:
- Set sales objectives, not revenue objectives.
- Calculate your velocity.
- Shape your salesforce
Go into your Funnel Plan now and adjust your objectives, velocity and channel. Consider having a separate Funnel Plan for each major market segment. If you don’t have a Funnel Plan, get yourself a free trial here.
- Claudia Ivanka for production.
- Hannah Sivalingam for her support in video production.
- Hugh Macfarlane for scripting and presenting this week’s show.