By Victor Antonio, BSEE, MBA

Measuring sales performance is easy compared to the Herculean task of trying to predict how well salespeople will perform.  Every quarter and at the end of every fiscal year, somewhere in the boardrooms or meeting rooms of corporate America, there are teams of managers and executives trying to hammer out next years budget. 

That budget largely depends on where they predict the sales number will be at the end of the year.  The higher the revenue projections, the more that can be done to grow the business in terms of investment: Research and Development (R&D), expanding into new markets, and of course adding more salespeople.  But just because a number is projected to grow doesn’t necessary mean the sales team will hit it. 

For example, let’s say our total year’s revenue number is $1,000,000 ($1M) and that we have 50 salespeople on our staff.  If we were to democratically ration out sales quotas, each person would have to sell $20,000 ($1M divided by 50).  I realize this is unrealistic, but let’s work with this assumption.

Now, lets also assume that we have no ‘sales history’ from which to look at to see what the new sales year will bring.  That means we have to estimate what percentage of salespeople will hit their quota (100% or more) and what percentage will falls short and by how much.

In the figure below, I assumed that: 25% of the 50 salespeople (12.5 people) will hit 100%, 40% (20 people) will only achieve 65% of their assigned quota, 25% (12.5 people) will hit 35% and the bottom 10% (5 people) of the sales force will hit only 10% of their quota. 

As you can see, the total revenues would fall 40% short of the sales revenue goal of $1M.  At this point we have a problem and we need to find ways to resolve it (i.e., hit the $1M).   

Scenario: Add more salespeople

This is an option but there are many things that have to be factored in on whether or not this will solve the problem.  First, adding more salespeople will increase the costs (expenses) thereby reducing the overall profit margin or worse, eroding any possible profit all together and putting your company in the red. 

Second, you have to consider training time and ramp up time for new salespeople.  It would be nice to think that the salespeople will hit the sales ground running, but that would be betting on a long shot.

Nonetheless, let’s assume we added 20 more salespeople and still require them to hit the same quota of $20,000.  As you can see, the revenues did increase to $850,500 but we're still 15% short of hitting our $1M revenue goal and we’ve just increased my expenses by adding more people. 

Scenario 2: Improve the performance of your existing team

Sometimes the answer to the sales question can be found in your bathroom accessories.  Instead of buying a more tubes of toothpaste, maybe the answer is to find a way to effectively ‘squeeze’ the tube to make sure we’re getting 100% of what we paid for.  Now, squeezing sales people by demanding they meet their quota and then threatening them with job loss is not what I have in mind.  What if instead we decided to retrain the sales force on product capabilities so they know what their selling and how to effectively position the product?  And on top of that, what if we retrained them on using sales techniques that are specifically designed to sell their type of product? 

Let’s assume that after the training: the top 25% increased their sales by 50% (total of 150%); which means each sold on average $30,000 instead of $20,000, the next 40% could increase their sales from 65% to 100% of quota, the next 25% of salespeople increase their sales from 35% to 60% and the last 10% increased their sales from 10% to 35%. 

As you can see from the table, the new revenue number is $972,500.  Although we didn’t hit the $1M revenue goal, it’s pretty darn close and within striking distance.

It’s worth noting that in both cases you will be increasing your expenses.  But in the first scenario I can bet the costs (S,G&A) will be much higher compared to the expense of sales and product training.

I am amazed at how much money corporations and small businesses spend on R&D, hiring people, product development, marketing and so on and how little they invest in sales and product training! 

Jim Cathcart in the Sales Success seminar series “Relationship Selling in a New Era", had a great anecdote about sales training.  He mentioned how managers or business owners often worried and complained about people leaving the company after they’ve been trained.  They’d say, “What if I train them and they leave?”  Cathcart’s response, “What if you don’t train them and they stay!”

It's like I've often stated, "Upgrade your training, or downgrade your expectations!" 

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Copyright © 2008 by Victor Antonio G.   All rights reserved.  This article MAY be reproduced in any form or by any means, electronic or mechanical, including photocopying, as long as the author’s name, website and email address are included as part of the article’s body.  All inquiries, including information on electronic licensing, should be directed to Victor Antonio G. at info@victorantonio.com.