What to do before expanding your sales team
More sales reps does not mean more revenue
Hi and welcome to this week’s issue of The Revenue Architect. I’ve been writing weekly for over 6 months now and am loving the feedback from my subscribers—please keep it coming! And if you arrived here because someone forwarded you the email or link, please consider subscribing.
It’s mid November, that wonderful time of the year when we all spend way more time than we should guessing what will happen next year and turning it into a plan and budget for our exec team and board to sign off on.
For many sales leaders, the annual planning process begins with determining how many salespeople you are going to hire next year and how much revenue growth you are going to sign up for in return.
It’s rare to get a ton of pushback on hiring salespeople as, in an ideal world, they pay for themselves. Throw in the pressure from your investors to grow fast and spend ahead of revenue and it’s easy to come to the conclusion that adding more sales reps is the key to generating more revenue.
However, before you go out and double or triple the size of your sales team, let me tell you what will happen:
You will hit your hiring goals.
80% of your reps will miss their quota.
Your company will miss the number and heads will roll.
Here’s why you will hit your hiring goals:
Hiring will be your top priority. You’ll spend 50% of your time on it. When anyone asks you what you are focused on, you’ll say “I’m so busy, we’re hiring like crazy!”.
You’ll lower your hiring bar. You’ll start out looking for superstars who are on par with your top salespeople but will realize they are few and far between and happy where they are.
You’ll increase sales comp. Your recruiting team will tell you, “for another $20k we can close this candidate now!”, you’ll use it to create urgency with Finance, they won’t want be blamed for holding back revenue and will open the purse strings.
Here’s why 80% of your reps will miss their quotas:
Territories will shrink. In order to support more reps you’ll start carving up existing territories, leaving less low-hanging fruit for your existing reps.
Leads will be more scarce. Your inbound leads won’t grow fast enough, leading to fewer inbound leads per rep and lower win rates.
New reps will ramp slower. You’re spending 50% of your time on hiring so won’t have time to ensure your new reps are onboarded. After all, your existing reps learned on the job, so why can’t your new reps do the same? Especially as you are paying them more, right?
I’ve seen this movie way too many times over the last few years. Its #1 on my list of reasons why heads of sales fail. You’d think that, of all people, investors would know that past performance is not a guarantee of future results, yet extrapolating this year’s results to create next year’s goal is the starting point for 99% of tops-down planning.
To get ahead of becoming next year’s villain, start asking the following questions now, and using the answers to adjust your assumptions of quota capacity and ramp time.
How many of your existing reps are regularly hitting their quota? If it’s less than 80% now, it’s going to be a lot less than 80% if you double or triple the size of your team. Even if you are hitting the company goal thanks to a couple of superstar sellers, you can’t expect them to keep getting you to goal as you add more people to the team.
How does the win rate vary by rep? If your top reps are currently closing 40-50% of deals and your bottom reps are at 15-20%, find out where in the sales process are their deals stalling and why. Many sales leaders don’t look into this if a rep is hitting quota, but if a rep needs 2x the number of leads to hit their goal, Houston we are going to have a problem when we start adding more reps and there aren’t enough leads to support a 2x-a-quarter habit. For a step-by-step guide on figuring out where deals are dying in the process, check out my previous post on the subject.
How many wins are from inbound leads vs outbound leads? If your inbound leads don’t grow fast enough, the number of inbound leads per rep will decrease and win rates will decrease for everyone, including your top reps. If your top reps start missing quota they are going to quickly start looking for a new job, creating even more pressure on hiring. If there is a plan to grow inbound leads, ask what stage of the buying journey will they be in. If the plan involves throwing events and webinars, the leads are going to be way earlier in the buying process (and therefore less qualified) than the organic and word-of-mouth referrals you are getting today.
What are the stages in your sales process, what are the exit criteria for each stage and how are you measuring them? If the exit criteria aren’t being measured, you won’t know if any given deal is in the correct stage, which is going to impact your ability to forecast accurately. You can’t go around the room on every deal when you have 20 reps. Get the data into your CRM.
What is the onboarding process for a new rep? The ideal customer profile should be clearly defined and based on a win/loss analysis of recently closed deals. It should not be slideware owned by marketing. Buyer personas should be defined, along with common pain points and discovery questions to surface them. The sales process should be documented, with in-stage actions and exit criteria for each stage and enablement content linked to each stage of the process. It should not be a document that sales ops owns but nobody looks at. Sales calls should be recorded so that new reps can review seasoned reps without having to wait for schedules to align to attend a sales call. A coaching process should be in place where managers regularly review calls with reps and provide feedback vs the sales process. If any of the foregoing do not exist, the time to address it is now, not halfway through next year when half of your sales team is struggling.
If you have any questions about creating your 2022 plan, or suggestions for future topics to cover, please send them my way either by replying to this email or through my LinkedIn.
I won’t be posting next week as it’s Thanksgiving here in the US, so let me take a moment to wish all my American subscribers a very Happy Thanksgiving!
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