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.