Salesforce Productivity

Using best practices to improve salesforce productivity — achieving substantial sales growth from an existing salesforce, which produces improved profitability — may offer a fast, attractive payback for many businesses with a large direct salesforce.

The leverage available is very high. Here is a simple example:

A mid-sized company with annual sales of $500 million has a direct salesforce of 200 in its primary markets. Its operating margin is 15% of sales, or $75 million. Gross margin is 40% of sales, with SG&A expense of 25%.

Salesforce productivity is $2.5 million per salesperson, an average that probably ranges from $0.5 million for new and weakest performers to perhaps $10 million for the superstars.

Suppose that you could increase sales productivity by 10%. This would mean an average productivity of $2.75 million in sales on average. The corresponding company sales increase would be $50 million, assuming the same salesforce.

The leverage becomes apparent when you require this sales gain to come at essentially no increase in selling costs. You have to deduct the cost of sales for this increment, or $30 million. There may be a slight increase also in non-sales SG&A (e.g., order processing, billing) but we can ignore it here to keep things simple. This leaves a $20 million contribution to current operating profit of $75 million — a more than 25% increase!

The key assumptions underlying this example are:

1.    Same salesforce — no headcount increase.

2.    No increase in selling expense.

3.    Same product mix is sold (no gross margin change).

"All" you have to do is increase salesforce productivity by 10%. But, as  they say in New York, "if I coulda, I woulda."

So, How Do You Get This 10% Increase?

Good question. A big technology investment might do it but this adds an amortization expense and probably a good chunk of technology-related operating expense. This is a very standard approach and many companies do this routinely. Your current productivity figures thus reflect the contribution of whatever your technology migration investments have to offer.

How about a lot of sales training using available best practices and benchmarking? This is another common approach for increasing sales productivity, but it tends to be quite expensive and it doesn't always produce the expected results. Besides, most companies also do this routinely, so your current productivity performance already reflects this approach.  

Well, we still have sales incentives and hiring practices to tinker with. We can mess with sales territories to match the best producers with the best territories. Same answer: Your current numbers probably already reflect your best efforts.            

Is a 10% increase in productivity actually achievable? If the common approaches we employ are already baked into our base productivity metrics, what else is there?

Working Smarter

This is a meaningless piece of business jargon in most cases. It requires careful definition to become useful.

Exactly how do we go about "working smarter" on sales productivity? ...More...

 

 

Work Smarter

Best practices methodology, at least as we apply it, does not usually involve any significant spending or development lead time. Instead, it involves doing more of what you are doing right today, and less of what you are doing wrong.

This is the essence of the best practices approach we use: Work smarter.

Your selling resources are your sales time supported by things like mailings, events, and promotions. These are what you have available to utilize in different, more productive ways.

Most sales forces do not use these resources efficiently.

They also tend to favor approaches that add resources instead of ones that employ existing resources more effectively.

This means that most sales forces have a substantial amount of untapped productivity.

This is what we are after.

Process Commentary

Work Smarter? How?

We explain exactly what "working smarter" means in the context of improving salesforce productivity.

Allocating Time

Strategic time allocation can be the most effective way to improve salesforce productivity.

Account Potential

To support strategic account planning, you need to estimate account potential in a much different way.

Try, Learn, Improve

Experiment to learn, and then share what you have learned to leverage your knowledge.