Sales force sizing is an integral aspect of a best-in-class sales team.
Optimized headcount maximizes revenue while limiting inefficiencies within the sales organization.
However, this important process doesn’t occur in a vacuum. Executive teams usually choose to expand and scale their sales teams when they’re responding to or anticipating a significant shift, such as major external investment, a merger, a new product or market, or a change in leadership.
Because the expansion of a sales force size impacts both new business goals and existing revenue streams, it’s vital that business leaders create a comprehensive sales team scaling strategy.
Many organizations skip this step, lured by the promise of higher revenue with more ‘feet on the street’. However, it’s important to plan an expansion with full knowledge of potential missteps.
Here we examine the 5 biggest mistakes made when scaling a sales team, and the tactics that can be used to prevent these errors moving forward.
1. Taking a Slow Growth Approach
Due to financial concerns, business executives often recommend a slow growth approach to scaling a sales team. Although it’s natural for leaders to take a conservative stance, slow growth fails to account for both the short-term and long-term gains that accompany a sales force expansion to match prospect needs. In short, it places fears about short-term solvency ahead of the long-term viability of an organization.
World-class companies understand that headcount costs are an investment in future market share, which is the clearest indicator of long-term profitability. In fact, research from ZS associates suggests that by holding off on expansion, companies compromise their future standings compared to competitors’. Meanwhile, their studies also found that organizations that adequately staff their sales teams based on analytical models exhibit higher short-term and long-term profits.
Even if executive teams choose to take a conservative route, initial conversations around sales team sizing should rely on analytics and modeling rather than short-term financial constraints. By taking into account the future revenue and market share that accompany an expansion, companies can determine the optimally sized sales team to widen profit margins. With numbers based on analytics and data, business leaders can make a firm argument for fast but sustainable growth that supports the organization.
2. Ignoring Sales Territory Analytics and Data
Many sales leaders use CRM and automation tools to evaluate sales team performance, but don’t apply the same technology to determine the sizing. Instead, they make a critical mistake of relying on gut instincts or inaccurate cost limits, which can lead to a mismatched sales force size or failed expansion.
When executives scale up too fast, they waste valuable resources, fail to adequately support reps, and can cause a downward spiral in the sales culture. When they scale up too slow, profits and standing in the market regresses. Therefore, any go-to-market strategy needs to be grounded in top-down and bottom-up assessment of sales territories. Leaders need to test assumptions, basing sizing decisions on data rather than instincts. Two methods — the return-on-sales optimization calculation or the efficient frontier benchmark model — help companies maximize profit and market penetration.
Both these methods effectively target the ideal sales force size based on factors like the segment and product profitability, sales revenue, costs for sales employees, and competitors’ performance. The benchmark method is particularly effective for making sales allocation decisions on a national scale.
3. You’re Overpopulating Territories
When expanding a sales team, it’s also easy to misallocate reps, overpopulating a territory to the detriment of the sales team and the entire organization. When hiring too many reps cover the same area, new or less-experienced salespeople prioritize ‘low-hanging fruit’ from low-revenue prospects or easy, short cycle accounts instead of lucrative clients that have a strong lifetime value (LTV).
However, by intentionally optimizing territory design, leaders can increase sales by 2-7 percent without requiring additional resources. Industry leaders can prevent overpopulation by using index-based methods that incorporate three variables: the potential of the territory, the base of existing accounts, and the workload associated with the area. This approach balances reps’ workloads and earning opportunities while guaranteeing that reps are covering the most lucrative prospects.
When an organization’s leaders proactively plan territories, they can create a clear foundation for revenue growth — with the exception of a few tweaks, a well-planned territory design can work for three to five years before needing a reassessment.
4. Failing to Recognize and Counter Role Pollution
When designing an expanded sales team, organizations often fail to recognize and counter the impact of role pollution. As more people join the team, administrative and managerial support can be spread too thin, leading salespeople to pick up extra non-selling activities that are not central to their positions.
Reps spend too much time servicing and supporting clients and conducting administrative work, which severely limits their ability to maximize sales. A survey from ZS Associates indicates the average salesperson spends 8-10 hours on internal administrative activities (expense reports, meetings, and incentive tracking), 5-7 hours on customer service and support, and 7-11 hours on travel.
As best-in-class companies scale up their sales force, they also scale up the administrative, customer service, and support teams, enabling salespeople to focus on selling products or services. By delegating these low-value tasks, organizations create a more engaged, productive sales team and set themselves up for higher revenue.
5. Your Compensation Plans are Misaligned
Compensation plans are the most powerful tool a company can use to guide its sales force actions and behaviors. As a company scales its’ sales team, leaders need to consider the incentives that drive reps.
When compensation isn’t directly aligned with sales goals, reps allocate too much effort on sales actions that don’t contribute to the company’s goals. Reps may focus on activities that, once profitable, are no longer lucrative in a new stage of growth.
There are three aspects of an effective compensation plan for expanding firms: simplicity, alignment, and immediacy. Simplicity means that sales reps can easily calculate their direct earnings based on their performance—it prioritizes the most lucrative sales action without getting complicated. Alignment refers to the strong “cause and effect” connection between incentivizes and the priority of the organization. The compensation plan should align with the most important goal of the year, whether it’s market share, profitability, or penetration. Immediacy means that when salespeople either succeed or fail, they see the impact on their salary immediately.
Incorporating these three characteristics into a comprehensive compensation plan leverages a company’s resources to meet its goals. This approach is even more important for an expanded sales team because the negative impact of misaligned incentives has even wider consequences.
Want to know the 5 other massive mistakes organizations are making when it comes to expanding their sales teams? Download our latest eBook – The Biggest Mistakes Made When Expanding a Sales Team.
Latest posts by Keith Johnstone (see all)
- Responsibilities of a Sales Manager: The Ultimate Guide - May 16, 2017
- How HR Can Build an Integrated Approach to Sales Talent Management - March 14, 2017
- Debunking 14 Common Sales Management Misconceptions - February 24, 2017