The start date for annual planning has to acknowledge time lags and dependencies, otherwise, it’s like throwing a “Hail Mary pass” with seconds remaining on the clock, as opposed to creating a Workforce Plan to set the Sales team up for success. Specifically, if an organization needs to expand its sales organization, the time to hire salespeople is NOT the first month of the new fiscal year as talent acquisition may require three months and ramping may require another 6 months. Net, it may be necessary to create an operational plan 9 months before the start of a new fiscal year so that the sales team is fully productive. Most importantly, there are investments in people, programs and systems that have to be made before, at the same time and after the hiring of a sales rep that is in many cases not acknowledged nor addressed.
Workforce Plan Drives Sales Success
Workforce Planning is a systematic, pragmatic process to identify and analyze the staffing needs of an organization and that sets the organization up to achieve its objectives. The fundamental concept underpinning a Workforce Plan is the ability to anticipate or forecast what will be needed, structurally and culturally, to capitalize on market opportunities. Unfortunately, most organizations do not understand or embrace Workforce Planning as a continual process to align the needs and priorities of the organization with a corresponding workforce to fuel their go-to-market strategy. What usually happens in annual planning is a revenue target is set, the number is divided by the sales quota and sales reps are hired. Some organizations over assign quota anticipating that some reps will not make their number. However, the fundamental issue is that the new fiscal year starts with open req’s in the sales organization and that puts the sales team at a disadvantage before the year starts, not to mention that the supporting infrastructure for a sales rep has not been addressed.
Many organizations, especially start-ups, dismiss most planning concepts because they are perceived as being contradictory to being agile. Best-in-class organizations embrace scenario planning to prepare for the ramifications of attaining plan, exceeding plan or performing below plan. In addition, operational planning should include the appropriate time horizon to allow an organization to properly staff itself. In other words, the first date in the new fiscal year, or even 3 months before, is most often not a sufficient planning horizon. And, organizations need to reverse-engineer staffing requirements from revenue (including interrelationships and dependencies), to encompass a cascading effect to a workforce plan versus reacting to a simple mandate to hire some salespeople.
Workforce Plan – Nail it Then Scale it
While many entrepreneurs and management teams believe a correlation exists between sales and revenue, they frequently do not understand how to create a managed, repeatable sales process. Their sales teams performance usually falls in line with a bell curve, and for every couple of reps that blow their number away there are a few sales reps that can’t get out of first gear. Then there are the reps that attain somewhere between 50-80% of quota. Many times hiring and firing is the mantra within the organization.
If an organization has not moved beyond the Lone-Wolf sales model (a rep who crushes it but cannot and will not be managed—they do it their way), it’s better to step back and focus on hiring the right resources and set those resources up for success. Studies show that the cost of a bad sales rep hire is anywhere from $250K (the OTE) to $1.5M (the quota for the year). Note that these are actually conservative estimates as they do not include costs from any other function or resource in the organization.
Workforce Plan – Hiring is an Interrelated And Cascading Process
It’s important to understand that the workforce plan is not a compilation of discrete, isolated labor units. Much like a team, the workforce plan is the careful construction of pieces that, when compiled together, create value that is much greater than the sum of its parts. The hard part is decomposing the structure to understand the component, the ratio of the components, the interrelationships, dependencies and the timing associated with each. In a sense, it is very similar to cooking. If a meal is being prepared for four people and six people need to be fed, the chef does not just add more of the main ingredient. The recipe must be reviewed and increased so the appropriate ingredients are added at the precise time and in a specific ratio. Likewise, increasing revenue is not as simple as adding a few sales reps. It requires analysis of direct sales, insides sales, sales development reps, demand generation and sales enablement and more.
Inside Sales Reps
The definition of Inside Sales is sale of products or services by a sales person who reach customers by phone or online (email social etc.), rather than traveling to meet them face-to-face. ISRs are usually on a path to be a direct sales rep so the average tenure in this role is about three years with the top performers making the transition after two years of above quota performance. Ramping ISRs is more complicated as they require subject matter expertise, product knowledge, the ability to demo, and account management skills. Best-in-class companies typically ramp their ISRs in three months while lesser programs may require up to six months or never at all.
- Inside sales reps (ISRs) dominate the SaaS world and normally carry a quota of about $700-$900K per year.
- Their base pay is about $65K per year and commissions are double their base pay for an OTE of $130K per year.
- One sales engineer would be expected to support up to five ISRs.
Sales Development Reps
The primary objective for Sales Development Reps (SDRs) is to prospect (cold – suspects) and to follow-up (warm – responses) to qualifying and create new qualified sales opportunities, for Inside Sales and Direct Sales Reps, that have a high propensity to close. The foundation for an SDR is critical to establish and the best-in-class companies know this. They have a formal onboarding program that is successful in ramping a new SDR in two to three months. Less effective programs that leave onboarding to osmosis may require four to five months.
- One SDR can support two to three direct sales reps.
- Average base pay for an SDR is approximately $45K with 50% of the base available in variable compensation. This is usually based on booking a meeting and acceptance of the meeting by the sales rep.
- Because SDRs are typically focused on becoming a sales rep (indirect or direct), the average tenure in the role is about two years with the best performers transitioning after a year (whether within their company or to another).
- About 50% of SDRs advance in the sales organization, a small percentage are happy to remain in the role and the rest are removed.
- SDRs typically make about 50-60 calls a day resulting in approximately five to six live conversations and one booked meeting every business day.
Direct Sales Reps or Field Sales Reps
Direct Sales, Outside Sales, or Field Sales reps may perform the tasks of a Sales Development Rep or an Inside Sales Rep, the difference being that they have face-to-face meetings in their arsenal–they are expected to travel to a prospect or customer site.
- Direct sales reps’ OTE is approximately $250K, with an equal balance between base and commissions.
- Quota in a SaaS model ranges from $1M – $1.3M per year.
- Quota credit is typically only provided for the first year of the annual contract value.
- Most B2B companies have four ISRs for every direct sales rep.
- One sales engineer is expected to support 2-3 direct sales reps, depending upon the solution complexity and the direct sales reps’ ability to demo.
Demand Generation or Field Marketing
Demand Generation or Field Marketing’s role is to soften the earth and to fill the top of the sales funnel with responses or leads and marketing qualified leads for Demand Management (the Sales Development Reps) to convert to qualified sales opportunities. Key aspects of Demand Generation, as it relates to supporting sales, include:
- A portion of the sales pipeline is sourced by marketing, and that percentage typically ranges from 20% – 50% of the qualified sales opportunities.
- A competent marketing programs person (design, develop and execute) will cost the organization $150K (fully loaded).
- That resource can effectively manage about $250K in program spend and can support about 5 – 7 sales reps, inside and direct, combined.
In addition, an integrated marketing plan will require – best case – at least three months of planning and another one to three months to execute. The plan needs to be based on the needs of the territory, sales rep quota requirements and compensation and the brand offering.
Onboarding the sales team and providing the right resources at the right time and in the right format is the key to producing productive reps that can efficiently and effectively convert prospects into customers. The core of sales enablement resides in a detailed understanding of the market, technology, workflows and competitive environment. Some organizations have created a specific Sales Enablement function while others leverage Product Marketing, Industry Marketing, Solution Marketing, SME’s, and Product Specialists. Regardless of the title, the focus is the same, and there is still a linear relationship even when automation and a “one-to-many” mentality is applied—the core IP is in people’s heads.
When building out a sales organization, the need for sales enablement resources to facilitate onboarding and to increase conversion and velocity in the sales cycle can’t be an afterthought. It needs to be proactively managed.
Workforce Plan – The Net/Net
Resist the immediate temptation to pull the hiring trigger on salespeople to increase revenue unless:
- There is a managed and repeatable sales process that results in sales reps attaining 90% plus of their quota assignment.
- There is a proactively-managed workforce planning model in place that cascades to encompass the operational interrelationships so that an effective and efficient sales process is built, funded and supported, i.e., sales people, sales engineers, sales development reps, demand generation and sales enablement resources.
History is always an important topic to study as the past often repeats itself. It’s important for organizations to acknowledge what has not worked and to understand why it has not worked. With respect to sales, there is a tendency to throw sales resources at a problem because that seems like a quick revenue fix. Often times that does nothing to accelerate the go to market strategy. Most times, the lack of a workforce plan simply wastes precious resources: time , money and frustrates all of those involved.