Sales Rep Calculation

 

Here’s how most companies (incorrectly) figure this out: 

 

The CEO hands a projected revenue number to you (the senior sales leader).  You both know for cost reasons what the quota per salesperson needs to be.  So you simply divide the revenue number by the average quota number.  This produces a headcount number.  Then you take the headcount number and multiply it by the cost per rep.  You use the “all-in” cost – base, commissions, overhead.  This yields a cost of sale typically expressed as a percentage of revenue.  This simple analysis is the most common way of headcount planning in corporate America.

 

Workload Analysis Calculator

 

Here are the implications of this too-generic approach. Below is a quota distribution chart. On the left side vertical axis is the number of reps.  On the right side vertical axis are quota numbers expressed as dollars. The red bars from <10% – 99% are the number of sales reps for each range.  For example, five sales reps attained between 40 and 49% of the quota.  The green bars indicate numbers of reps who exceeded quota.

 

Uneven Quota Attainment

 

This distribution would drive anybody crazy – especially your CFO.  The CFO sees this and walks in your office.  He says, “Hey, Mark, you should whack your bottom 10 reps.  They cost a fortune and aren’t performing.  We can save the money.”  But you know if you don’t have enough reps, you’ll miss the number.

 

What’s a better way to do this?  I’ll give you two: a top-down approach and a bottoms-up approach.  The combination of these two will keep your CFO out of your office.

 

Top-down: Calculate the territory market potential

This method works best if you employ Hunter sales reps (who hunt new logos).  First, using your Ideal Customer Profile, identify the number of opportunities in your market.  Then calculate the potential revenue from the market.  Do this by looking at the current spend of customers who resemble the ideal opportunities you’ve identified.   This allows you to see the total potential of your market.  You can also see the potential of each existing territory.  If you haven’t done this before you’ll be surprised.  The potential will vary dramatically by rep territory.  This is a common cause of unequal rep quota attainment.

 

Bottoms-up: The Workload Analysis approach

Download an advanced example of a Workload Analysis Calculator today.

 

This method works best if you employ Farmer sales reps (who develop existing accounts).  Start with your total number of existing target accounts.  Have you mapped your ideal customer’s Buying Journey?  If so, you know how often they want to be called on.  Multiply this call frequency by the number of accounts.  When you multiply these two numbers you get an annual call volume.   This is the total number of rep appointments per year.

 

Let’s apply some math to this. Assume you have 2,000 target customers.  You want to call on each one of those accounts once a month.  That’s 12 x 2000 = 24,000 calls.

 

Now calculate rep capacity.  Based on your experience, how many appointments can your reps handle in a week?  Let’s say it’s 8.  Multiply that by the number of working weeks in a year (typically 47).  47 x 8 = 376 appointments in a year.

 

24,000 annual calls divided by 376 calls per rep equals about 64 reps.  This is an example of a workload analysis, or bottoms-up approach.

 

When you use these two methods you get a quota distribution curve like this:

 

Balanced Quota Attainment

 

This kind of a standard distribution makes CFOs very happy.  You’ve staffed your organization properly to enable you to make the number.  You’ll produce balanced quota attainment, which is typically in the 60-75% range.  Put another way, 38-48 of your 64 reps (60-75%) should make the number.

 

Download an advanced example of a Workload Analysis Calculator today.

 

ABOUT THE AUTHOR

Mark Synek

Leads SBI client engagements, primarily in the Enterprise space, and is typically engaged at the senior sales and CXO levels.
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Few people in the sales and marketing world besides Mark can claim they are former opera singers. And now SBI clients everywhere are singing his praises. Perhaps that’s because Mark has taken his extremely diverse background, which includes post-graduate work at The Juilliard School and living abroad for several years, and distilled it down to an enormous passion for helping sales and marketing leaders make their number.

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