The relationship between the size of your sales force and its impacts on revenue, costs and gross contribution margin are shown here.

 

 

sales vs. margin vs. cost

 

 

As the size of the sales force increases, so too do sales revenues and sales costs.  However, at some point, the returns in margin diminish as the incremental benefit of adding an additional sales rep begins to taper off but the incremental cost continues in a linear fashion. The time to stop adding sales staff should be before the cost curve crosses the margin curve indicating saturation of sales reps based on market opporutnity. 

 

The question is how does one determine that point?  World class companies use three sales force sizing approaches:

 

  • Activity – How many reps are needed to perform the necessary selling activities against the prospect/customer universe the company wants to pursue?
  • Pipeline – How many reps are needed to manage a sales pipeline sufficient to achieve the annual sales targets?
  • Financial – What is the return each channel/division of the sales force produces at different revenue levels?
ABOUT THE AUTHOR

Aaron Bartels

Helps clients solve the most difficult challenges standing in the way of making their number.

He founded Sales Benchmark Index (SBI) with Greg Alexander and Mike Drapeau to help business to business (B2B) leaders make the number. The world’s most respected companies have put their trust in and hired SBI. SBI uses the benchmarking method to accelerate their rate of revenue growth. As an execution based firm, SBI drives field adoption and business results.

His clients describe him as a consultant who:

 

“Makes transformational impacts on me, my people and my business”

 

“Solves my most difficult problems that to date we have been unable to solve ourselves”

 

“Brings clarity to an environment of chaos”

 

“Has real world sales operations experience making him qualified to advise us on a variety of sales and marketing challenges”

 

“Is able to spot proven best practices that once implemented will make a material impact on my business”

 

“Constantly challenges status quo and compels us to act”

 

“Focuses on execution and driving change to stick in our environment”

 

“Makes good on his promises while enabling our business to realize his projected results”

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