When Will My New Reps Produce a Result?
As CFO you have approved the 2015 headcount plan. It called for a 20% increase in sales reps. Sales is now hiring with the help of HR and recruiters. You still believe you need more sales headcount. And are confident in the 20% number. But you are now worried about surviving the lag time between hiring and results. As you should be.
Hiring additional sales heads is never a guarantee to growth. So how do you ensure the new headcount plan does not wreck you Q1 profits?
First you need to model for the change in cost. Adding 20% heads is going to cost you 20% more base pay. But you should be thinking in terms of OTE as well. Often organizations try to minimize the financial impact of new hires by deferring variable pay until they generate revenue. This may be a mistake. An A-Player sales rep who requires months to build a book of business is not going to settle for base pay alone. They may take the job. But then leave over once they realize the effort required to achieve their OTE. So in your financial planning, account for ramp quotas and possibly draws. How do you know if this is needed for your situation? Ask yourself the following questions:
- What is the profile of a rep who would take this job for base only vs. OTE?
- What is the pipeline of business that exists for this new rep?
- What is our position vs. the competition in the territory for the new rep?
- What level of training will the new sales rep receive?
- What level of sales management support will the new sales rep receive?
- What has been the ramp performance of sales reps in the past?
More than likely a few of the questions above were uncomfortable. If that’s the case, then consider a ramp comp plan for your new sales reps. Do not just hand them a draw for showing up to work. But don’t defer any variable until they generate revenue either. You should stagger the goals by tenure:
- Early stage indicators—Shadow sales calls, point quota system, training certification, etc.
- Mid-stage indicators—Appointment setting, proposal generation, etc.
- Monthly/quarterly/yearly quota attainment-—New logo wins, land and expand, quota attainment, etc.
In addition to the advice above, here are 3 more tips:
- Ensure you are hiring an A-Player sales rep as Ryan points out here – https://salesbenchmarkindex.com/5-reasons-you-need-to-redesign-your-sales-territories/.
- Have a Fast Track to New Sales Rep Productivity as George points out here – https://salesbenchmarkindex.com/how-to-fast-track-new-rep-productivity/.
- Sales management is staffed to decreasing onboarding time as Dan points out here – https://salesbenchmarkindex.com/4-25-ways-sales-management-can-decrease-onboarding-for-new-sales-reps/