Your sales reps tell you they are busy, constantly working customer issues, pursuing opportunities in the current account base, and even prospecting new logo business. Everyone is constantly working, therefore you must have well-balanced and optimally aligned territories, right? This is not true. Upon a closer examination, many sales leaders realize their alignment is far from optimal or balanced.
So, as a sales leader, why should you care if your team’s territories are balanced and well-aligned? Sales consulting surveys consistently find that a portfolio of well-balanced territories create a 10% – 12% annual revenue increase.
Let’s examine the key components of balanced territories while comparing them to your organization:
- Existing Account Balancing – Are your account managers or farmers pursuing balanced account portfolios? A well designed group of territories contains many different account or customer considerations, and not necessarily just sales or revenue. Other design components often should be considered:
- Profit/Margin. Nearly all world class sales organizations have the ability to analyze a customer based upon a profitability statistic like contribution margin or EBIT with a carefully designed account P&L. Once you can measure the profitability for each account, assessing margin contribution by each territory becomes a key indicator of alignment. If margins are out of whack in a particular territory, it will tell you something about the overall balance of this region.
- Number of Deals. In some businesses, the count of deals is more meaningful than the actual number of accounts managed.
- Number of Partner Channels Managed. Perhaps you don’t sell directlyto the end client, but through a channel partner.
- Number of Accounts and Sales. This is the most commonly used metric for territory balancing.
- Prospect Optimization and Balancing – Optimally designed territories will distribute an even number of potential accounts. A finer level of tuning will require that the amount of new logo prospects are in alignment with the growth requirements expected from a certain role. For example – a rep in a hunter position will need a richer and more fertile territory with higher new business potential.
- Work Load Balancing – This category is oftentimes considered the most complex. How can you really tell when the respective work load is balanced? The best way to approach this is by simply surveying your sales team. Ask them what they do, and how often they do it. The answers will be quite revealing.
- Opportunity Balancing. Is each territory yielding a comparable amount of sales qualified opportunities?
- Metro Compression – Keep in mind the fact that territories should be optimized around dense metro cores where the largest concentration of target accounts exist in the smallest geographical area. In many cases you will need an alternative plan to cover (or not cover) accounts outside of major metro areas as well.
Sales Analysis Territory Design is one of the most basic and fundamental performance factors that if managed correctly, well position your team for future success.