In my last blog post, I laid out our six-step methodology for determining optimal headcount and aligning sales force size with market potential. In this post, I want to specifically address market potential.
We often find that most sales organizations lack clarity on their TAM (Total Addressable Market) and as a consequence, the market potential within their individual territories. In lieu of market potential, we typically see sales territories designed based on customer density, location or even historical sales precedence. All of these methods ignore the actual demand in the marketplace for a given product or solution which can and does change over time.
Remember this equation… Success = 50% Talent + 50% Performance Conditions. You can have the best talent available, but if you’re not putting them in the right performance conditions, you will not achieve the desired results.
My colleague, Bryce Record, recently outlined the 5-Step Process to Uncovering True Market Potential. In his blog post, he guides us through the major steps to optimizing and aligning your sales territories. The formula for determining Market Potential, writes Bryce, is the multiplication of a company’s Total Number of Prospects by Potential Customer Spend. Check out his post for an in depth explanation.
At the end of the day, the goal of any sizing exercise is to answer the following three questions:
- How many heads do I need?
- Where do I need them?
- When do I need them?
Without understanding your market potential, you will not be able to accurately answer these questions.