Sales

Understanding The Real Cost of Launching a Field Sales Team

Key Concept ~ Launching a field sales team is a key investment in driving sustainable growth.  But it is expensive.  Here’s some compelling research on just how expensive it can be.

You’re finally ready.  You’ve worked diligently for years leading your company to this point.  The time has come to launch the field sales team.  It is the inflection point for growing startups.  How you plan, target, validate, train, and execute the launch will be the single most important driver for success.  This is especially true if you’re an investor-driven startup.

As you ramp into your launch you’ll be burning time and other people’s money until you achieve sufficient market traction to break even.  Speed to traction is mission-critical due to the high cost of field sales professionals.  How expensive are they?  Here’s some interesting research from the book, “Outsourcing the Sales Function, The Real Cost of Field Sales”, by Erin Anderson and Ph.D. and Bob Trinkle (The Thomas Corporation, 2005).

The authors took a hard look at sales productivity, defined as face-to-face selling time.  What they found was rather astounding.  Out of a 365 day calendar, a typical, business-to-business sales representative will spend 132 days in the field.  Here’s the breakdown of their days not in the field; Weekends -104, Holidays -8, Vacation Days -10, Sick Days -5, Sales Meetings -20, Trade Shows -8, Office Days -78.

The second thing they examined was the effect of windshield time.  Their research demonstrated the typical sales rep spends between 2 to 3 hours per day actually selling to prospects when in the field.  Boil this down and you quickly realise a typical, b-to-b sales representative is contributing somewhere between 33 and 50 actual face-to-face selling days per year.

Let’s say your fully burdened, average cost per sales rep is $100,000 per year (this figure can easily run $120,000 to $180,000 per year, depending on the industry and geography).  At $100K, your company’s cost per hour of actual, face-to-face selling time will run somewhere between $250 and $378 per hour, per representative.

At this very real, hourly rate, you’ll want your sales representatives firing on all cylinders.  That’s part of why your pre-launch planning, targeting, validating, and training is so crucial when it comes to time to traction.  Investing in a highly engaged, performing sales professional is expensive; but not as expensive as a poorly performing one.

The other challenge to achieving time to traction is the natural lag built in to creating a traditional sales organisation.  Once you have the capital to move forward, you’re ready to find your sales leader.  Depending on the scope of the launch and particular industry, this could take months, involve recruiters, relocation expenses, etc.  Then there’s a bit of acclimation time before your new executive or manager is ready to build his or her team.

Then there’s the sales/customer support interface that needs to be addressed, the collateral need to be created, targets should be set and databases, and a training program needs to be developed.  Now you’re ready to hire your sales reps.  And of course, they will have a learning curve in the marketplace as well.  Depending on your sales cycle, this can easily add five to six months of lag time and expenses prior to initiating sales traction from the time you were financially ready to launch.

For many firms, crossing this threshold is the single most important initiative they will undertake.  It is the sales engine that will drive the company to success or sputter out along the road to market.  Plan for it like the company’s life depends upon it…it does.

Dave Solomon

Dave Solomon is a serial entrepreneur influenced by Terry Murray, one of the greatest business mentors of 21 century. This Blog is an initiative to recollect the lessons of Mr. Murray and help aspiring entrepreneurs become transformational entrepreneurs

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