No Way to Run a Railroad
In my article “Free Range Salespeople—A Day of Reckoning” I talked about the connection between missing information and negative outcomes in sales such as:? Stalled opportunities, Pushed deals, Lost deals due to No Decision and Competition, and Customer Churn/Dissatisfaction.
In this article I offer an example of the tremendous negative financial impact of salesperson churn.? First some stats:
Below is an example from a software company that sells complex products to the SMB market.? This analysis models the impact of a sales position that churns:? That is, how much revenue would be produced by a sales position that churns versus one that does not.? To keep this calculation conservative, I assume that the non-churning sales position is one that only achieves 80% of its annual quota of $1M.
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If we look at a single sales position over the course of a year and assume that the existing rep leaves in month 3 and is replaced by a new rep in month 4, we can see that the cumulative annual revenue generation of that sales position drops from $805,000 to $325,000 given a typical ramp rate for this company.? In this case that amounts to $480,000 in lost revenue because of sales position churn.? Said another way, a sales position that does not churn produces ~2.5 TIMES as much revenue as a sales position that does over the same period.? (Even if the non-churning rep does not make quota.)
If your average annual turnover is 34%, that means that 1 out of every 3 sales positions on your team is going to produce just a fraction of the revenue you need to make the team number every year.?
Salesperson churn leads to a significant decline in revenue and gross margin, substantially higher sales costs, lower customer satisfaction, and an increased risk of customer churn. It also results in reduced close rates, longer sales cycles, and a loss of critical organizational expertise, all of which undermine overall business performance.
Clearly, today's business landscape has evolved, and salespeople are no longer the sole point of interaction between companies and their customers or prospects. However, for organizations providing solutions to complex problems, a culture that fails to do everything it can to help its salespeople succeed is going to significantly underperform those that do.
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Calculation Details:? In this example, the new rep produces zero revenue for the first 2 months and then 10% of on-target monthly quota ($83K) in month 3, 20% of on-target monthly quota in month 4, ramping up to 80% of on-target monthly quota in month 8.?
I've had the honor of working and collaborating with Pete for nearly twenty years. IMHO, he is not only one of the most consummate sales executives I know, but he's also the most pragmatic, quantitative, and analytical. As I write my next book on business performance, I have him on speed dial. His insights are spot-on, sometimes uncomfortably so. When I saw this recent piece from him on the devastating impact of salesperson churn, I called him up and told him about my research on a company that's had a new CRO 5 years in a row. He then described the trickle-down impact on revenue and more. That makes Pete's analysis even more significant.
https://compass-ion.info/compassionate-offboarding
Great insights, Pete Smith! While better onboarding is crucial, perhaps an overlooked yet powerful tool is better off-boarding. Paradoxical as it sounds, esteemed ex-colleagues—once free from internal constraints—can offer candid, unfiltered feedback on what truly drives talent away. Leveraging these insights could be the key to retaining those who are still on board.?
Professor @Bryant University / Co-founder @RNMKRS / Forbes #NEXT1000 /TEDx Speaker / Author / Director Sales Institute / Chief Science Officer / Fitness Geek
1 个月Companies need to start taking a hard look at their sellers. Every time they lose good talent, it sends them back so far considering recruiting, hiring, building a relationship, on boarding, and so much more. Good training and support directly translate to organizational commitment and performance. Nice POV.
Digital Workplace Strategist | Driving Employee & Customer Experience
1 个月Great article here, Pete, with good data on salesperson churn. You're effectively highlighting a critical, often underestimated, cost in sales organizations. So, how do we address this? Are we talking about better onboarding processes, competitive compensation, and career development opportunities or a more supportive and collaborative work environment?