Creating a sales organization to cover the market is no easy feat and needs to be revisited often as you gather more intelligence about the market and market dynamics. Sure, it’s fast and easy to come up with a simple geographical approach but in order to maximize the market opportunity it’s not quite that simple.
There are 2 extremes that people seem to go with…
1) Not enough salespeople to adequately cover the market
2) Just way too many salespeople
Either scenario is a problem and the answer lies somewhere in between and therein lies the skill. What is the correct size and structure of the sales organization?
I really liked this blog post @ https://executiveanswersforum.com/answers-blog/
There is an all too common practice at companies especially in the software and technology space to operate under the premise that in order to grow sales you need to add sales people. This is more often wrong than it is ever right, but surprisingly keeps happening over and over again.
The net/net – How to solve it:
- Model has changed ramp marketing and lead gen first
- Exhaust capacity of existing sales group before adding headcount
- Respond and adapt to the market, you have to be nimble if you overreach
The story goes something like this:
Gathered around whiteboards and iPads a group of executives discuss expansion plans. Guided by metrics, financial reports and market analysis (best case scenario – often it is just educated guessing) a target growth rate is determined. This goal is then divided by past statistics of rep production which equals the number of reps needed to reach this target rate.
The company then expends massive resources in recruiting, hiring, training and onboarding to support this expanded sales force. The team, now trained and ready charges into the market, first they find they are ill equipped by marketing to speak to the product and competition, but the company has not ramped up marketing efforts yet and the sales team is asked to just make it work.
With limited resources the sales team finds engagements a challenge, but the major issues is that with such a large group the business interest is not enough to satisfy their pipeline needs or quota expectations. They dig in hard to prospect, but have limited support from lead gen because that team has not been ramped to meet the new demands and now is behind. Sales reps must create their own demand and pipeline, but with their sales cycle time and prospecting conversion time are finding themselves chasing after a quota that is starting to seem unattainable.
As the months drag on the moral begins to turn, sales reps commiserate together, frustration with marketing and lead gen delays increase and the first people begin to leave. Management recognizing the issue starts to offer incentives, but the writing is on the wall. The quarters and year ends in stressful disappointment and then the round of layoffs come.
The lowest performers now have been let go, the top performers worn out and frustrated continue to leave and management is left fighting to get back to where they began never mind the goal they had intended.
I have lived through this and seen it happen too many times at great companies which thankfully ended up getting it right in the end. The moral of the story is this is a painful road that can be avoided – here is how.
- The model has changed – companies are engaging late in the process and therefore places a much higher need on great lead gen and marketing to drive early engagement to give your reps a fighting chance (more on this at our event next week) Therefore ramp marketing and lead gen first and then sales
- Prove the market before you expand by maxing out the capacity of your existing team. I have never once met a sales person who had more business than they could handle. Why carry the overhead of more reps when you can just increase volume.
- Respond quickly to what the reality is. Even thought you do exhaustive TAM studies, it may be wrong or you may be too early or too late. There are so many dynamic factors in the market today it is impossible to have static perspectives and be successful. If you overestimated make the adjustment quickly and take responsibility, everyone understands a mistake but everyone despises the transparent pretense.
Sales and Business Strategist
Bethesda, MD 20814