Rapidly increasing the size of your sales force might sound like a surefire way to reach more prospects and close more deals. But doing so too quickly can stir up more trouble than it’s worth. Smaller, growing businesses, for example, might not have sufficient expertise to manage a large sales team, especially if the company has yet to establish a tried-and-true sales process. Similarly, without clear direction, frustration and disenchantment among team members can ensue, eventually contributing into high staff turnover – a waste of precious time, talent and money.
On the flip side, a sales team that’s too small may not be able to close as many sales opportunities as a business with adequate staffing. Sales reps may feel overworked and under-appreciated, even if they’re not under-compensated. Corners might have to be cut to hit all targets, and so performance may begin to suffer – not to mention employee retention rates.
So, have you thought about determining the size of your sales force lately? Is it too big? Too small? Just right? How are you even supposed to know? Here are a few ways to pinpoint the sales force sweet spot for your business.
The Breakdown Method: A Quick Sales Force Estimate
The breakdown method of determining the size of a sales force is based on forecasted sales figures, both at a company level and per sales rep. It’s a quick, straightforward way to get a sense of whether your sales team size is on the right track.
- Step 1: Determine the annual sales forecast volume for the organization.
- Step 2: Estimate the annual average productivity of each sales rep, in dollars.
- Step 3: Divide estimated annual sales forecast volume by each rep’s projected productivity to arrive at optimal number of sales reps. For example, if a business expects $10,000,000 in sales for the next year and each rep is expected to sell $500,000 of that, the company would need a sales team of 20.
The breakdown method offers a quick snapshot of exemplary sales size, but it’s based on projections, which can change. It also assumes all salespeople have the same selling potential, which often isn’t the case.
The Workload Method: Comparing Sales Force Capacity to Overall Needs
The workload method of determining best sales force size is based on the amount of work needed to adequately cover a company’s customer base. It’s a bit more detailed than the breakdown method, but is still a relatively straightforward way to rightsize your company’s sales team. Here’s how it works:
- Step 1: Estimate the amount of salesperson time, including travel and administrative tasks, needed to manage all potential customers throughout a predetermined period. This can be weekly, per sales cycle, annually – whatever works best for your company’s sales process. The idea is to get a sense of the total workload required to meet the needs of your customer base. To illustrate, suppose this equals 200 hours a week.
- Step 2: Estimate the total annual capacity for each individual salesperson in a given sales cycle. Assume that all salespeople will have an equal amount of time available, and be sure to subtract for vacation time, sick days, and training days. Let’s assume this number is 40 hours per week for one sales rep.
- Step 3: Divide the total amount of time required to cover your customer base by the amount of time available per salesperson. The result is the number of salespeople you should have in your sales force at a given point in time. So, if a business needs to dedicate 200 hours a week to selling and each rep has 40 labor hours available, the business would need a team of five.
The workload method can be relatively simple, but it does have limitations. For example, it may not be realistic to assume that all salespeople can or should handle an equal portion of the workload. It also may not be the most productive way to allocate your sales team’s individual talents and abilities, especially if you have a wide variety of clients, complex products or services, or sales reps with diverse areas of expertise. It can also assume that every type of customer may need the same amount of attention – this may not always be the case, as it can take longer to sell certain products or to certain types of customers.
Still, it can be a good way to get a quick sense of how to size your sales force, especially if your company has a simple sales process.
The Sales Potential Method: Factor in Sales Team Abilities
The sales potential method takes the workload method a step further. It calculates ideal sales force size based on workload requirements plus the total sales each rep is expected to generate in a certain period, such as a year. This method builds on the workload approach by adjusting for individual levels of ability and effort.
- Step 1: Estimate sales team size according to the workload method; this serves as your starting point. Assume that this estimate represents a sales force consisting exclusively of “average” salespeople.
- Step 2: Rank your existing sales team members as “below average,” “average,” or “above average,” based on factors such as past sales performance, overall sales goals, or industry benchmarks. Estimate how much less a “below average” salesperson might achieve relative to an average one. Do the same for an “above average” salesperson. For example, maybe a “below average” salesperson accomplishes 0.75 as much as an “average” salesperson, while an “above average” salesperson is equivalent to 1.5 “average” salespeople.
- Step 3: Using this ranking, find the difference between your needed sales reps and the actual number of reps you have in your sales force. So, if you need and have five reps but three are below average, one is average, and one is above average, you’re still one below-average rep short (0.75 + 0.75 + 0.75 + 1 + 1.5 = 4.25). To avoid overworking employees, you may want to adjust your sales force by hiring another rep.
This method can present a more realistic sales force estimate because it takes into account the individual abilities of each salesperson, but it may still not be a perfect method because it assumes all salespeople can always meet their assumed potential and no more. Performance can change over time, whether due to improvements, setbacks, or external forces that influence customer behavior. Still, the potential method can provide a more accurate picture of sales team needs than the workload method alone.
The Incremental Method: A Gradual Approach to Growing a Sales Team
The incremental method calculates optimal sales team size by gradually tracking the additional output each sales rep can generate. The idea is to continue to add salespeople, as long as each new person brings in more revenue than they cost to employ. Here’s how it usually works:
- Step 1: Start by hiring a new salesperson.
- Step 2: Measure the additional sales that are generated as a result of hiring the new rep. This could be measured over a few months or a year, depending on your sales cycle.
- Step 3: Compare the salesperson’s contributions to the total cost of their position, including salary, benefits, training, and any additional expenses. If the incremental sales are greater than the total cost, it indicates that the new hire is profitable.
- Step 4: Keep adding salespeople, as long as each new hire generates more revenue than they cost.
This method can help companies ensure that they’re hiring only salespeople who positively contribute to the company’s bottom line. It also can be a good, slow way for small companies to begin growing their sales force, but that gradual process might be too time-consuming for rapidly growing businesses that need to max out potential ASAP. This method also can assume that each new salesperson can always perform at the same level, which may not be the case. And, there may be limits to the size a sales team can reach before other factors – management capabilities or market saturation, for instance – can start to impact productivity.
The Bottom Line
Determining the proper size of your company’s sales force can take time and careful analysis. Each outlined method – breakdown, workload, sales potential, and incremental – can have its own advantages and disadvantages, so the best way to estimate ideal sales force size may depend on your company and its needs. And try not to assume the method you initially choose should be the only way to a determine sales force size. In some cases, it can help to use a combination of methods. For example, a company might combine the incremental method and sales potential method to slowly ramp up its sales force while realistically taking individual abilities into account. Try to regularly review your sales team against overall business performance and sales goals, adjusting as necessary.
A version of this article was originally published on June 13, 2011.
Photo: Getty Images
