by Paul DiModica

Managing and growing a sales team is expensive. In a market where base salaries range from $50,000 to $120,000 per year (plus commission and bonuses), hiring a salesperson who fails or does not meet their quota is an expensive issue that most managers must deal with in their career at some time.

When salespeople do not hit their quota . . . it is not always their fault.

Selling successfully requires an integrated team approach. It is then up to the individual to succeed or fail based on his or her own initiative.

To increase individual salesperson success, firms must integrate and align internal support systems. The average non-selling salesperson costs a firm OVER $1,000,000 a year.

That's right, over a $1,000,000 a year.

To calculate the cost of a non-producing salesperson, you must include the lost gross margin contribution you expected from them during their selling year.

Additionally, a first-time sale with a new prospect should generate three times more revenue (lifetime value of the prospect) over the next three years (through add-ons, maintenance, upgrades, new projects, etc.).

To accurately determine what the lost revenue effect is to your firm caused by the non-selling salesperson, you must multiply their lack of gross revenue capture by a factor of 3.

Lost Sales Analysis Calculation Example

Using an example quota of $1,000,000 and calculating gross margin on quota at 30%:

So, each month that a salesperson does not hit quota, they are costing you $85,000.

Instead of writing off this amount, why not invest in an internal business structure that minimizes the failure of salespeople and increases your firm's ability to hit your corporate goals.

This internal structure is based on aligning your sales hiring and sales training process with corporate revenue objectives so that all departments work in unison to help the salesperson succeed.

Corporate Sales Performance Alignment Chart

Through the above graph, you can see how internal systems should be created to support the individual as well as the team's performance based on corporate goals.

Yes, this analysis looks at salespeople over a 12 month period and salespeople may hit their sales quota on some of their available months during a fiscal year. But when a salesperson is hired, it is a one-year commitment by management to their fiscal forecast. So, isolating an individual's monthly performance is not truly reflective of the true cost of a salesperson.

Next week, we will talk about how to use the Corporate Sales Performance Alignment Chart above to hire the right salespeople and manage their success path to reduce the high cost of failure.

To help your sales team sell more, you should reduce your focus on individual performance evaluations. Instead, focus more on the synergy between performance and the internal support systems you have designed for them.

Every month you don't support your sales account manager, it is costing your firm $85,000!

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