An Insight colleague recently got married and the occasion reminded me of my own wedding and all the planning that went into it. Of course it’s nearly 17 years since I got married and it’s self-serving to think that I thought about everything all those years ago, but my current experience planning tells me that I didn’t really get it.
Beyond the obvious importance of finding the right partner, a wedding requires an intense amount of planning. You start with the end goal in mind – actually holding your wedding – and work backwards to determine what needs to happen between the present time and the wedding date. A location must be picked, a venue booked, the menu decided, guests invited, travel planned, and a myriad of other critical tasks – not least of which is trying to work with different families and friends.
Imagine waking up today and deciding that you’ll get married next week at a beach resort in the Bahamas or at St. Patrick's Cathedral in New York City at 5:15 pm with a few hundred of your closest friends in attendance. It simply wouldn't happen because those venues are fully booked for the next 12 months, if not longer. If your plan was to get married a week from now at those locations, you would need to have planned for that a year ago.
The same goes for the planning needed to ensure you can hit your sales targets a year from now. To do this, you work backwards to determine how many sellers will be needed given your goals, including their estimated performance and quotas. Sales capacity is one of the most critical elements of planning to succeed.
Here’s a typical example of poor planning: we often speak to sales leaders who share that they need to grow new business sales by 25+% next year. They know they need more headcount, so they plan to hire five additional sales reps and assign each full quota with minimal ramp time. BOOM! It’s assumed that the existing headcount plus the new headcount will yield their targets.
This is a very risky assumption since there are many dependencies, and we recommend a more detailed plan by taking the following into consideration:
1. Hire early
Depending on your vertical market, and geographic location, it takes between 3 and 6 months to hire quality people. Recruiting always takes longer than we think. In a tight labor market, strong talent is even harder to find quickly. Since most good sellers are waiting for their final commission checks and awards for the current year, they may not be looking to start recruiting until after Q4 and potentially into Q1. Realistically, you may not get anyone to start until March or April. If you want to have reps on board and productive for the next Fiscal year, you needed to start the hiring process in Q3, or you’ll have to temper your Q1/Q2 bookings expectations.
2. Avoid aggressive ramp time estimates
A common mistake made by all optimistic sales leaders is their assumption that they can ramp reps to full productivity quicker than reality. We will hear that companies have new training processes, content or tools in place, and the team has been asked to improve ramp times. While there may be exceptions, the average ramp time for a rep to get to full productivity is 4 to 12 months (depending, of course on target buyer segment). You should always be building better onboarding, but until you’ve proven that the new program actually decreases ramp time, build your ramp expectations in one of three ways:
- Sales Cycle Based – Take your sales cycle and add 90 days for new sellers to source qualified opportunities
- Historical Analysis – Use actual data about how long it’s historically taken to get reps to full productivity. Adjust slightly for new tools and trainings.
- Training Heavy Model – Take yourtraining period and add sales cycle duration with a modest adjustment for experience
Be cautious about placing overly aggressive ramping requirements on your reps. If for various reasons reps don't ramp at the pace you need them to, you’ll find yourself with demotivated reps, or reps that check out before they can fully ramp. And you run the risk of missing company goals.
3. Account for rep attrition
Today you have 10 reps in territory and 5 new ones ramping up (yes, you hired early and made realistic ramp assumptions). You’ve done the math and, assuming various levels of productivity, your sales capacity model suggests you are on track to hit your targets. Fantastic planning, but one critical data point is that there’s always attrition from the team. Regardless of why reps leave, you need to account for up to 20% turnover. This means that you should build some slack into the model to ensure you hedge for team member fluctuation. You can do this through over-allocation of quota (we recommend no more than 15%), over-hiring, and deploying more productivity enhancing tools like Salesloft.
4. Mitigate income stress on reps
Starting in a new sales role is difficult. A seller needs to learn about the company and its products, adapt to the culture, learn the internal processes and systems, and transition from any former sales methodology to your company's way of selling. It takes time to adjust let alone to start closing sales. Depending on sales cycle length, the complexity of the sale and the ASP of the deal, a rep will likely not make any commission money for a few weeks, or months. Those reps will need a bridge on their variable incentive to ensure that they can ramp successfully and aren’t constantly worried about how they’ll make ends meet. Best practice is for companies to provide 3-6 month draws for new reps to ensure that they can earn part of their variable incentive while they start to ramp and close actual sales. You want your reps hungry, not starving.
5. Plan differently for new markets
Existing market expansion is relatively straightforward, whereas new market expansion is much more complicated. Your company needs to establish its brand, build a reputation and develop tailored training and content to support the sales teams. Those fundamentals need to be in place well before the launch of a new market or product. As a result, you’ll need to plan for a much longer ramp period to account for all these things. Additionally, finding talent may be more difficult since your company has no track record of success and you’re asking local talent to take a leap of faith in your company. This will also require different compensation structures to allow reps to seed the market and cultivate it over time.
The upside to these new markets may be significant which is why detailed planning is critical. Given the complexities and dependencies, we recommend that Insight Partners’ portfolio companies contact us well in advance of launch to work through these issues.
6. Include cross-functional dependencies
While recruiting and ramping reps is the sales team’s focus, many other company teams need to be included in the planning process. The marketing team needs to be ready to drive more leads and potentially support new markets. Sales operations needs to be able to scale to support and manage an expanded team. Within sales, you’ll potentially need additional managers. All of these things need to be factored into the planning process.
If you’re reading this in mid or late Q4 and you haven’t already addressed some of these things for 2020, it’s time to start. You can still have your dream wedding.
Insight’s Sales Center of Excellence has seen many companies in this situation and there are ways to address it – although, fair warning, you may need to temper your expectations or change some of your strategies. For example, if you don’t yet have reps in the pipeline but have major hiring needs, look at outsourcing a portion of your sales process. If you haven’t planned for realistic ramp time or rep attrition, take another look at your quota allocation specifically for tenured reps; we find that many companies underestimate the amount of productivity a tenured rep can generate compared to new hires. You can also modify spend on non-core items to cover the cost of non-recoverable draws and productivity tools. There are many ways to work through insufficient planning and get you to your end goal.
Weddings are for celebration. Advanced and comprehensive wedding planning can ensure that your special occasion meets your expectations and unfolds effortlessly. Similarly, comprehensive sales planning sets your company up for an amazing year of successes and revenue growth.