One problem that SaaS companies often struggle with is making sure their pipeline is constantly full of high-quality leads. But even if you’ve achieved that, if you don’t have the right reps in place to take advantage of those opportunities, then you’re most likely losing out on many great deals.
This is why having an efficient and effective hiring process in place is crucial for growing your business. Occasionally you’ll hire a rep that turns out to be a natural superstar, but most great reps are trained to be that way. This means not only do you need to be able to hire reps who can be trained, your hiring team also needs to be aware of how reps are ramping up to full productivity.
How Do You Calculate Sales Ramp Rate?
Ramp rate is the rate at which your reps are ramping up to hit full quota within their first few months on the job. Coaching and onboarding new reps takes time and energy from other team members, so the faster your new reps can ramp up, the faster the team can continue to succeed.
Knowing your ramp rate can not only tell you how long it will take new reps to get up to speed, but it can also inform your hiring plan, so you know how many new reps to be hiring to hit your goals. But before you can know any of these things, you need to know how to calculate your sales ramp rate.
Start by getting a general sense of your current average ramp rate by cohorting your new starting reps and normalizing the dates to see how they do in month one through month twelve.
Quota Heatmaps can give you a close look at how much quota attainment individual reps met each month.
- By analyzing these heatmaps you can get a clear picture of how many months it takes new employees to contribute to quota. In this example, Mary Badham started meeting quota by month six, while it took Dorothy McGuire until month nine to meet her first monthly quota.Right off the bat, you can tell that if your ramp period is any shorter than six months, you’re not leaving enough time for ramp. So how should you go about actually calculating your ramp period? There are a few ways to calculate based on which metrics are most important to your company.
- Method 1: The Sales Cycle Method. This centers the ramping period around your average sales cycle which is an important metrics for sales teams. Adding 90 days gives a buffer period for onboarding and training, but this number is a bit arbitrary and may be too much or too little for companies.
Method 2: Quota Attainment. By calculating based on quota instead of sales cycle, this formula takes into account situations where reps may not have an average sales cycle or are not working directly to sell a product. However, there is some room for error if reps hit 100% quota prematurely or if some reps never actually reach 100% but are still strong performers. The heatmap report above can help to track this metric.
Method 3: Training and Tenure. This formula takes into account the amount of time it takes to onboard and train a new rep as well as the amount of experience a rep is coming in with. More experienced reps should have less time added on for the Experience part of the equation. While this formula may help give a more accurate ramp period with more factors taken into consideration, these factors may be a bit arbitrary at first especially when defining the experience variable.
Remember that your ramp rate should be something that you’re constantly updating and checking up on. We suggest starting with method 1, the simplest method until you have a better understanding of your own hiring process. Keeping an eye on how your ramp rate is correlating with performance will make sure that you’re not under or over estimating new rep performance.
Will Your Average Ramp Rate Keep Your Company Afloat?
Now that you’ve figured out how to determine your ramp rates, you need to figure out if these rates are fast enough to account for the dip in MRR each new hire brings.
Because it takes time before a rep can start contributing to quota, their first few months are highly cash flow negative. This builds up a cash trough that you must first invest in for all of your new reps before they eventually finish ramping and start to meet quota and pay back this investment.
When you start hiring multiple reps at the same time, the payback period doesn’t shrink, but the cash trough will compound.
You need to be sure that not only can your company handle the initial cash trough you will experience when bringing in new reps, but that the ramp period isn’t so long that the payback period is extended to the point where it’s no longer feasible for your company.
Let’s see exactly how your ramp rate can affect how much you can hire and the payback period for new reps. Let’s assume that the company below sets quota at $60k a month for sales reps. Based on this graph, we see that it takes about nine months before a rep can start to hit quota.
If the initial investment needed to bring in a new rep is $150k, then it’ll take about 10 months before that investment is paid back and your rep can start generating a profit. As the number of reps you hire increases, the amount of investment you’ll need to make in the beginning increases as well.
The crossing point your company will need to determine is how much investment you’re willing to wait 10 months to be returned. You want to be hiring at a rate to meet your goals for the year, but you also don’t want to be spending so much on hiring that you’re low on capital.
The best way to increase the amount of capital you can spare is by increasing your ramp rate. The faster your ramp rate, the faster you’ll be able to make up for the dip in MRR each new hire brings.
3 Onboarding “Best Practices” to Accelerate Your Ramp Rate Without Burning out Your Reps
When designing your onboarding program, there is a fine line between “content overloading” your reps by cramming information into a few weeks and spending weeks and weeks on onboarding.
Onboarding is an extremely important time not just for the new hires, but for the entire company. By spending more time coaching here, sales leaders will save themselves time further on. Setting out consistent workflows for new reps here will get them ramped up quicker and build a stronger foundation for them to build upon in the future.
But the flip side is cost. You need to find a balance between an effective onboarding program and an efficient ramp rate. So, what if your ramp rate isn’t good enough, and you need to accelerate, what can you do?
Here are some “best practices” when it comes to onboarding so that your reps feel motivated to learn and your onboarding process stays efficient.
- Outline clear expectations. By providing a clear framework for learning and goals that new reps are expected to achieve, reps will have both short and long-term goals that they can work towards. This gives them a clearer picture of how well they’re meeting expectations and what steps they need to take to reach the next level.
- Provide hands-on workshops. Teaching is one thing, but your reps will never properly learn without hands-on practice. Give them the change to engage with the technology they’ll be using and to really become comfortable using it. By putting techniques they learn into practice, reps can quickly learn what works for them and what they need to practice more.
- Identify problem areas early. The hardest part of onboarding is weeding out the reps that aren’t a good fit and which just need time to grow. Keep a close eye on your new reps early metrics. This can help you determine which reps are low performers with low potential and should be let go, but also which reps are low performers with high potential and need a bit of extra grooming.
By keeping your reps at the center of your sales strategy, you can make sure you’re hiring the best reps for your company and training these reps with an effective coaching strategy.