Questioning Small vs. Large Sales Teams
Are you clear about what the ideal size of your sales team is? This is a question the owners of every company should consider before hiring or firing salespeople. Sales are the principal source of revenue for any business, so having the optimum number of salespeople is of utmost importance.
Finding a balance is the key. A sales team should be proportionate to the composition, goals, and specific needs of a company. You cannot haphazardly start hiring salesmen and expect an automatic boom in your business. As an entrepreneur or business manager, you are responsible for choosing an appropriate size of a sales team that matches your business culture. That way, you’ll be cultivating a high-growth environment in which the sales force can truly shine.
To one enterprise, a sales target of $1M may be a fortune but to another business, the same amount may be like a drop of water in the ocean.
Generally speaking, small sales deals are characterized by:
- A small number of buyers and stakeholders
- Minimal internal resources requirements
- Fewer activities in every stage of the sales process i.e. lead generation, budgeting, guiding prospective customers, and delivery (customer satisfaction)
On the other hand, big deals have:
- More internal resources requirements
- More activities in every stage of the sales process i.e. pre-sale stage, locating potential clients, pre-approach, meeting prospects, formal product presentation, handling complaints, closing the sales, and post-sales follow-ups
- Many buyers and stakeholders
In this brief article, we shall look at some of the choices for organizing your sales team and the importance of a sales team proportional to your sales target.
How is your sales team in relation to your competitors?
Prior to hiring more sales representatives to increase your sales, you may choose to consider how well your competitors are doing.
As a BusinessLife subscriber you often have heard me say, a business that doesn’t sell is not in business. The question today is how do you balance the sales team with the volume of your business goals? Context of sales is crucial — your vulnerability will show up where objectives have been set poorly. This is especially true for fast-moving and high-growth enterprises whose future revenue estimations can not always be clearly defined.
While sales teams have an intrinsic competitive drive, that competition must remain effective. Getting the right mix and number of salespeople can help you add motivation and excitement to the team dynamic without introducing a hostile environment.
Sizing a sales team
Proportion of sales
Every business has a sales target of some sort and a strategy for achieving it. Choosing realistic goals is important for business. To set a sales target, look at your previous financial year’s performance and decide where you want to take your business by adding a reasonable growth rate. Choosing an unrealistic goal can at best be challenging, and at worst, counterproductive.
At BusinessLife, we believe merely setting targets based on past growth doesn’t consider various external factors such as the introduction of new products or new regional sales opportunities, market volatility, or choosing to enter international business and open up new territories. Setting a low sales target can have adverse effects on your company, from low cash flow to lowering management expectations and drive. When you choose to include these types of factors they can help you determine the balance in your selection of a sales team.
When venturing into any new market, there are many points to consider. We pose these questions to you to ponder:
- What are you choosing as your sales target and how do you plan to get there?
- How many sales representatives do you estimate you need? What assets (sales team) do you have, and what will it cost to train new salespeople?
- Are you aware of what your competition is doing?
- Are you considering sales employee attrition, and considering how that might affect your business?
Proportions of revenue
More expenditure often translates to less profit. To find a balance between spending and profit, pricing is a crucial factor for you to consider. What percentage of revenue do you spend on your sales team? To know whether you, have the right sales team size, check your gross margins.
If a big sales team is driving a big amount of sales, it probably means you have the right size. On the other hand, your team may be too big if they’re not generating sufficient revenue. This applies the other way, too: If your sales team is small and successfully selling, perhaps you might consider growing the team.
Check your sales target accuracy regularly and consider various factors which might have an impact on them, such as e-commerce. Understanding how your sales team performs and represents your corporate culture, as well as the revenue that each salesperson brings is an asset for you as an owner. As you work on your business targets, make sure your team is present and able to give feedback by inviting them to join you in strategy and planning. They are often your front line and could give you insight, so that you get to see the weak and the strong points.
Achieving business growth depends on sales
By focusing on supporting and equipping your team, you will empower them to succeed. So again ask yourself, Do I have the right number of salespeople to bring in the sales I am looking to produce, am I utilizing all my assets? The size of a sales team affects business profitability by impacting both the expenditure and revenue.
Are you getting the most out of your sales team? To discuss the effectiveness of your sales team, contact me today at peter@marcuscoaching.com.