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Sales Per Salesman

July 7, 2006

Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. ~Mark Twain

I was assisting a very successful entrepreneur. He has been doing everything right by hiring the right people, incentivizing them, and watching costs very closely. His sales are about $11 million a year and he had a nice level of profits. His problem that he came to me about was that his sales were just stuck for last couple of years. He knew if he did not grow the firm it would have very little value in the future and business might not even make it. To put it mildly, he was upset as he just did not know how to get sales growing again.

During a very long lunch (most of my lunches are long); I asked him how many salesmen he had. He said he had three and that they were very well paid but worked very hard. During the busy season they were as busy as they could be. I asked him if knew how many folks these three could not service on a busy day and he said he did not know exactly but thought it could be quite large.

I showed him how each sales person was selling about $3,600,000 a year and that was about all they could do and this was the limiting factor in the sales expansion of his business. He was concerned that by introducing more sales staff that the income of his sales force would go down (he is a good man). However, I explained to him that this was the factor that was really limiting his sales. He just needed to introduce new sales staff into his organization and the problem should solve itself. He also understood quickly that he just had to do this even if we could pick up some flack from his existing sales staff. He thought he could deal with this and left the luncheon fuller in terms of both food and the knowledge of how to fix his problem.

In order to determine if you have too many or too few sales staff pay attention to the revenue per sales staff. Once you have this number then you can compare this to industry norms to see how staffed you are. Another number to pay attention to is cost of sales as a percent of sales over time. This will allow you to compare again your firm to others in the industry.

Sales staffs are always going to be reluctant to add more staff as they know it will cut down on their income. While you have to deal with this issue you must always ask yourself, “What is in the best interest of the business?” It takes courage to get the sales staff out of their comfort zone but you must do this.

Now go out and examine to see if you have too little or too many sales persons. This is such an important task especially for firms are trying (which is a necessity) to grow sales. Sales staffs are such an important part of each business but you just cannot only worry about their compensation. You always much to what is in the best interest of your business.