Having More Reps Doesn’t Always Equal More Revenue
We hear this a lot at Square 2, especially from prospects who haven’t worked with us yet: “Why should we hire your team when we can just hire two more sales reps and get the same results?”
It’s a fair question, but it’s a bit like comparing an apple to an orange – they’re two different fruits.
A better question, and one we often recommend for prospects, is this: “If you hired our team, how many fewer reps would you need?”
How exactly does adding a steady flow of qualified leads mean you might need fewer reps?
Let’s break it down today.
Reps Aren’t Prospecting; People Are Finding You
Whether you have business development reps (BDRs), whose job it is to make cold calls, or you have reps making cold calls, this is a highly inefficient lead generation effort.
With events canceled, people out of their offices and office phone numbers redirected to voicemail, it’s harder than ever to find the people you want your reps talking to.
Let’s do some quick math. General stats on cold callings show that a rep cold calling gets about 1% to 3% of their calls to turn into appointments. To make this easier, let’s split the difference and say 2%. If they make 1,000 calls, they get 20 appointments.
But those aren’t all quality appointments. Statistics show that about 20% of those result in qualified opportunities. Now you’re down to four sales opportunities. And it probably took a single rep two weeks to get those sales opportunities (100 calls a day for two weeks). If you close 50%, that’s two new customers every two weeks or four in a month. Not bad, right?
If you wanted to get 10 new customers a week, you would need 10 sales reps at a cost of $100,000 all-in with base and commission, or $1 million in annual payroll for reps. If your average revenue per new client is $10,000 a month, that’s $400,000 a month or $4.8 million for the year on the investment of $1 million in rep costs. Still not bad, right?
But what if marketing was generating many more leads and handing only the best and most qualified leads to your reps?
Here’s some more math.
Your website gets 10,000 visitors a month and turns 300 into marketing-qualified leads. Of those 300 leads, 100 are sales-qualified leads (meaning they want to talk to reps), and of those, 80 are solid sales opportunities. If you close the same 50%, that’s 40 new customers a month.
If the reps were only dealing with the 100 SQLs each month, would you need 10 reps? No. Maybe if you had four reps, each could handle 25 prospects a month. The cost of the reps is now $400,000 and the cost of the marketing is $200,000, reducing your cost of acquisition by 50%, meaning $600,000 is going right to the bottom line.
On top of that, the reps would actually be helping those 100 prospects instead of cold calling people who aren’t interested, ready or even remotely qualified. This gives everyone involved a much better professional experience, shortens your sales cycle and very likely increases your close rate, making this model even more profitable.
I hope this gets you thinking.
Reps Are More Efficient, Spending More Time With Better Leads
Let’s dig into this a bit more. Cold calling is highly inefficient. But following up on people who want to talk to you can be highly efficient. The time your reps are spending sifting through leads looking for the best ones means you’ll end up with better clients that spend more, close faster and close more frequently.
You’ll be able to do more with less, not to mention you won’t be pestering, abusing or even torturing your marketplace by just calling, calling, emailing, emailing, calling and emailing more.
By marrying an effective marketing and lead generation effort with sales follow-up, you’re letting those people who are interested in you present themselves, and then you’re providing expertise to help them work through their buyer journey in an advisory, guided and helpful way.
It’s the way people want to buy today.
All Reps Are Following The Same Process
When you lose a deal today, do you know why? Do you know exactly what the rep did or didn’t do? Not likely, and even if the reps do tell you what happened, it’s just one side of the story. Do you ever call prospects and ask them for their side of the story?
If you’ve never done this, you should consider doing it. You will learn a lot about your sales team and your sales process.
But if you have a defined, documented and carefully crafted sales process, you’ll know exactly what happened and why.
Your reps are talking the same language, using the same qualification methodology, using the same forecasting tool, asking the same questions and using the exact same technology.
When you see a breakdown at the same place in the process, you can fix it. When one rep is doing well and another rep is not, you know it’s not the process but rather the rep. You can train them, mentor them, coach them up or make a change.
It’s critical if you want to scale growth to have a scalable sales process that is documented and deployed across all your reps.
Decisions Are Made With Data
This story keeps getting better, because when you look at generating sales scientifically with process, tools and technology, you get an incredible amount of data that helps you make decisions in a more informed way.
The result is even better performance of your sales and marketing efforts.
You start to see which reps are performing “in process” as opposed to just knowing who is closing what deals. You start to see where in the process the cycle is slowing down or stalling. Anecdotal data become quantitative.
You see which tools are moving deals forward and which tools are causing deals to stall. You see what types of prospects are moving quickly and what types of prospects are moving slowly.
Forecasting becomes more scientific, which means you’re able to resource plan much more efficiently. Instead of depending on a rep to tell you when a new customer will close, lead scoring and opportunity qualification scores help know exactly what to forecast and how to efficiently plan for the new customer onboarding.
All of this has been referred to recently as sales operations. Our blog article on sales operations goes into great detail on why it’s important to the success of your revenue generation engine.
Sales Hacker defines sales operations as “the unit, role, activities and processes within a sales organization that support, enable and drive front-line sales teams to sell better, faster and more efficiently.” Here’s their full article.
You should be able to see how what we’re going through here is intimately connected to a sales operations role.
Optimization Is Done Daily, Weekly And Monthly
One of the areas sales operations works on is optimization. Continually improving the performance of your sales team based on data is critical for ongoing success.
To quickly illustrate this, consider a company with an extremely low close rate (below 50%). The issues might be the agreement, contract or proposal paperwork. It might also be the final presentation where the solutions are unveiled, or it might be a process that doesn’t help the prospect socialize the investment prior to seeing it on paper.
If there isn’t any energy applied to this low close rate issue, it’s never going to get better. If there isn’t a more scientific approach to fixing the low close rate issue, you’ll never know what was causing the issue or what worked in fixing it.
And to back up further, if you didn’t see the data on low close rates across the board, you might never have put any energy or investment toward fixing this very important revenue-related challenge.
By the way, based on our research and data, you should be closing upward of 80% of the clients who receive your proposal. If you need tips and techniques on how to improve close rates, schedule time to talk with us today.
Technology Makes The Process Scalable
Finally, marketing moved from an art to a science about eight years ago. Today sales is moving from an art to a science, too. It’s not about the reps anymore. Today it’s all about the process, the tools and the technology the reps use to be more efficient and much more productive.
I’m not going to spend a lot of time going through each of the individual technology products that are transforming sales today. In this article about tech stacks, there are many references to software (mostly SaaS products) that you should be considering to improve your sales execution and create a more predictable revenue stream.
Follow these steps, and instead of hiring new reps to grow revenue and sales, you’ll be looking at improving efficiency, making continuous improvement and investing more money in lead generation, lead scoring and the experience your prospects have with your salespeople.
This will give your company a revenue generation machine that can be fueled by an investment in marketing instead of an investment in salespeople.
Square 2 — Building The Agency You’ll LOVE!