For most companies, the sales team is the primary engine of organic growth. So it stands to reason that adding new sales talent and increasing the size of your sales team will accelerate your growth rate.
But if you’re in a B2B market with a relatively long sales cycle, it can take up to a year for a new salesperson to generate significant revenue — even though the cost of that hire starts affecting your balance sheet on day one. As a result, if you want to maintain or increase profitability, there are only so many new salespeople you can bring on board each year. Unless you can get new hires generating revenue faster, this can become a major barrier to growth.
Many companies are struggling with this issue right now, especially with sales headcounts and budgets under pressure. Even companies that aren’t pursuing aggressive growth targets are still hiring to address attrition and deliberate churn of the bottom 10% of performers. And the reality is, from recruitment to guarantees to onboarding, hiring a salesperson is a very expensive process.
Adding to expense is the fact up to 25% of those new salespeople won’t succeed. So in order to get an accurate sense of what this process really costs, you have to spread the cost of the 25% who don’t make it across those who do. For a salesperson earning a $110,000 salary, the first-year cost before commission can be as high as $270,000.
The overall P&L impact depends on when they are hired, but without question, the cost is a larger number than most people realize. If you are hiring enough salespeople to make a real difference in your revenue, their costs will also make a real difference in your profits.
The Impact of Reducing Time to Revenue
The good news is, if you can reduce the time it takes for a new hire to start producing, you can significantly reduce your exposure and even make the case for bringing on more salespeople to accelerate growth. For a B2B business with a field sales force and a typical sales cycle of 6-9 months, reducing the time to revenue from 9 months to 5 can reduce your net cost in the first year to zero, unlocking much more rapid growth in the business.
We call those salespeople who can generate revenue within 5 months or less “Sprinters.” Sprinters are not only fast revenue generators; they also tend to be more likely to exceed their targets year after year. This is partly because the same factors that led them to early success remain relevant, and partly because they are made more confident by that success.
How to Speed Up Revenue Generation
To understand how management actions can affect the “ramp-up” of new salespeople, we researched a wide range of new hires and the revenue they generated in their first year. The following diagram shows what we identified as the main factors affecting sales ramp-up, along with key management levers to pull.
You don’t have to take every action listed here (and you will be doing some already), but the importance of the issue warrants a systematic approach. After all, your profitability and business growth literally depend on it.
Find more tips on reducing the break-even time for new salespeople here.