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Filet Mignon or A Better Sales Team?

It truly can be a matter of simple choices

by Paul Nolan

We don’t mean to take the sizzle out of your steak, but the next time you plunk down the corporate credit card to cover a sizable dinner bill with clients, ask yourself if you would trade that evening for a more skillful sales team.

Many organizations simply don’t realize how they are allocating sales expense dollars across the major categories. Interesting facts came to light when sales performance company Miller Heiman’s Sales Benchmark Index recently completed a research report analyzing sales management expenditures in 2006.

According to the study, 3 percent of 2006 total sales budgets were spent on entertainment, while 2 percent was designated for training.

A company with 100 sales reps and a $125 million annual sales objective will spend, on average, 9 percent (or $11 million) in total annual expenses. Entertainment costs account for $330,000 of this total (3 percent) while $220,000 is allocated to training, a difference of $110,000.

This company spent $110,000 more on entertaining than it did on sales training in 2006! But wait, it gets even more interesting.

Miller Heiman states that turnover in sales last year was just shy of 40 percent across all industries. It sets the cost of turnover at $200,000 per salesperson, and notes that the three key drivers of sales force turnover are poor hiring decisions, insufficient training of new hires and lack of support from a direct supervisor.

Using the example of the company above, the cost of sales force turnover would amount to $8 million (100 sales reps ? 40 percent turnover ? $200,000 per rep). If you weigh each of the three key drivers of turnover equally, you can estimate the cost of poor training for our sample company to be $2.64 million ($8 million ? 33 percent).

Sales leaders today have the opportunity to increase investment in training, thus reducing turnover, for “free,” the Miller Heiman study states. Simply fund it out of the entertainment budget — and you still have $3 million left over for steak and lobster.

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See also in:  Have The Wheels Come Off Of Your Sales Training Program?

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Note to Self:  Have Employees Put Their Training to Good Use

Filet Mignon or A Better Sales Team?

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