Sales reps change jobs much faster than employees from other functions. This high turnover trend is commonly accepted as a ‘normal’ behavior among sales managers and organizations. But how much do these turnovers really cost you? Is it only the loss of potential business or training days? It goes much deeper and further than that and when all things are added up, the loss is much worse than what most people think.
Here’s how turnover adds to your expense budget:
Recruiting and hiring: The average turnover rate for sales organizations is 35%, which is an expensive problem in terms of hiring and training a replacement. It costs over $100,000 to recruit, hire, and train a sales rep. Sales reps do not become productive till they start selling and even then it takes time for them to generate the required revenue to offset their hiring and training cost.
Market knowledge and relationships: When sales reps move on, they also take with them the rapport that they built with the customers and the knowledge they gained about the market. This loss of knowledge and relationship leads to loss of potential revenue. The average sales rep receives $3,400 during training per year. If you add even 10 new reps, the impact on your budget becomes drastically high.
Loss of revenue: Research shows that more than 70% of the top performers have been in the same position for more than two years and in the same organization for more than four years. It means that spending time learning the trade, understanding the customers and markets, and polishing one’s selling skills, takes time. When sales reps leave the organization after a short stint, they lose out on becoming top performers and you lose out on their productivity.
All the reasons for sales reps leaving fall under these two main groups:
They are not happy with their compensation:
- Unreasonable expectations from the salespeople or unattainable goals.
- Repeated errors in payment calculation and delays in payment disbursement.
- Miscommunication regarding the compensation structure, which leads to disputes.
They are not happy with their environment:
- Not enough understanding of the product or service they are supposed to sell.
- Poor rapport with the management or loss of faith in the leadership.
- The job is no longer challenging or engaging.
Even between the two groups above, compensation is typically the main reason that leads the sales reps to consider leaving. If the reps feel that they are not getting compensated adequately for their efforts, they will quit. Period. It does not matter if the compensation is really unfair or there is a perception of it being unfair.
Compensation is a major motivator for the sales reps and any issues related to it need to be taken seriously and addressed immediately. High turnover adds huge seen and unseen expenses to your budget. It is in your interest to retain your sales reps and invest in their training, coaching, and engagement with the organization’s sales strategy.
How is your turnover rate? Are you doing all that is necessary to retain your sales team?
Here are some tips on ways to develop compensation plans that will ensure your reps are happy:
- How to Successfully Deal with Sales Operations Turnover Through Knowledge Management
- How to Ensure Sales Performance Through Efficient Plan Modeling
- 7 Facts about Sales Coaching that Every Leader Must Know
This article is part of a series dubbed The Cost of Doing Nothing.