Seriously, Here Is an Investment in Your Sales Team With 30,000 Percent ROI. Training that brings your least performing sales manager up to the level of your top people has a huge return.
By Jason Jordan Edited by Dan Bova
Opinions expressed by BIZ Experiences contributors are their own.
There's no shortage of things you can do to improve the performance of your sales team. You could re-start your CRM, re-train your salespeople, re-design your territories, re-do your incentive plans, replace your sales methodology.
What has already been done?
But the issue with re-doing things you've already done is that you start to experience a decreasing ROI with each iteration. When you deployed your first sales methodology in 1987--Ding! Huge ROI.
When you deployed your first CRM tool in 1997--Ding! Huge ROI. But now that you're on sales methodology 12.0 and CRM 8.0, what will you do in 2017 to ring that ROI bell just as loudly as you did before? CRM 9.0?
The frontline sales managers.
The answer could lie in a population that's neglected within many sales forces -- frontline sales managers. In a recent study of 518 Fortune 500 sales managers, we found a surprisingly large disparity in performance.
The top 25 percent of sales managers perform at 115 percent of their teams' annual targets, while the bottom 25 percent trail far behind at 76 percent of their teams' goals. That's a whopping 39 percent difference in revenue yield between the top and bottom quartiles of managers.
We did the math.
When we did the math, that 39 percent disparity equated to $3.5 million in revenue per manager. In other words, teams managed by top-performing sales managers bring in an average of $3.5 million more in revenue each year than the teams of bottom performers. They do this simply by being more diligent managers and better coaches to their reps.
Related: It's All About Accountability For Sales Managers
Bring bottom performing managers to the top.
So there's clearly a big "R" in ROI to be had if you can bring your bottom performing sales managers toward the top--millions of dollars per manager, in fact. So what "I" would it require to get you that level of improved supervision and coaching?
Related: How to Manage a Successful Sales Team
For the sake of easy math, let's say you have 100 managers on your team and it costs $3,000 each to train them. You're clearly not going to train only the bottom 25 percent--that could hurt someone's feelings. You're going to train them all at a cost of $300,000.
What's the top line?
Let's also say that your investment gives your bottom-tier managers the skills they need to elevate their teams to the top. This means you would have 25 managers bringing in $3.5 million more in revenue each year, for a total of $87.5 million to your top line.
That's a whopping 29,067 percent return on that $300k investment. Ding, ding, ding! I'd be willing to bet you haven't seen that ROI on CRM in recent years. In fact, you might be hard pressed to find that kind of return anywhere else in your sales force.
Leverage your sales managers.
And why is the number so big? Well there is huge leverage in training your sales managers. If you're like the sales forces in our study, you only have to train one-tenth of your sales force. Investments in sales managers have a unique multiplier effect that cascades to all of the sellers they manage. You get a full "R" with a fractional "I." It's just good math.
Related: To Drive Business Success Invest in Your Managers
Other costs?
Okay, I can hear you all thinking, "With travel and other costs, there's no way I can get this done for $3,000 per manager." Well then, increase the training cost to $5,000 per manager for a total investment of half a million dollars. Now you'll only realize a 17,400 percent return on your investment.
"Is it really likely that all of my bottom quartile managers are going to improve that much?" With the right training and consistent reinforcement, our experience says yes. But for the sake of argument, say only 10 of those 25 managers improve their performance to that level. Now you're down to a 6,900 percent ROI. "But my actual ROI should be based on my profit margin, which is only 30 percent of my revenue." Now we're at 2,000 percent. Get the idea?
Related: How to Calculate ROI (Return on Investment)
It's not rocket science.
No matter how you do the math, you probably can't get that kind of ROI from any other investment in your sales force. Not sales methodology 8.0--Not CRM 12.0--Nothing. It's not rocket science--it's not even advanced math.
You simply get the full "R" with a fractional "I." If you do the math for yourself, you might agree that investing in your sales managers is the best money you can spend this year. That's math you can literally take to the bank.
Related: Investment ROI
