64% of salespeople, who fail, do so because they are in the wrong job, not because they cannot sell. Combine this fact with the knowledge that in many sales forces, 20% of the sales force delivers 80% of the revenues and the value of hiring the right candidate is enormous.
1) Hiring the right person for the wrong job!
Every company and every industry are very specific with very specific cultures and business practices. A salesperson that succeeds in one role may fail in other roles. There are salespeople with great talent who should only work in very specific environments. It is common for a salesperson to have an incredibly successful career in one environment but once in a different industry will fail again and again. It is important to understand what your need is and what type of salesperson, with what specific history is best suited.
A salesperson might have had a successful track record because they have been lucky or were specifically suited to a sales environment. Selling real estate during a boom market may not be difficult. Don’t make assumptions that once successful means always successful.
Generally, the most successful salesperson will be one who has worked for a similar company, selling similar products to similar customers. Hiring successful salespeople from competitors is a proven approach! You might pay more but the results are actually predictable – not hopeful!
2) Designing for failure – many businesses do!
Too many businesses think that the solution to a business problem is to hire a salesperson. Sales have been dragging for months or years and it is expected that hiring a salesperson will generate immediate revenue to get the business out of trouble.
This will not work.
Every business first needs a sales process that can direct and support the efforts of the salesperson.
The right salesperson, in the right environment with the right supports will succeed.
Don’t stack the odds against success by not providing the supports and systems actually needed to achieve success. Don’t put roadblock and speed bumps in the way of your salespeople. Think of salespeople as the professional athletes of your business – coach, support, and encourage them toward success!
A sink or swim attitude only hurts your business when the salesperson inevitably fails.
3) Falling for the wrong candidate – hook, line and sinker!
Salespeople are great at selling themselves during job interviews. They understand better than any other type of candidate how to pitch themselves. They know how to build rapport and often sell themselves into jobs where they don’t belong.
As a manager, it is great to have a competent, eloquent salesperson but too often the manager ‘falls’ for the charm and personal qualities of the salesperson and begins to make assumptions about performance.
How many times have you felt so positive about a new hire only to be disappointed three or six months into the contract.
Getting distance and perspective is essential!
What is the cost of a failed hire?
A lot more than you think. With so many reps currently below target, we thought we would show a quick and dirty calculation on what a bad sales hire costs. Let us assume we are speaking of an intermediate to senior position (depending on the company) with a base salary of £50,000 and a quota of £600,000. Assume that they achieved only 50% of their target (generous based on a typical “bad hire” these days).
Direct First Year Expenses:
1. Hiring – in-house or third party recruiting costs, background checks, (more if the position is more senior or travel involved) – £10,000
2. Base Compensation – year one £50,000
3. Commissions (assume none paid since targets were not met) – $0
4. Benefits – £4,000
5. Travel and Expenses – £8,000
6. Training – £6,000
7. Overhead – desk, supplies, infrastructure, admin, etc. – £8,000
8. Severance – assume 4 weeks + legal/HR costs – £9,000
9. Wasted leads and/or lost customers– rep might have received leads and existing business in their territory that would reasonably have represented more than a third of their target – assume two lost customers and, or deals representing £90k to the company
10. Lost margins – the rep failed to hit their target, falling £300,000 short – depending on company business model this could represent hundreds of thousands of dollars of lost gross profit which will have to funded from another source – if 75% of revenue is gross profit, then this represents £75,000
Total: £260,000!
Wait, there are typically other costs that are harder to associate with a pound value, but equally or more severe:
1. Additional management time associated with guidance and performance correction
2. Loss of goodwill and damage to reputation in the market
3. Loss of morale from peers who are frustrated that poor performance is tolerated
Your math might be different, but your categories will be the same and the point is, the cost is a lot higher than most people think.
A world-class hiring process prevents these mistakes and a well-managed on-boarding process spots problems before they cost you hundreds of thousands of pounds.
At The Sales Experts we understand salespeople, sales process and what is required to achieve sales success!