What is the return-on-investment (ROI) differential between two growth strategies?
I want you to think like a CEO, Private Equity firm, Venture Capital firm. If you have a finite amount of money, what is the best go-to-market strategy?
Strategy #1 – Increase headcount in open markets
VS
Strategy #2 – Up level process & skills to increase yield-per-seller
Strategy #1 – Increase headcount in open markets
Sales leaders execute this play every quarter. Whether it’s filling open “recs” because of churn, or proactively addressing new market opportunities, more sellers = more sales. This play allows you to really attack a specific geography, vertical or specific account.
Let’s assume you’re hiring an Account Executive to cover Texas. The “AE” will GROSS cost you a base salary of $100,000 (let’s not bother diving into NET costs of recruiting, onboarding, “fully loaded” costs like tools and insurance, etc.). Let’s also assume the sales quota you expect from this AE is $1,000,000. When the sales professional achieves sales quota, the GROSS value delivered is $1,000,000.
Pros: You’ve run this play before. While CSO Insights studies have shown that 50% of sellers reach sales quota in 2017, you know you can achieve quota in this market. You can feel confident that $1,000,000 will be achieved against your number in 1 year.
Cons: It’s only $1,000,000! For all that time, money and energy to get that person in place, you made $1,000,000 against your $100,000,000 or $1,000,000,000 sales quota. Wow, we need to find 25-50 more people JUST LIKE THIS AGAIN?!?!
Strategy #2 – Up level process & skills to increase yield-per-seller
You see your competition investing in sales performance (training, coaching, process design, tools, etc.), and you don’t want to be left behind. You also know in your gut that you have “random acts of selling” in your organization, without a process for modern, digital pipeline creation.
Let’s assume the investment cost for scaling learning & development across your sales organization was also going to be $100,000. There are less NET expenses, other than much more time/energy invested in change management over the same one year.
Let’s also assume the following yield increase baselines:
- 20% incremental sales pipeline increase across the sales organization in 1 year
- Your company has a historical record of winning 25% of sales opportunities
- Thus, 1 year later, you expect to win 1/4 of the opportunities (5% increase in sales)
Pros: Any organization with >20 sales professionals in this scenario will yield more revenue. If you have 100 sellers, this equals $5,000,000. If you have 1,000 sellers, that’s $50,000,000!! This means a 50x return! The secondary effects of this investment typically reduce employee churn (you’ve invested in capabilities to help them stay). Also, you’ve created a recurring skill set in the business.
Cons: How do you know you can achieve these results? This is venturing into the unknown???
THINK LIKE AN INVESTOR:
Investors make calculated bets. There is a risk in anything you do. Are you willing to venture into the unknown (like investing in stocks, or other investment vehicles) that potentially create OVERSIZED returns? Best-in-class C-level executives and investors realize that making more-per-seller has exponentially greater returns in 1 year than 1 seller (and training programs many times cost the same investment).
What approach will you be taking?
