Here’s a useful exercise.
Calculate your market size. But, instead of calculating total revenues or total unit sales, try calculating total face-to-face, business-development meetings (FTFBDM).
Imagine you wish to determine the optimal size for your sales team. The normal approach is to start with one of the standard measures of market size (revenues or unit sales) and reason from there.
Sounds fair enough but, it’s the reason from there bit that causes the trouble. The problem is, that there are a bunch of difficult assumptions required to do this reasoning, including:
- How many times do accounts change hands each year?
- How many of these opportunities will we have the opportunity to bid on?
- How much of a salesperson’s capacity is likely to be consumed by each of these opportunities?
So, here’s how the alternate approach works:
- Calculate the total number of salespeople operating in your space (the sum of the salespeople you employ, and those employed by your competitors)
- Estimate the number of face-to-face, business-development meetings performed by an average salesperson in your space*
- Estimate the share of meetings you can reasonably expect to win in the near term**
- Divide the product of the first three numbers by your salespeople’s average capacity
The result of this calculation is (in my experience) likely to be a lot more conservative – and much more realistic – than traditional calculations.
Let’s face it, even if your market is $100m in size, if your plans require your sales team to perform 50% of total FTFBDM, you’re certain to fail!
If you are reengineering your sales environment, it pays to be conservative when estimating your requirement for salespeople. You are better off starting with a very small team and focusing on getting that team to 100% utilization rapidly than you are struggling to keep a larger team busy.
* Estimating the number of face-to-face, business development meetings performed by an average salesperson in your space is easier than it sounds. Start by sitting down with your salespeople and analyzing their calendars (not the CRM, the calendars they actually use on a day-to-day basis). Once you have a count, interview people who have operated in your competitors’ sales teams and determine if their sales environments have a structure similar to yours. (If in doubt, assume two true business-development meetings, per salesperson, per week.)
** Be conservative when estimating the share of FTFBDM. Remember, even if you are a clear market leader, your customers will still talk to your competitors salespeople on occasion!
