Big Red Car here. Nice day in the ATX, nice and sunny and getting a bit warm. Maybe some pool time this afternoon for a Big Red Car?
Well, we will see.
OK, so The Boss is talking to one of his hard headed CEOs — they are all very special people because they are those crazy entrepreneurial types who can live on air and work their butts off — about how to determine when or whether to add a person to the sales effort.
The simple, one cell, worm like brain analysis
The Boss likes to use a bit of analysis. About a single index card analysis.
Here is his simple, one cell, worm like brain analysis. [Hey, I hope The Boss does not take offense at that, you know what I mean? The old boy has a pretty thick skin. I hope.]
1. Determine your total cost of overhead — everything. How much does it take to run your company on an annual basis?
2. If you already have some sales persons, identify their cost and productivity — how much does it cost to employ them for a year? How much revenue do they generate over the same year? Are they covering their own direct cost and are they contributing to the costs of the company? Hopefully, they are making you a bit of profit, no? If you have no current sales staff, then skip this step.
3. Ascertain the cost of an additional sales person for a year. If you already have sales folks, then you can base this cost estimate on your actual costs. Take into account that it make take six months to get a new salesperson up to speed and maybe therefore, you may want to take a two year look at costs.
4. Now, estimate how much revenue the new sales person can bring in over the first year — or whatever time period you desire to use for your analysis. Again, if you have existing sales persons this will be easy to do.
Now, let’s take that information and work a problem.
Work a problem with me
So let’s drop in some numbers and see what we get. Click on the following PDF to see a quick little spreadsheet.
Additional sales person analysis <<< click here
So, what you can see is that we have laid out the impact of having from one to four salespersons.
We have used the numbers we identified above and we have increased the cost of overhead an arbitrary ten percent each time we add a sales person. This is a background cost increase. Note also that with different iteration, we are adding the cost of the prior number of sales persons to the background overhead cost. In this manner, you can clearly see the impact of one additional sales person.
Don’t be a literalist
The methodology for the analysis is the teaching point. Don’t struggle with the differences between your company and the analytical approach. Adapt it to your specific enterprise. Each company will be a little bit different.
Your company and product may not lend itself to a “sales person” analysis because it sells directly on the Internet, as an example. If so, this approach may not be for you exactly but the underlying logic may guide you to a better way to look at things. Do that.
I hope this is useful to you. If not, send me a message and I will help you directly.
But, hey, what the Hell do I know anyway? I’m just a Big Red Car.