From Chapter 13 of Aaron Ross and Jason Lemkin’s new book, From Impossible to Inevitable.
Sales culture is different compared to pretty much every other function in that it expects most people to fail or succeed almost totally on their own. Companies assume “We’ll hire 10 salespeople to sink-or-swim and a quarter to half won’t make it.”
CSO Insights’ studies show average sales team’s annual turnover of around 25 percent (it varies by a few points year to year), with half quitting and half fired. That means out of 100 salespeople, 25 are lost every year. So you need to hire (and train, and ramp, and transition pipeline or customer accounts for …) an extra 25 salespeople per year just to tread water.
But—what the hell? Would you hire 10 HR people and then expect to fire three to five? Managers? Supply chain people?
Beating the Odds On Sales Team Churn Rates
Losing a quarter of your engineering team, total employees, or customers would be a board-level catastrophe. But it’s accepted, even expected, in sales. Sales team churn is especially expensive because of the time required, the lost opportunities, and customer frustration. They are your face to customers, people!
At EchoSign, in growing from $1 million to $50 million in revenue, no one quit from VP Sales Brendon Cassidy’s team. They were making a lot of money, knew what they were doing, and had fun. Why would you want to leave that?
Imagine you work at a growing company, and you might be hitting or beating team-wide sales goals. But internally the team’s struggling with growing pains, such as:
- Missed quotas: 30 percent, 40 percent, or more of the sales team is missing quota.
- Team attrition: Salespeople just keep coming and going … 10 to 50 percent of the sales team is leaving every year (whether voluntarily or involuntarily).
- Ramp times keep lengthening for new sales hires, such as going from two to four months when you were smaller to now six to eight or more months.
- Rep count is growing faster than leads: As the team has gotten bigger, each rep is getting fewer leads passed to them. Lead generation isn’t keeping up with sales team or goal growth.
And despite all this, and the other reasons, the board is still telling you to keep hiring more salespeople to drive growth! It’s pouring water faster into a leaky sales team bucket.
It’s Not You, It’s Me
Now, if say, 30 percent of a sales team is missing quota, is it the fault of the people or the system? Was 30 percent of the team really mishired? If you are losing 25 percent of your sales team a year (whether they leave or are fired)—is it the people or is it your system? If almost every new sales hire is taking twice as long now to ramp, is it them—or your system?
See the pattern here?
Who sets quotas and incentives? Who defines territories, roles, and responsibilities? Who’s ultimately responsible for hiring and training? Who promotes, hires, and trains the sales managers on the front lines?
It’s not the salespeople. Ultimately, it’s the responsibility of the VP Sales and CEO to ensure sustainable sales success, not the individual salespeople. Your sales “system” and environment have enormous effects on salespeople, either helpful or hurtful.
Until you fix the systems, you’re going to struggle getting repeatable success.
Defects in the System
Your ability to scale a sales team depends on making everything a system. When salespeople leave for any reason—missed quotas, dissatisfied, bad apple—it means you have “defects” in your system.
Your ability to scale a sales team depends on making everything a system.
Sales team attrition should be much lower—say 10 percent or less per year overall (and with 0 percent voluntary attrition). Not only is it incredibly expensive in time, money, and lost opportunities—it also frustrates prospects and customers when their point people keep changing. A commonly accepted estimate of the cost of one lost salesperson is one and a half to two times their annual comp.
At two times their comp, losing five salespeople with targets of $150,000 is a cost of $1.5 million.
A $200 Million Loss?
In 2013, rumor had it that Salesforce.com lost 750 of their 3,000 people in sales (25 percent attrition). If their average comp was $125,000 (which is probably low), then this was a cool $187.5 million lost.
That much turnover disrupts everything in the sales team and with customers.
Common Sales Attrition Causes
There can be a million underlying causes behind high sales attrition, but the three most common ones are:
- Lead generation: The company isn’t doing enough to support the reps with quality leads.
- Specialization: The company isn’t specializing at all, the right ways, or going far enough with it.
- Management: Leadership (mostly the CEO & VP Sales) isn’t connected with what’s going on “in the trenches,” or is still very traditional or conservative. We love this quote: “People leave managers, not companies.”
Do Your Salespeople Have a Headwind to Success?
You need to dig and discover the root problems that are making it so hard for people on the team to succeed. Is it that they need more leads? Maybe your products are weak or are targeted to the wrong markets.
Maybe you’re an early company with completely wacky sales expectations. Or you’re targeting a “slog” market. Maybe some of your sales managers or leaders are doing more harm than good with their management style. Maybe your VP Sales is a bit crazy and is just hiring a bunch of random people into a disorganized system (it happens), and you gotta rebuild it before even lead gen matters.
Don’t Make Assumptions
In addition to looking at those areas of Lead Generation, Specialization, and Sales Management, go talk to your people, one by one, and identify patterns that lead you to discover the main one or two problems that are causing high attrition.
- Don’t just blame salespeople for failing. What else contributes to the systemic problem(s)?
- Keep up the one-to-one coaching, and don’t let individual salespeople use team wide problems as an excuse to give up.
- Great reps with a great (or even good) manager and fair compensation will prefer to stay.
- People leave managers, not companies. Which managers have high churn, and why?
- Voluntary attrition should be 0 percent.
- Overall attrition should be 10 percent or less, but but not 0 percent, because no company has perfect hiring and coaching.