The Cost Of Ineffective Sales Hiring
It's January. Many agencies have waited to make their next sales hire until after the holidays. This is probably smart....since most quality salespeople have waited until after the holidays to make any career changes. But...here we are. Every so often it pays to examine what the cost to your business could be if you don't interview, hire, compensate, and train your team properly. Here's the way I figure it:
Cost of Rep (all amounts are examples - annualized)
Salary - $70,000
Payroll Tax Burden - $11,000
Health Insurance - $5,000
Car Expense - $6,000
Phone - $1,200
Marketing Expense Budget - $2,500
Total Rep Cost = $95,700. (this does not include any bonus or commission amounts that would be offered as incentive)
Now the key question is "How much business does this person have to bring in to justify me paying them this much money?"
Let's take a simple, revenue based example.
Revenue = $100
Direct cost to deliver $100 worth of care (caregiver, nurse, etc) = $50
Administrative and General cost (rent, insurance, support staff, etc) = $30
Net Revenue per $100 = $20 (or 20%)
Ok...so now we have the numbers we need in order to figure out how much business this rep must bring in just for your agency to break even. For ever dollar they bring in, we have 20 cents to pay them with. This rep must bring in five times the amount of revenue versus their cost for you to break even.
Cost of Rep = $95,700 x 5 = $478,500 required to break even. Simple...right?
Now you only need to track this number and make sure this rep is bringing in (at minimum) this amount in order to make sure you business isn't getting bigger, but becoming less profitable. If your rep brings in $478,500 over the course of 2021 you have made zero dollars in additional profit...but you haven't lost any either. If your rep brings in $300,000 over the course of 2021 you have lost $178,500 in net profit for the year. If they bring in $800,000 then you have done well in hiring, supporting, and training your new rep.
So, where do your calculations fall? Did you make money with your sales team or lose it? Did you get bigger and less profitable, or bigger with more profit?
These exercises are vitally important to any business that wants to grow and improve their bottom line. You can see why effective hiring, planning, and training of the sales team are so important. If you simply "hire and hope" that your new hires are going to make you money, most times you'll be disappointed. Each new hire (or existing hire) should have a solid plan in place to to help them achieve their maximum amount of success and help your agency achieve the financial goals you've put in your 2021 budget.
That's where we come in....
In short, we help you grow. Please let me know how we can help.
Good Selling!
Michael Giudicissi
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