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January 14, 2017

What Exactly Is The Cost of Delaying Sales Training?

Don't delay sales training

Sales training, just as every other initiative in a company, must compete with shifting priorities and an often fluid business climate. When training is delayed there is an impact to the bottom line, to shareholders and to employees - but how many companies spend the time to quantify that impact? What is the actual cost of delaying sales training? While funding sales and marketing training may be a game of managing priorities - there is one priority that never goes out of fashion - REVENUE GROWTH.

All executives want it. All sales reps hunt it. All organizations depend on it. Throughout the course of my career in sales and marketing, I have found no other weapon more effective at increasing sales rep performance and revenue generation than the right training and coaching.

My experience and the research align - trained sales professionals perform at significantly higher levels than those without training. Yet despite this scientifically validated understanding, training is rarely seen as 'mission critical'. That is, until you actually calculate the 'Cost of Delay' and the impact to the bottom line.

"Companies that train employees on a sales methodology coupled with tactics and consistent reinforcement see a 26% increase in the number of reps attaining or beating quota."

Aberdeen Research and Achieve Global

 

Cost of Delay Summarized

Essentially when we employ 'Cost of Delay' analysis we are asking 'what would it cost the company if this was delayed for a month?' vs 'what would it be worth to the company if we did this a month earlier?' Sounds simple - but simple is rarely easy.

When done right, meaning when the research is executed correctly to feed the equations, this is an intermediate sales tactic that can steer and inform buyers. However, to be effective, to be credible, quantifying 'Cost of Delay' requires a deeper understanding of business in general and your prospect's business specifically.  

Based on some data modeling I conducted, on average, B2B, enterprise companies may be letting up to $65,000 per MONTH per REP slip through their fingers by delaying sales training. Looking at it another way, that is $3.9M lost annually with just a small team of five reps.

 

A Sales Velocity++ Model: Calculating Cost of Delay

To help clients understand the Cost of Delay associated with sales training, I created a model based on the Sales Velocity formula. Calculating Sales Velocity is a best practice which allows sales executives to establish a baseline for sales rep performance and one method of identifying potential problems areas. With some extension - adding in cost to hire, ramp time, average quota attainment, 'A Player' vs 'B and C Player' productivity, etc - this model can be used to determine revenue lost as a result of delaying sales training (and Cost of Delay associated with not training marketing teams).

The model can be updated with specific values for any client; however, let's think through an average example. Based on research done around complex, B2B enterprise sales we know the following:

  • $10K to $15K, on average, is spent to hire each sales rep - The Bridge Group
  • 50% of sales reps take 6 - 10 months to ramp up and contribute significantly to company and quota objectives - Accenture
  • 27% greater revenue production is realized from well-trained and coached reps vs reps with no training - CSO Insights
  • $118K is an average base for enterprise field sales, $68K for inside sales - RingDNA Survey
  • $15,000 in draw per rep for first three months is a conservative number - SaaStr Survey

Combining the information above with average estimates for number of deals per rep, win rates and length of sales cycle averaged out per industry, it is possible to compare the revenue generation of a trained vs not-trained rep over time. There are of course other impacting factors, for example, that training is appropriately reinforced and internal coaches and leaders are trained, the level of executive buy-in and support, etc.

With assumptions in place, the model shows a delta of $476,253 per rep in year one and over $750,000 per rep in year two between trained and not trained sales reps. Essentially, a properly trained and reinforced sales rep can generate 47% more than an untrained rep in the first year and more than 54% more in the second. Multiply this by field reps and the numbers are even more persuasive.

When it comes to highlighting why an investment should be made now rather than down the road, it's helpful to understand these numbers break down to $39,687 lost per rep, per month in year one and $62,000 per rep, per month in year two. With five field reps on the team, the delay can be costing the bottom line as much as $198,435 per month.

Or, for every day the executive suite delays a decision, they are costing themselves and shareholders, conservatively, between $1,300 and $2,000…A DAY, PER REP.

 

What Are You Waiting For?

According to research by ValueSelling Associates, 56% of sales professionals have no formal training - meaning over half of your team is currently performing at unacceptable levels through no fault of their own. Taking the time to train them will increase their productivity and, even discounting my model by 50%, can provide an ROI in weeks. Many of our clients have seen greater results across verticals, and those who have made sales training a priority are leaders in their industries.

For more information on the 'Cost of Delay in Sales Training' model I created, please feel free to contact me. With a 15 minutes conversation, we can start to quantify what sales training could mean to your revenue, growth objectives and career.

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