It's expensive to have too many sales people and not having enough means loss of income. But how are you best able to figure out the optimal number in your sales force?
According to Andris A. Zoltners, PK Sinha and Sally E. Lorimer at Harvard Business Review most companies use financial indications to decide whether it is time to increase or decrease the sales force. Three typical ways are:
A sales person is added when there's enough sales to pay for him/her
A sales region is split into parts as soon as the sales transcends a predetermined number
The sales force is kept at a certain percentage of the sales
However, a focus on financial elements may not give you the best indications on whether or not the sales-force has the right size. Instead you should look for quite different signs. The authors recommend this three-step method:
Examine four different sources for signs revealing whether the sales force is too big or too small:
Are customers complaining about bad service?
Are sellers complaining about too many trips and too many assignments?
Is sales work more about taking orders than providing new customers?
Is your competition expanding their sales force?
If the above is the case, it is likely that your sales force is too small. On the other hand, if your customers do not call back, if your sales people don't think they have enough opportunities, if sales focusses on non-critical assignments and if your competition is cutting down on their sales team, then your sales team is probably too big.
Make analyses that focus on the customers and not on finances. This requires an understanding and a segmentation of your customers according to needs and potential. Then you have to find out how big a sales capacity you need in order to cover the needs of the identified. By adding time-consumption across customer segments, you can assess how many sellers it takes to do it in an efficient way.
Consider the financial parameters as the last thing you do.
Remember that changes in the size of the sales force has immediate and long-term effects. For instance, you'll see the expenses of your new sales people immediately, whereas it takes longer to see the effect of more sales on the company’s income. Partly because it takes time for new sellers to adapt to their new job, and also because it takes time before new customers purchase the second, third and fourth time. The same thing applies if you downsize the sales team. Loyal customers may continue to purchase even though the sellers don't contact them as often as they used to.