Sales turnover is a dangerous problem because very few business owners actually understand how much turnover impacts the bottom line. This is because some of the most expensive costs are hidden and require a deeper analysis.
For the purpose of what I’m going to cover here, let’s define “turnover” as when a salesperson leaves your organization at some point between when they have been on-boarded and when you had planned for them to be productive. There are three things that normally lead to a salesperson’s early exit in such a timeframe.
Ineffective Hiring Process
Most businesses do not build the profile of the ideal salesperson for their business. They don’t know what they’re looking for and thus begin the challenging hunt for “talent” in the job market. Read more about “talent” not quite panning out here.
Lack of Defined Role/Job
I covered this topic in another post and the point is that a salesperson must know specifically what activities they need to perform in order to generate new business in their role.
Assuming a talented salesperson is just going to make it happen is a HUGE gamble and will normally lead to a slow and painful death (a.k.a. turnover).
Lack of Effective Training and Sales Support/Coaching
The manner in which a salesperson is onboarded and trained is not only critical to their success but it also determines how seriously they will take their role and the business.
Without defined roles and responsibilities it becomes challenging to effectively measure the performance of a salesperson outside of whether or not they are converting new deals.
The other tricky thing about turnover is that it is a delayed cost. In other words, a business won’t know whether or not they have effectively accomplished the above three items until they are in the middle of the hiring and onboarding process. This is why most business owners don’t take the time to get organized – there are more pressing issues in front of them. Something not directly related to getting the next customer can seem like a waste of time. Don’t make this mistake!
The actual costs associated with sales turnover can certainly depend on compensation structure and other variables. However, it’s the hidden costs that end up hurting most in the long run.
The time it took to find the salesperson that is leaving.
The time it took to on-board/train that salesperson (actual training as well as ad-hoc questions and issues that arise from this stage).
The impact on the morale/culture of a team.
Lost customers that would potentially have been converted otherwise due to the salesperson’s inexperience.
In addition to these hidden costs you have to factor in the actual dollars spent on the initial compensation of the salesperson and potential hard dollar costs during the recruiting process (meals/entertainment, recruiting firm, job posting, etc.). In total, some experts believe that turnover costs total over 150% of the salesperson’s average annual compensation. Think about that for a second. If you are promoting and expecting an average first-year salesperson to make over $50,000 then that gets expensive. If that number is $100,000 then things start to get a little out of hand.
Turnover is, of course, a normal part of doing business and you shouldn’t expect to never lose anyone from your team. Take a look at the three things that typically lead to high turnover and simply ask yourself how organized you are. If you’re posting a job on Indeed or LinkedIn, doing some interviews, and hiring someone who simply impresses you, then it’s probably time to rethink your strategy.