Sales managers hate to see a sales rep leave the company, but the repercussions aren’t only restricted to the sales team. If sales has a high turnover rate, the entire company suffers by wasting significant amounts of time and money invested in training sales reps that then leave too quickly.
You can lose an employee in many ways – either you have to fire them, they quit for another job elsewhere, they’re promoted, or they do a lateral move to a different role within the company. No matter what the reason, you’ve lost a sales rep on your team, and have to spend time finding a replacement. This is something every sales manager faces, but what is the real cost of sales rep turnover and how can you minimize it?
Cost to the Company
When a sales rep starts their very first day, they have already cost the company money just in the hiring process. If you look at the impact, in dollars, of that employee in the first few months on the job, the cost they incur grows steadily. The sales team must invest time and money into training for every new sales rep at the beginning. It’s not until that employee is fully ramped up and begins to generate leads or close deals that you will start to see a positive impact in real dollars.
In this graph from David Skok’s blog For Entrepreneurs, you can see the point where a sales reps turns and starts to repay the business. However, it can take months to return the investment the company has already made. Eventually, there’s a break-even point where the employee fully pays for the cost of their initial training and salary, but the length of time to that point depends on the company. For sales roles at a SaaS company, that payback is usually between 12 and 18 months before the company breaks even.
Ideally, the value the sales rep provides to the company continues to increase over time, justifying the initial investment. But in the worst-case scenario, you hire a rep and they leave or are fired within the first six months on the job. If you lose a sales rep at the lowest point on the graph, the company loses a significant investment that you can never get back. The company expended time and energy in the training this new rep who is now gone.
The cost to your team isn’t just in dollars and hours, but also in something that is tougher to measure objectively: low morale. A company that experiences substantial sales rep turnover can sometimes have a snowball effect where a few reps leave, and then a few more, and now you have a quickly-accelerating turnover rate. The sales manager is then scrambling to hire and train new employees quickly. This means that the team overall is constantly operating at less than optimal capacity.
While hiring should be a constant focus for all managers, a high turnover rate forces a manager to focus more time and effort than usual on unexpected hiring. This isn’t hiring for growth, but rather emergency hiring just to keep your team functioning. But if your sales team is in constant flux due to turnover, they will never be able to gain a good selling rhythm. With a distracted manager, the overall sales results will suffer without the consistency and focused sales coaching needed to create a scalable, repeatable sales process.
Move on Quickly
So what can you do to minimize the wasted time, money, and effort caused by sales rep turnover? The solution is two very different strategies – you can either fire underperforming sales reps quickly, or invest more time and effort into their overall training to ensure success, or ideally, both.
You want to avoid losing employees when the company has already invested a significant amount into their training. This means you can implement a short assessment period, from 6 to 10 weeks, where a new employee has to meet certain objectives to earn the right to stay, and reduce the time and money wasted. It may sound harsh, but if the job isn’t right for that person, it’s better for them and for you to decide quickly. On the flip side, you also want to have a solid sales training program in place, so that at the end of a 6-month program, new sales reps will be successful because you’ve given them all the tools they need.
If your team has a high turnover rate, it’s not just an inconvenience or a waste of your time – it is also causing serious harm to your company. In order to mitigate the serious impact of sales rep turnover, implement a short trial period for new reps and focus heavily on training for the ones that make it through. With the right efforts, you can keep turnover low and make your team a great place to work.