Until recently, operational principles that revolutionized manufacturing and operations management were completely inapplicable to the world of sales. We had no way to quantify the work needed to prospect or close deals effectively, so the principles of concrete production like manufacturing cars simply didn’t stick.
That is no longer the case. CRMs and analytics have opened the door to precise, data-driven sales management. As this reality spreads, more and more companies rely on Sales Operations to make sense of large amounts of sales data, and map a course of action from the analysis they perform.
Sales Forecasting is a concept that all sales teams are familiar with. It’s one of the standard responsibilities for Sales VPs (and often the bane of their existence) — but it doesn’t go far enough. A sales forecast is just a crystal ball; it tells you what’s going to happen, but doesn’t tell you how to change your fate.
To take forecasting a step further, you have to put on your Operations hat, and think about capacity planning.
What is capacity planning?
Capacity planning is an operational term commonly defined as matching an organization’s production capacity to the market demand for its product.
Put simply, capacity planning is the process by which your company can accurately determine how much input it needs to maximize output. When applied to sales, capacity planning means understanding how much revenue each rep is capable of bringing in, and learning how to expand the total amount of revenue your team can bring in.
The reason this term is only now being applied to sales is because team sales performance simply wasn’t quantifiable enough to merit the level of analysis needed to apply capacity planning in any meaningful way. Now that It’s easy to record, collect, and analyze data, capacity planning is suddenly an extremely valuable complement to sales forecasting.
Sales capacity planning is, practically speaking, a more granular forecast. It’s the process through which you can break down your monthly goals and develop an actionable plan to hit them. That should sound very familiar to sales ops teams, because that’s your job.
Colleen Francis of Engage Selling wrote a nifty blog post on how to calculate sales capacity for your team — it’s a great way to benchmark where you stand, and begin thinking of ways you can expand and improve performance. It’s important to get that number right.
If you underestimate your team’s sales capacity, you’re leaving money on the table because it means that there’s business left to be won and your reps have the bandwidth to win it. However, if you overreach, you risk overburdening and burning out your sales team.
Once you have a good grasp of where you stand, you can apply that knowledge to grow the team in a steady, consistent manner.
Expanding Future Sales Capacity
There are two ways to expand your team’s sales capacity: by adding headcount and by implementing sales enablement. Both of these approaches have their costs and benefits, so the key to growing your sales capacity is knowing when each one is appropriate.
Adding headcount: Adding additional sales reps is the old fashioned, brute force method of increasing sales capacity. It’s expensive and time-intensive, but it’s also a necessary function of growth. The nuance is understanding when you’ve maxed out the capacity of your current team, and mapping your hiring plan so that a new class of reps is on a steady ramp as the previous class reaches full quota.
Sales enablement: The constant battle for Sales Operations is figuring out how to maximize sales capacity before you are forced to hire additional reps. Sales efficiency is another way of thinking about capacity: How can we increase the amount of time reps spend selling without increasing the amount of time they spend working?
Tools, training, and process tweaks are all cost-effective, sustainable ways to increase sales capacity, but always remember — you’re working with human beings, and there’s a limit to how much they can do. Once you hit a certain point in your growth, you just need more hands on deck to keep going.
As the old saying goes, sales is a numbers game — and that applies now more than ever before. Forecasting on its own is the old way of doing things. Start going a step further, and think in more granular terms to truly maximize your company’s sales performance.