Tuesday, July 30, 2013

Analytics: Sales Representative Profitability 1

As the owner of a small business deciding to hire a salesperson can be huge.  Adding personnel is not only a significant expense but also added responsibility to you to support them to get the most sales out of the investment.  Paying for salespeople is investing in increasing revenue; but it is important to know that how your sales is costing your business.

When implementing a sales team or sales program, measuring and tracking sales rep profitability can be key to learning what works and what doesn’t.  For startups, understanding customer acquisition costs (CAC) is essential.  Salesforce profitability analysis will help justify increasing the overall CAC and help you assess the health of that overall CAC.

What you will need for to do the analysis:
  • Sales person
  • Sales person monthly salary
  • Monthly cost of the sales person including benefits, commissions, travel expenses and other overhead.
  • Monthly revenue
  • Monthly profit

The following targets will allow you to round out your return on investment analysis:
  • Target profit on products sold by the sales person
  • Target month where you expect: monthly revenue will equal the sales person’s salary
  • Target month where you expect: monthly revenue will equal the total cost of business (breakeven)

This analysis can give you more insight than simply answering questions such as what is  the total sales for each sales person? And, which sales did each sales person make?

In that it goes beyond getting the numbers, and helps you understand if your return on investment is working as you believed.  And if you sales cost structures need to be tweaked.

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