Sales capacity planning is key to your company’s success, but by no means is it a simple task. Why is it so challenging? In large part because so many different variables can affect it. For sales ops, that means the process needs to stretch well beyond simply plugging numbers into a formula and then cranking out a capacity plan.
If you want to get better at sales capacity planning, here are five pitfalls you want to avoid.
Not aligning with corporate strategy
Just about any sales op pro can create a capacity plan designed to achieve corporate top-line targets. Want to grow by $10 million next year? Here’s a capacity plan with 15 new sales hires that can get you there. Yet, too often there is a disconnect between what’s included in a capacity plan and the key pillars of the corporate strategy. For instance, if the long-range corporate goal is to increase penetration into the enterprise space, and your plan calls for hiring the majority of salespeople to focus on SMBs, then there’s going to be trouble.
Further, corporate strategy typically extends beyond one year, so you need to tailor your plans so that they will not only reach short-term goals but also keep the company on its long-range strategic course. To make sure you’re in sync, work closely with leadership as well as the finance team so you build a capacity plan that aligns with the broader strategic mission of your company.
Failing to fully account for expenses
In business, making money costs money. Yet too often in capacity planning, the expense side of the equation is left as an afterthought for sales ops. If achieving corporate goals requires you to generate $10 million more in sales in the coming year, there are considerable expenses that need to be factored into your plan. And, of course, expenses stretch well beyond salary and sales commissions of your new salespeople to include related hires (supporting headcount such as SDRs and presales), benefits, equipment, training, T&E, and facility costs.
Traditionally, sales ops have had to go through the time-consuming process of going to a partner on the finance team to help nail down expense impacts related to sales capacity planning. If you’re still using Excel, you will need to partner closely with your finance team. By moving from Excel to real-time cloud finance solutions (such as Adaptive Insights for Sales), you’ll have the data you need to make those assumptions at your fingertips.
Not connecting capacity plans to sales territories
You shouldn’t build a capacity plan without having a clear picture if the business can actually support it. Want to put five new salespeople in the U.K.? You need to explore whether there is enough total addressable market in the U.K. to support the new hires and produce the projected productivity.
You want to avoid having salespeople who are “starving” because there are not enough prospects. On the flip side, you also don’t want your salespeople “overfed” because there are too many opportunities and they don’t have enough time to fully work the territories to maximize returns.
Not factoring in attrition rates
People leave even the best of businesses, and salespeople tend to move at a more frequent pace than others. It’s important to try to get a firm grasp on your attrition rate because it can have such a significant impact on your capacity planning. For instance, if you estimate 10 salespeople are going to leave this year and it’s actually 20, that will hurt your chances of hitting financial targets.
What is often lost related to attrition is that when a salesperson leaves, there is a multi-month ripple effect. Typically, those leaving are fully seasoned salespeople whose productivity is hard to replace in a short time span. Even if a replacement is hired within two months, there is at least a three-month ramp-up to get that rep producing consistent revenue. Understanding your attrition rate and monitoring it consistently is a necessity.
Underestimated ramping time
Similar to attrition assumptions, capacity planning often falls short due to lack of understanding about the ramping process for new sales hires. When a salesperson is hired, he or she often comes in needing to learn just about everything about how your organization operates. That goes from simply finding out where the bathroom is to getting fully trained on systems and processes to building pipeline in their territory. This ramping process takes time and pretty much guarantees a newly hired salesperson won’t be at full productivity for several months.
It’s important to be aware of how long that process actually takes because if you are estimating that a sales rep will be fully productive at three months and it’s actually closer to six months, then your capacity plans will be more off-target with every new hire and hitting the top-line number will be difficult. If you believe it is a six-month ramp, but on average your salespeople are fully productive after three months, you’ll probably be paying out a lot more on commissions than you planned.
Clearly, sales capacity planning can be a lot trickier than it looks. Yet by increasing your awareness of the many factors that impact capacity and using modern planning tools, you can craft capacity plans that keep your sales force—and your executive team—happy and productive.