Recently I asked a sales manager, "How much does it cost you to hire someone who does not sell?"
Their response was typical, "I don't know. I am sure a lot."
I then stepped them through less than five minutes of analysis to identify some of their biggest costs.
She was shocked for two reasons. Every time they hire someone who cannot sell, it costs them several hundred thousand dollars. For her it was frightening that with all of the efforts to increase sales, the obvious answer was right there - be choosy when hiring salespeople. Hire "sales wolves" and avoid the "sales lambs".
- A "sales lamb" is someone who is not "wired" to sell.
- A "sales wolf" is someone who is "wired" to sell.
What does it cost your company when you hire and retain sales lambs who cannot sell?
What does it cost your career, reputation, and your income?
We go about our respective journey called "life" where we discover things. For some of us, we discover a problem we did not know we had and we resolve to solve it.
Be that person - solve the problem of hiring sales lambs. You absolutely must know the cost of hiring a sales lamb. Knowing the cost of hiring a sales lamb will redefine your career and income. When a good CEO / president / VP / manager knows the cost of a problem, they will commit the appropriate resources toward solving that problem.
Most CEOs and sales managers know intuitively that the cost of hiring a poorly-performing salesperson - a "sales lamb" is very expensive. It seems that most merely view the occasional bad sales hire as a cost of doing business - you "win some and lose some" or "luck of the draw" but you cannot do something about it.
You can do something about hiring sales lambs.
Decide to stop doing it. There is a powerful multi-science sales aptitude personality test that enables you to know if you are hiring a sales lamb or sales wolf.
And if you are even moderately successful as a company while hiring sales lambs and you are thinking about selling, give me a call. I like the idea of buying a company and hiring sales wolves to sell. It is a license to print money.
Your company's budget for hiring sales lambs should not be unlimited. Companies that do not know what a sales lamb costs them and/or do nothing about it have an unlimited budget - a black hole of lost sales opportunity. Do not be that company!
The scary-funny thing is that while a company will allow a sales lamb to destroy tens of or hundreds of thousands of dollars annually, they will penny pinch their recruitment efforts and go cheap on their candidate screening. This blows my mind!
What does it cost you to hire a salesperson who cannot sell?
Here are three general costs of hiring sales lambs to be mindful of.
- Cost of recruiting / training / onboarding sales lambs. This is fairly obvious. Companies that actually care about their bottom line often go with a "rule of thumb number" of a bad hire- $25-50,000 per bad hire.
- Cost of lost sales opportunities / non-performance. The cost of non-performance is what silently kills the bottom line of a company. Sales lambs prospect less, ask for the sale less frequently (if at all), and leave the door wide open for your competition. When you hire a sales lamb, you help your competitors.
- Cost of damage to your reputation. Whether you are the CEO, president, or the sales VP / manager, you look like an idiot when you hire sales lambs.
Average CEOs and sales managers focus primarily on the costs of recruiting / training / onboarding. Strategic CEOs and sales managers focus on lost sales opportunities that sales lambs screw up.
Think strategically - test and use results
Do not think like a typical bean counter. Accountants are usually focused only on accounting costs. An accounting cost is the actual number associated with a given item - say a sales personality test. A sales personality test can cost $20 yet allow sales lambs on your "bus" that can cost you hundreds of thousands and eventually millions in lost sales and referrals. An accountant will likely say, "You have spent $5,000 with your hiring assessment vendor. Keep your costs down!"
Price is what you pay, value is what you get. Always.
Smart accountants care like you do about the lost sales opportunities sales lambs lose.
Know your opportunity cost of hiring a sales lamb... Smart accountants keep hard costs in mind but also focus on "opportunity costs". An opportunity cost is the cost of choosing one thing over another. For example... If you hire a sales wolf and you get the sale, the sale hits the books. Hire a sales lamb and the lost sale does not hit the books. No one knows about it because few organizations are conditioned to think this way.
Imagine if you tracked your lost sales by sales team member and had to reconcile it quarterly...
What is the opportunity cost associated with hiring a sales lambs? The answer is the lost sales your competitors won. The answer is... The lost sales a sales wolf would have won if you had hired a sales wolf instead of the sales lamb.
Track lost sales. Lost sales due to sales lambs losing the deal must haunt you in your sleep.
If you "get it" - you are committed to being successful, you count the lost sales as well as the wins and you track it by salesperson. Sales lambs lose deals much more frequently than sales wolves.
Sales lambs consistenly lose. Sales wolves consistely win. It is a universal truth.
A quick rule of thumb to identify your opportunity cost of hiring sales lambs is to know three numbers.
- What your average salesperson sells.
- What your top 20 percentile salespeople sell (wolves).
- What your bottom 20 percentile salespeople sell (lambs).
Conservatively, I usually start with the average salesperson minus the bottom (lamb) salesperson spread. This is usually an attention-getter if I am talking with someone who "gets it".
Unfortunately, not everyone gets it.
The following is a typical illustration. Let's say that your average salesperson sells $250,000 quarterly, your top 20th percentile salespeople (sales wolf) sells $500,000 quarterly, and your bottom 20th percentile salespeople (sales lamb) sell $50,000 quarterly. Let's assume 25 percent margin.
The cost of hiring a sales lamb is a range of $200,000 to $450,000 per quarter. Your margin loss is between $50,000 and $112,500 per quarter - PER SALES LAMB.
The math follows:
- Your minimum range is average minus bottom or $250,000 - $50,000 or $200,000.
- Your top range is top 20th percentile minus bottom 20th percentile or $500,000 - $50,000 or $450,000 per quarter.
Do not count on the gradual reduction of the base salary to weed out sales lambs. Smart companies compensate their salespeople the way salespeople are supposed to be paid - small base with a large variable compensation based upon sales. The problem is it can take months for a sales lamb to eventually financially starve to death. Never allow a gradual base reduction to weed out your sales lambs.
Hire the best sales talent in the first place. Hire sales wolves and those who have the potential to be above average.
Here are five key takeaways if you are committed to success...
- Know what a sales lamb costs you in terms of recruiting / training / onboarding and the opportunity costs associated with lost sales. Know both numbers. Get them tatooed somewhere - preferably someplace highly visible.
- Stop using recruiters who specialize in recruiting sales lambs. Hold them accountable.
- Use a valid sales aptitude test to separate the sales lambs from the sales wolves. Leave the sales lambs for your competitors.
- Do not use a gradual reduction in base compensation to weed out your sales lambs.