Lesson Learned- What is the Cost of Inaction (COI)?

In a recent conversation a colleague made an interesting comment, “Sales training is a waste of money.” Since he knew that they were in the sales productivity improvement business where “sales training” is one weapon in our arsenal, it piqued our interest. We couldn’t resist asking him why he felt that way. Here’s part of our exchange.

David      “Sales training is too expensive!”

Us             “David that’s an interesting comment. How did you come to that conclusion?”

David     “It’s simple. All you have to do is hire good sales people, train them with product knowledge, give them a differentiated product and turn them loose. Remember our product is the best in the industry and we have the largest market share.”

Us             “So what makes a good sales representative? What is your hiring profile?”

David      “We look for young, adaptable sales representatives that have been successful selling tough products like copiers. We can teach them everything they need to know about our industry.”

Us             “That’s interesting. Well you have been Vice President of Sales for a year now, so tell us, how many sales representatives do you have and what is their average quota?”

David      “I have 50 sales representatives with an average quota of $2M.”

Us             “Did you make plan last year?”

David      “No. We came in at 85% though. That’s pretty good given our recent change.  You see we eliminated a distributor and went to a direct sales force.”

Us            “How many of your sales representatives made quota and how many exceeded quota?”

David    “Here are the results.”

Us             “So let’s be sure we understand the numbers.

  • A $10M shortfall at 50% gross margin equals $5M net profit.
  • If 34 people had made plan or sold $0.53M more at 50% gross margin you would have generated $18M more in revenue or $9M more in net profit.”

David     “Well your painting a pretty negative picture. The way I see it we only had a $15M revenue short fall and it’s easy to explain. We went from a distributor model to a direct model. We expected a short fall.”

Us             “Did the $100M revenue target take this into account?”

David     “Yes, but our revenue short fall was due to some unforeseen circumstances.”

Us             “What were the circumstances?”

David     “In most of our lost deals we were outsold. We had some glitches. At times we didn’t get to the right people with the right message. In some cases we didn’t understand how important some of the non-users of our product were to the decision making process. But that’s to be expected since we hired a group of sales people who are just coming to understand our industry. They will learn over time. We’ve added a heavy dose of industry information to our on-boarding process. They’ll catch up quickly.”

Us             “From our end there are a lot of unknown variables: your hiring profile, the skills and competencies necessary to be successful, how they were on-boarded, your transition plan from a distributor model to direct, the amount of time they actually spend selling and a host of other factors.  It’s difficult to tell what priority you should place on sales training.

However, based upon what you have shared, we can tell you that providing training in call planning and opportunity management would certainly help your team address some of the issues you’ve mentioned. If you budgeted $5,000 per person for training, reinforcement, on-going support, integration into your CRM and travel for 50 people you would be investing $250,000 to get $18M in potential revenue or $9M in potential net profit if everyone made plan.

That’s a pretty good ROI. In reality all you need is 5 of these 34 people to make plan to break even on the investment.”

David      “You present an interesting business case. Let me think about it.”

Us         “Please understand, David, there is a cost associated with doing nothing and savvy sales executives measure both the benefits and costs of training, they know the performance gaps they want to address and the financial return to their company.”

 Parting Thoughts

We are all creatures of habit. We all have our biases. Opinions often become confused with facts. It’s not uncommon for emotion to rule instead of logic.

Sales training is not a “cure-all” for every ill in a sales organization. It is, however, a foundational element in every world class sales organization. In an upcoming blog we will outline the essential elements to implement sales training properly. Sales leaders might be wise to calculate the cost of inaction.

As always we welcome your thoughts and input. Let’s start a discussion and elevate the sales profession with a thoughtful, civil and informative discourse.