|
How to Size & Build a Territory |
|
|
Written by Bob Howard
|
Think you have designed a sales rep’s territory by handing out a list by geography or vertical market? You would be wrong. That’s not territory development; you are merely setting the rules for which sales rep would get a lead from some marketing activity. You are not developing a territory.
There is only one definition of a sales territory: the number of targets a sales rep can reach out to each year. And, that number is smaller than you think.
While you have many thousands of targets that you “market to,” your aggregate sales territory comprises a small subset of those targets. And, the size of that subset is largely defined by the amount of time the sales reps spend on the phone trying to set appointments.
Consider this. You give your sales rep, Billy, a list of 5000 names. Billy spends an hour a day on the phone “dialing for dollars.” From the arithmetic you will see below, Billy could reach out to about 500 of those names in a year. So, are you developing a territory of 5000 names or a territory or 500 names? More important, if Billy can make quota from those 500 names, do you have more “territories” in that list than just Billy’s?
As a matter of fact, as a manager, you are really in the territory development business. Sales reps come and go, but your “territories” will always be your territories. A new rep will quick start more successfully if placed into a territory that you have been developing (with all the reps that came before him) over time.
To determine whether you could benefit from a better territory development approach, let’s see if you have the typical symptoms of territory development disorder.
• Does most of the prospecting history for a territory leaves when the current sales rep leaves the territory?
• Do opportunities ‘in play’ get lost when the sales rep that found it leave? i.e, “Call me back next month…”
• Do new sales reps spend their first days in the territory cobbling together their list from scratch using CRM or paper remnants left from the last rep?
• Do new sales reps call companies that previous reps had already called and had already labeled as not a good candidate and should not be called again?
• Do new reps call customers by mistake?
• Do new reps know if another rep is calling the same company, or worse, calling the same person in a company?
• Do you declare that your lists are bad and buy new ones frequently?
If you answered yes to one of these, you have room to improve your Territory Development approach. Let me disclose at this point that we work with sales consultants and sales managers to design approaches to increase, and also measure, telephone prospecting activity to make telephone prospecting programs sustainable and consistent.
The challenge is to create a Territory Development program to achieve three goals:
Each territory has the right amount of targets based on the effort the sales rep is expected to apply towards generating new customers.
A territory will, over time, become a list of only qualified targets.
3. The database (and history) of targets is owned and controlled by management
1st Goal – Each sales rep has the right amount of targets. The simple answer to the right number of targets: The number of targets they can call in a year. No more, no less.
The coin of the realm of telephone prospecting is the dial. There are only so many dials that a rep can do each year and the use of those dials determine the number of targets a sales rep can pursue.
As an extreme illustration, if a rep could make 4400 dials a year, the territory should have somewhere in between 4400 names (the rep would call only once) and 1 name (the rep would call 4400 times.) So, the question is how to determine “somewhere in between.”
The answer is arithmetic: six numbers in the calculator below will illuminate this issue. (You can request this free calculator to model your own environment by emailing
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
)
1 Cold Calling Minutes Per Day 60
2 Average Number of Calls Made 2.5
3 Average time per Call in Minutes 6.0
4 Number of Cold Calling Days per Year 220
5 Number of times, on average, a target will be pursued per year 2.0
6 Percent of replacement targets needed to keep calling pool at the right level 25%
Number of Targets needed per Rep 550
1. The first number is how many minutes a day the sales rep commits to prospecting.In our sample calculator, we will start with a commitment of one hour per day.
2. Next, what is the average number of calls they will make over the few weeks in pursuit of one target. The average number of calls is usually less than the maximum you are willing to make since you do reach some targets in the first, second, etc. attempts. In our example, we call a target 4 times maximum but the average number of calls we make to connect is 2.5.
3. The next number is the average time spent in the pursuit of one target. In a given hour on the phone, other than dialing the phone and leaving a voicemail (or having a conversation,) the Best Practice often requires the sales rep to do other things before they can make the next call. A few of these are: recording what happened, setting the time for the next call, sending an email, putting the record away, getting the next one, reviewing it’s history… paperwork, mostly.
4. Now, an easy one, how many days a year our sales rep is available to make calls. We would exclude vacation days, the days spent at quota club and company holidays. In our example, we expect 220 days of telephone prospecting.
5. Now, how often per year do we want to pursue a single target? Most of the time, we don’t connect and move on; but plan to pursue again later. For some markets, it is smart to pursue targets every quarter, for others once a year is frequent enough. Every product and market is different but you must have a Best Practice which defines frequency. We will use twice a year.
6. Finally, how good is your list? Our final number is the percentage of names that need to be replaced from the sales rep’s starting list. In the ideal list, there would be no company out of business and no company that does not fit the profile of a perfect customer. (That list is actually a goal of Territory Development, which is covered next.) In our calculator, we assume one out of four names will be replaced.
The most common reaction to the calculation is “that’s not a lot of targets.” Our response: choose your targets with care and have sales reps ruthlessly qualify them. You have a lot of targets, so don’t hang on to marginal ones.
2nd Goal - A list of Only Qualified Targets. That is to say, I know that every target on my list (aka My Territory) is a good candidate for my product. Ideally, someone in my company (including me) has spoken with someone at the target company and has qualified them, if only at a cursory level.
The implication here is that someone also spoke with a lot of companies that are not qualified in order to “cull” the territory to these of higher value.
As a practical matter, you will not reach the goal of a 100% qualified territory. The reason is that a sales rep cannot work a list of that many qualified targets; their pipeline would be bulging and the amount of time prospecting would need to be reduced. The real goal is to have a plan to attempt getting to the goal. And, that brings us to the third overall goal.
3rd Goal - Targets are owned and controlled by Management. For a lot of companies, not owning their prospecting database is very, very expensive. Each of the questions at the beginning of this paper has an associated cost.
Even if you own your database, you may not have control. Just because you have thousands of names in your CRM does not mean you control what is done with them, when or how. You have an electronic storage device; but you don’t really control the pursuit of those targets.
In summary, the value of true Territory Development is the ability to tell a new sales rep “here is your territory, pick up where the former rep left off.” This provides greater long and short term return on prospecting investment than giving the rep a list of names and the admonition to “hit the phones.”
|
Bob Howard |
| About the author: |
|
Bob Howard is Founder and President of Contact Science – www.contactscience.com which provides a sales tool to improve the efficiency and productivity of sales people who start their sales cycle with a phone call.
|
| Read More >> |
Trackback(0)
 |
|
|
|
|
|
Quote of the day
Leadership is action, not position.
-Donald H. McGannon
|
|
Tell a friend about Salesopedia
|
TrackBack URI for this entry
Subscribe to this comment's feed