From prospecting clients to making the pitch, it’s the sales team that brings your business profits. When you work in a profession where quarterly quotas and revenue goals need to be met, you can’t afford a high turnover rate.
When meeting with clients, how often are they experiencing sales problems that are often due to extreme turnover on their sales team? There are multiple reasons behind sales rep turnover, one of the biggest being ineffective sales managers. Other reasons range from poor company culture and inadequate pay to lack of training.
A modest amount of turnover is expected. Plus, it’s good to bring on new people with different perspectives, ideas, and capabilities. However, turnover rates near 35% can be costly and reflect poorly on your organization in more ways than one.
The Financially Crippling Truth About High Turnover Rates
On average, every salesperson that you lose and have to replace costs your organization approximately $112,500. This is how we calculate that number:
- The average cost of turnover for an employee is 1.5 times annual compensation
- If a salesperson earns $75,000 yearly, it will cost your organization $112,500
- 75,000 x 1.5 = $112,500
If your top salesperson is making $50,000 per year, then the cost of losing that sales rep and replacing them will cost your business $75,000. This is just the average cost of annual compensation. You must also consider other factors, such as:
- Recruiting costs: It typically takes over 30 days, and many additional resources, to source and hire new sales reps.
- Training costs: Onboarding new reps takes an average of 6 months and requires significant investment in training and coaching.
- Lost revenue: Sales will inevitably go down when you have a vacant position. The longer the vacancy, the greater the overall revenue loss.
- Customer risk: Customers become irritated when there isn’t a stable sales relationship. This also creates an opportunity for competitors to sneak in.
How much is turnover costing your organization? When you honestly do the math and look at the ratio, you realize high turnover rates are financially crippling. So, how do you reduce high sales rep turnover rates?
It's simple, but not easy. It's a process that takes months and sometimes years to fix, but it’s possible with strong dedication.
5 Strategies for Reducing Sales Rep Turnover
With turnover as such a costly problem, there are some strategies that you can utilize to reduce turnover rates and keep your sales team engaged.
1. Fill Your Talent Bank
You can't hire great people unless you have great candidates ready! In the long-run, a full talent bank is the very first step in reducing turnover. You should always keep your bank loaded with talent, even if you don't have a spot for someone at the moment. Ask for referrals, ask your friends, ask anyone, and always keep your eye open for new talent.
2. Interview the Right Way
The best way to grow a sales organization is to hire people who have the innate abilities to do the job – regardless of their experience (or lack of). Experience doesn't necessarily equal talent.
You need someone that has the inherent talents to be a superstar. At The Center for Sales Strategy, we always recommend our clients use the Online Sales Talent Interview. It’s a predictive talent assessment that offers the most effective talent instrument available on the market to accurately identify an individual’s innate strengths and guides you to coach them in a way to maximize those strengths. Hiring talented salespeople means you'll have more success, and more success equals less turnover!
3. Focus on Strengths
Once you assess a potential candidate’s talent, you must focus on how to maximize their strengths. Most managers try to help a salesperson get better at their weaknesses, but that is actually quite ineffective. At best, you can see someone improve up to 10% in a weak area, while focusing on a strength you can see a 10-fold increase.
4. Build Up
It's human nature to focus on the negatives. As a sales manager, focusing only on the problems demoralizes your sales team, hurts performance, and ultimately leads to good people leaving your organization.
Instead, help build your staff through positive reinforcement. Tell them what they’re doing right every chance that you get. That doesn’t mean to ignore when they’re doing something wrong but rather be truthful, straightforward, and to the point. They will appreciate your guidance and learn from it because you've been encouraging them along the way.
5. Train Your People
A fictional exchange that drives a stake right through one of the arguments against training and developing your salespeople is:
CFO asks CEO, "What happens if we invest in developing our people, and then they leave us?"
CEO answers, "What happens if we don't, and they stay?"
Salespeople need frequent opportunities to learn and practice in order to stay current, relevant, and responsive to the needs of the businesses on which they call. Training allows your team to build good habits, break bad habits, and polish their craft. A strong training program for salespeople should give them strategies and techniques to turn “why to buy” pitches into more productive “how to use” solutions.
The bottom line is that well-trained salespeople are more successful, earn more, and are happier. Committing to finding the right talent, focusing on strengths, and cultivating a rewarding approach towards managing a sales team can significantly reduce, if not stop, high sales rep turnover rates.