Most companies are already well into the second half of their fiscal year. So if you are one of those companies, what return are you getting on your sales team investment? Do you know the answer to that question right off the cuff, or do you need to research it? If you need to research the return, wrong answer! You should always know your performance to goal and be ready to articulate it to your CEO at any time. It’s your organization’s oxygen.
So what goes into an ROI calculation for your sales team? Typically, in the technology sector, you see the following formula:
(Gross Revenue Dollars – Gross Profit Dollars)
– (Base Salary + Variable Commission + T&E + Benefits)
So here is a real life example:
Sales team sold $4,000,000 in the first 6 months The profit margin was at 50% equaling $2,000,000 in gross profit dollars. You would deduct the following from that number to get to your ROI.
|$160,000||Combined base salary (4 sales reps at $80K base salaries -half the year)|
|$160,000||Commissions payout (4% of gross revenue)|
|$50,000||T&E (mileage reimbursement, customer lunches/dinners, etc.)|
|$24,000||Benefits Coverage (15% of sales reps annual base salary)|
$2,000,000 (Gross Profit)
– $394,000 (Deductions)
Actual ROI = the ROI amounts to 4 times your investment in the sales force. Ideally, you are looking for 3-5:1 ROI multiplier from your Sales investments. You should note, there are other variables you can include such as sales training, annual sales kickoff meeting, etc. Our example keeps things simple, but you can plug and play the other variables as warranted by your own situation.
President and founder of Sales Oxygen – Breathing life into your business