We all understand that losing a productive seller has a cost. When a sales manager loses a seller from their team, they lose productive selling time, both in terms of being short of quota carrying head count and the time spent recruiting and hiring a replacement. Many experts estimate that the cost of replacing a sales person can exceed 150% of their annual salary.
Then there is the cost of the new hire ramp. Once a replacement is hired, how long does it take your company to get them up to speed and fully productive? What does that cost you from a bookings perspective?
Let’s look at a simple example to illustrate.
Scenario: 6 month ramp, $1MM quotas
Let’s say you hire someone and based on your experience you expect they will take 6 months to become a fully productive seller. Let’s assume that on average they are 30% productive over the first 3 months and 70% for the remaining 3 months. If you assign them a $1m annual quota, even if they perform at 100% for the remainder of the year, simple math says they would end up closing $750k for the year. That’s 25% less than a fully ramped seller.
The problem gets worse if your new hire starts at a busier time of the year. Let’s say they start at the beginning of a quarter that typically brings in 37% of the annual bookings. Now the ramp costs you 34% of bookings for that position. Bottom line, if you have not accounted for ramp adequately when building your overall quota plan, you could end up falling short of your financial target by a substantial margin.
Ramp is not just an issue for replacement hires of course. Ramp also applies to:
- Net new hires
- People moving from one territory to another
- Inside sales reps becoming field reps
- Employees moving into sales from a different role within the company
Each of these situations are likely to have somewhat different ramp times.
Now that we have established that ramp time has an impact on your business, it is important to get it right in order to predict sales capacity. So how should you approach it?
Factors That Affect Ramp Time
There are many factors to consider that may contribute to your company’s ramp times. Questions to ask yourself include:
- Are there clear and consistent processes for on-boarding?
- Do new employees have clear objectives for the first 30, 60 and 90 days?
- What kind of training do you provide, both for product and sales methodology?
- Do you test skills and proficiencies during ramp time?
- Are you hiring the right profile of seller?
Before you address these questions, it is important to measure and understand your actual ramp times across your sales organization. If you are not analyzing ramp today, but have some historical information on new hire performance, this is often good place to start. Once you are tracking this information, you will have the opportunity to benchmark the progress of new reps against others who were successful with shorter ramp times. You can look for patterns and potential opportunities to improve your on-boarding process to get sellers fully productive sooner.
When building out your plans, do not overlook the importance of ramp times in determining the success of reaching your number. Shortening your ramp time will reduce your cost of sales and could help you build a more efficient sales team. Start with measuring ramp and modeling it into your capacity planning predictions.