You are on top of your business; you know the numbers that drive it and you keep score. At the same time, if you are in a sales leadership role, you probably don’t know the one critical number.
What is the cost of hiring the wrong salesperson?
Did I just hear a groan? If that was you, then you probably need to know this more than most because deep down you know this is costing you a lot– but you don’t want to confront reality.
How long would it take for you to take action if you walked out the back door of your business and saw an employee throwing $100 bills in the dumpster? That is what you are doing if you don’t know the cost of a bad hire.
Typically, we don’t act on this since we don’t see those dollars because we’re never back by the dumpster. Often, we just assume that finding, hiring and retaining a person who can actually sell is very difficult to find, so we settle.
All growth comes from telling the truth. Here is a quick and simple formula to get to the truth.
A) How many months, on average, do I keep a salesperson that underperforms? X Monthly draw or salary? = Hard Cost (not counting taxes, benefits, expenses, etc)
B) In the months that they work for me, how much revenue should that produce? Subtract what they did produce = Lost revenue
C) What is your time worth? X How many hours you spent onboarding them = Your investment
Add: A + B + C = Cost of a bad hire
As a leader you have a choice. You can accept that bad hires, turnover, lack of production from the sales department is just the way it is or you can decide your sales team is going to perform at the level that feeds opportunity for all.