Sales Force

Size

What is Sales Force Sizing?

How Many Sales People are Needed?

How Many Should be Generalists?

How Many Should be Specialists?

How Many Sales Managers are Needed?

How Many Telemarketing People are Needed?

Link between
Sales Force Size
and Results

Link between Sales Force

Size and Results

Sales Effort yields Diminishing Returns in Sales

Impact of Sales Effort is not Immediate

Some Results are Carried Over into the Next Year

Carry Over Drivers

Order Size

Customer Relationships

Business Cycle

Market Opportunities

High Short Term Impact, Low Carry

Over:

Small Orders

High Levels of new Incremental Business

Small Purchase Volumes

High Short Term Impact, Low Carry

Over:

Small Sales Cycle

Short Selling Cycles

No Maintenance or Service Activity

High Short Term Impact, Low Carry

Over:

Weak Customer Relationship

Low Customer Switching Costs

Products Similar to Competing Products

Weak Brand Loyalty

No Sales contracts

High Short Term Impact, Low Carry

Over:

Several New Business

Opportunities

Many New Customers

New Product

High Market Growth

Low Short Term Impact and High Carry

Over

Long Order Cycle

Long Selling Cycles

Significant Maintenance Activity

Sales Contracts Exist

Low Short Term Impact and High Carry

Over

Large Purchase Volumes

Low Level of New Incremental Business

Large Purchase Volumes

Low Short Term Impact and High Carry

Over

Strong Customer Relationships

High Customer Switching Costs

Highly Differentiated Product

Strong Brand Loyalty

Sales Contracts Exist

Low Short Term Impact and High Carry

Over

Few Market Opportunities

Few New Customers

Mature Product

Declining Market Growth

Sales Force
Size and
Profitability

The Critical Link Between

Sales Force Size and
Profitability
Sales Potential

No. of Sales People

>Rs. 5,00,00,000

15

Rs. 2,50,00,000 to Rs. 5,00,00,000

18

Rs. 50,00,000 to Rs. 2,50,00,000

36

Rs. 25,00,000 to Rs. 50,00,000

38

Rs. 12,50,000 to Rs. 25,00,000

54

< Rs. 12,50,000

149

The Critical Link Between

Sales Force Size and
Profitability No. of Sales People
Sales Potential

< Rs. 12,50,000

Rs. 12,50,000 to Rs. 25,00,000
Rs. 25,00,000 to Rs. 50,00,000
Rs. 50,00,000 to Rs. 2,50,00,000
Rs. 2,50,00,000 to Rs. 5,00,00,000
>Rs. 5,00,00,000
0

50

100

150

200

Sales Force Size and

Profitability

Sales Force Costs can be Substantial

Sales Force Costs can be Upto 40 % of Total Cost

Sales Force Decisions need to be Examined

Carefully and Taken Rationally

Sales Force Size and

Profitability

Right Sales Force Maximises Long Term Sales

Profitability

Cost Containment is not Profit Maximisation

Bigger Sales Force can Result in Higher Profits

Is Your Sales Force the

Right Size?

Sales Force Too Small

Sales Force Too Big

Is Your Sales Force the Right

Size?
Drivers
External

Customer

Competitor

Environment

Internal

Corporate Strategy

Productivity Enhancement

Sales Force
Too Small

Sales Force Too Small

Customer Changes

Market Expands

Customers Demand More Sales Support

More Purchase Influencers

Customer Needs More Sophisticated

Sales Force Too Small

Competitive Changes

Competitors Expanding Sales Force

Larger, More Aggressive, Wealthier Competitors

Opportunity to Capitalise on Competitors

Weakness

Sales Force Too Small

Environmental Changes

Better Economic Conditions

Outlook for Future Sales Better than Expected

Industry Deregulation

Industry Consolidation

Tight Labour Markets

Sales Force Too Small

Company Strategy Changes

Start Up Sales Force

Launching New Products

Entering New Markets

Shift to a Product Requiring More Sales People

Shift to a Market Requiring More Sales People

Sales Force Too Small

Company Strategy Changes

Selling Process or Go To Market Strategy Requiring

More Sales People

Targeting More Customers and Prospects

Switch From Cost to Revenue Focus

Size for Opportunity, Not Cost Savings

Sales Force Too Small

Productivity Enhancement

Increasing Sales

Increasing Market Share

Increasing Customer Satisfaction

Increasing New Business Development

Increasing Consultative Sales

Increasing Value Added Sales

Reducing Work Load

Reducing Sales Person Travel Time

Sales Force
Too Large

Sales Force Too Large

Customer Changes

Market Contracts

Customers Demand Less Sales Support

Fewer Purchase Influencers

Customer Consolidation

Customer Needs Less Sophisticated

Sales Force Too Large

Competitive Changes

Fewer, Weaker Competitors

Competitors Downsizing Sales Force

Commodisation

Pressure on Margins

Sales Force Too Large

Environmental Changes

Weaker Economic Conditions

Outlook for Future Sales Less than Expected

New Technologies Reduce Work

New Sales Channels

Sales Force Too Large

Company Strategy Changes

Mergers/ Acquisitions

Shifting to A Product Requiring Fewer Sales People

Shifting to a Market Requiring Fewer Sales People

Selling Process and Go To Market

Fewer Products

Pull Out Of Market

Switch From Revenue To Cost Focus

Sales Force Too Large

Company Strategy Changes

Selling Process or Go To Market Strategy Requiring

More Sales People

Targeting More Customers and Prospects

Switch From Cost to Revenue Focus

Size for Opportunity, Not Cost Savings

Sales Force Too Large

Productivity Enhancement

Reducing Costs

Increasing Productivity Per Sales Person

Reducing Calls to Un Profitable Accounts

Re Assigning Sales Force to Less Expensive

Personnel

Mistakes in
Sales Force
Sizing

Common Mistakes in
Sales Force Sizing

Keep the Size the Same as Last Years

Common Mistakes in
Sales Force Sizing

Increase the Sales Force Size only after the Sales

have Grown to Meet the Extra Cost

Common Mistakes in
Sales Force Sizing

Split the Territory once Sales Exceed a Threshold

Common Mistakes in
Sales Force Sizing

Reduce the Sales Force Size after implementing

Sales Support Measures

Common Mistakes in
Sales Force Sizing

Maintain Sales Force Size to remain Within a

Percentage of Sales

Common Mistakes in
Sales Force Sizing

Launch a New Product requiring Major Time

Commitment using the Same Sales Force

Determining
Sales Force
Size

Determining Sales Force

Size

Activity Based Method

Pipeline Method

Target Return per Call Method

Sales Response Method

Geographical Concentration Method

Activity Based
Method

Activity Based Method

Amount in Rs. Lakhs/ Rs. 000

Activity Based Method

14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
Paints

Paper
Segments

Textiles

Contribution Per Account in Rs.Lakhs/Year

Cost To Call Per Account in Rs.1000/Year

Activity Based Method

Suitable for Existing Customers

Appropriate when Activities are Simple and

Results are Predictable

Sales Pipeline
Method

Pipeline Method

Pipeline Method
Pipeline Method
Sales Volume Targeted Rs.

1,000,000,000

Average Order Value Rs.

30,000,000

No. of Orders Required #

33

Closure as a Percentage of RFP

20

No. of RFPs Needed #

167

RFP as a Percentage of Prospects

15

No. of Prospects Required #

1,111

Hours Per
Prospect

Estimated
Hours

40

6,667

10

11,111

Total Hours Required

17,778

Hours Per Salesperson Per Year

1,500

No. of Sales Persons Required

12

Pipeline Method
Pipeline Method
Sales Volume Targeted Rs.

1,000,000,000

Average Order Value Rs.

30,000,000

No. of Orders Required #

33

Closure as a Percentage of RFP

20

No. of RFPs Needed #

167

RFP as a Percentage of Leads

15

No. of Leads Required #

1,111

Hours Per Salesperson Per Year

Hours Per
Prospect

Estimated
Hours

40

6,667

10

11,111
1,500

No. of Field Sales Persons Required

No. of Lead Generation Personnel Required

Pipeline Method- Sales Funnel

Prospects= 1111

RFP=167

Orders=
33

Pipeline Method

Suitable When Process is Long and Complex

Linked to End Result

Target Return
Method

Target Return Method- 1

Customer

Contribution

Hours Reqd

Cost of
Coverage

ROI %

20,00,000

1000

500000

400

15,00,000

600

300000

500

1000000

1200

600000

167

600000

900

450000

133

1200000

400

200000

600

1300000

1400

700000

186

1700000

1700

850000

200

1600000

600

300000

533

2500000

1450

725000

345

10

3000000

1500

750000

400

11

1600000

1800

900000

178

Target Return Method- 1

Customer

Contribution

Hours Reqd

Cost of Coverage

ROI %

1200000

400

200000

600

1600000

600

300000

533

15,00,000

600

300000

500

20,00,000

1000

500000

400

10

3000000

1500

750000

400

2500000

1450

725000

345

1700000

1700

850000

200

1300000

1400

700000

186

11

1600000

1800

900000

178

1000000

1200

600000

167

600000

900

450000

133

Target Return Method- 1

Customer

Contribution

Hours Reqd

Cost of Coverage

ROI %

1200000

400

200000

600

1600000

600

300000

533

15,00,000

600

300000

500

20,00,000

1000

500000

400

10

3000000

1500

750000

400

2500000

1450

725000

345

1700000

1700

850000

200

Hours Required

7250

Target Return Method- 2

Segment

Contribution

Hours
Reqd

Cost of Coverage

ROI %

Existing

20,00,000

1000

500000

400

Existing

15,00,000

600

300000

500

Existing

1000000

1200

600000

167

Existing

600000

900

450000

133

Existing

1200000

400

200000

600

Prospect

1300000

1400

700000

186

Prospect

1700000

1700

850000

200

Prospect

1600000

600

300000

533

Prospect

2500000

1450

725000

345

Prospect

3000000

1500

750000

400

Prospect

1600000

1800

900000

178

Target Return Method- 2

Segment

Contribution

Hours
Reqd

Cost of
Coverage

ROI %

Decision

Existing

1,200,000

400

200,000

600

Cover

Prospect

1,600,000

600

300,000

533

Cover

Existing

1,500,000

600

300,000

500

Cover

Existing

2,000,000

1,000

500,000

400

Cover

Prospect

3,000,000

1,500

750,000

400

Cover

Prospect

2,500,000

1,450

725,000

345

Cover

Prospect

1,700,000

1,700

850,000

200

Cover

Prospect

1,300,000

1,400

700,000

186

Do Not Cover

Prospect

1,600,000

1,800

900,000

178

Do Not Cover

Existing

1,000,000

1,200

600,000

167

Do Not Cover

Existing

600,000

900

450,000

133

Do Not Cover

Target Return Method- 2

Segment

Contribution

Hours
Reqd

Cost of
Coverage

ROI %

Decision

Existing

1,200,000

400

200,000

600

Cover

Prospect

1,600,000

600

300,000

533

Cover

Existing

1,500,000

600

300,000

500

Cover

Existing

2,000,000

1,000

500,000

400

Cover

Prospect

3,000,000

1,500

750,000

400

Cover

Prospect

2,500,000

1,450

725,000

345

Cover

Prospect

1,700,000

1,700

850,000

200

Cover

Hours Required

7250

Target Return Method- 3

Segment

Contribution

Hours Reqd

Cost of
Coverage

ROI %

Existing

2000000

800

320000

625

Existing

2000000

500

200000

1000

Existing

1000000

1100

440000

227

Existing

600000

800

320000

188

Existing

1200000

300

120000

1000

Prospect

1300000

1200

480000

271

Prospect

1700000

1700

680000

250

Prospect

1600000

500

200000

800

Prospect

2500000

1300

520000

481

Prospect

3000000

1400

560000

536

Prospect

1600000

1700

680000

235

Target Return Method- 3

Segment

Contribution

Hours Reqd

Cost of
Coverage

ROI %

Existing

2000000

500

200000

1000

Existing

1200000

300

120000

1000

Prospect

1600000

500

200000

800

Existing

2000000

800

320000

625

Prospect

3000000

1400

560000

536

Prospect

2500000

1300

520000

481

Prospect

1300000

1200

480000

271

Prospect

1700000

1700

680000

250

Prospect

1600000

1700

680000

235

Existing

1000000

1100

440000

227

Existing

600000

800

320000

188

Target Return Method- 3

Segment

Contribution

Hours Reqd

Cost of
Coverage

ROI %

Existing

2000000

500

200000

1000

Existing

1200000

300

120000

1000

Prospect

1600000

500

200000

800

Existing

2000000

800

320000

625

Prospect

3000000

1400

560000

536

Prospect

2500000

1300

520000

481

Prospect

1300000

1200

480000

271

Prospect

1700000

1700

680000

250

Total Hours

7700

Target Return Method- 4

Segment

Contribution

Hours Reqd

Cost of
Coverage

ROI %

Existing

2000000

800

320000

625

Existing

2000000

500

200000

1000

Existing

1000000

1100

440000

227

Existing

600000

800

320000

188

Prospect

1300000

1200

480000

271

Prospect

1600000

500

200000

800

Prospect

3000000

1400

560000

536

Prospect

1600000

1700

680000

235

Target Return Method- 4

Segment

Contribution

Hours Reqd

Cost of
Coverage

ROI %

Existing

2000000

500

200000

1000

Prospect

1600000

500

200000

800

Existing

2000000

800

320000

625

Prospect

3000000

1400

560000

536

Prospect

1300000

1200

480000

271

Prospect

1600000

1700

680000

235

Existing

1000000

1100

440000

227

Existing

600000

800

320000

188

Target Return Method- 4

Segment

Contribution

Hours Reqd

Cost of
Coverage

ROI %

Existing

2000000

500

200000

1000

Prospect

1600000

500

200000

800

Existing

2000000

800

320000

625

Prospect

3000000

1400

560000

536

Prospect

1300000

1200

480000

271

Hours Reqd

4400

Target Return Method

Appropriate for Profit Maximisation Objective for

Customers giving Repeat Orders on an Ongoing
Basis

Detailed Data Needs to be Collected for Each

Account

Sales
Response
Method

Sales Response Method

Sales Response to Calls

Average Sales Per Account (Rs. Lakhs)

1,200
1,000

1,000
800

600

700
500

400
200

200

235

250

Moderate Call
Frequency

High Call Frequency

0
Low Call Frequency

High Potential Accounts

Low Potential Accounts

Contribution
Maximisation
Method

Contribution Max. Method- 1

Sales Force Financials
Revenues Less
Variable Production Contribution
Cost

Sales Force Size

Sales Force Cost

50

4,000,000

10,000,000

6,000,000

60

4,800,000

11,000,000

6,200,000

70

5,600,000

12,000,000

6,400,000

80

6,400,000

13,000,000

6,600,000

90

7,200,000

14,000,000

6,800,000

100

8,000,000

14,500,000

6,500,000

110

8,800,000

15,000,000

6,200,000

120

9,600,000

15,500,000

5,900,000

130

10,400,000

16,000,000

5,600,000

140

11,200,000

16,500,000

5,300,000

150

12,000,000

17,000,000

5,000,000

Contribution Max. Method1

Sales Force Size/ Cost
140,00,000
120,00,000

120,00,000

112,00,000

Sales Force Cost (Rs.)

104,00,000
96,00,000

100,00,000

88,00,000
80,00,000

80,00,000

72,00,000
64,00,000
56,00,000

60,00,000
40,00,000

48,00,000
40,00,000

20,00,000
0

50

60

70

80

90

100

110

120

130

140

150

10

11

Sales Force Size

Sales Force Size

Sales Force Cost

Contribution Max. Method- 1

Sales Force Size / Financials
180,00,000
160,00,000

Sales Financials

140,00,000
120,00,000
100,00,000

80,00,000
60,00,000
40,00,000

170,00,000
165,00,000
160,00,000
155,00,000
150,00,000
145,00,000
140,00,000
130,00,000
120,00,000
120,00,000
112,00,000
110,00,000
104,00,000
100,00,000
96,00,000
88,00,000
80,00,000
72,00,000
64,00,000
56,00,000
48,00,000
40,00,000

20,00,000
0

50

60

70

80

90

100

110

120

130

140

150

10

11

Sales Force Size

Sales Force Size

Sales Force Cost

Revenues Less Variable Production Cost

Contribution Max. Method- 1

Sales Force Size/ Financials
180,00,000

Sales Force Financials

160,00,000
140,00,000

Sales less
Variable
Production Cost

Sales Force
Cost

120,00,000
100,00,000
80,00,000

Contribution

60,00,000
40,00,000

Sales Force
Size

20,00,000
0

Sales Force Size

Sales Force Size

Sales Force Cost
Revenues Less Variable Production Cost
Contribution

10

11

Contribution Max. Method- 2

Sales Force Financials

Sales Force Size

Sales Force Cost

Revenues Less
Variable
Production Cost

50
60
70
80
90
100
110
120
130
140
150

2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000

10,000,000
11,000,000
12,000,000
13,000,000
14,000,000
14,400,000
14,800,000
15,000,000
15,400,000
15,600,000
15,800,000

Contribution

7,500,000
8,000,000
8,500,000
9,000,000
9,500,000
9,400,000
9,300,000
9,000,000
8,900,000
8,600,000
8,300,000

Contribution Max. Method

Links Efforts to Results

Suitable When Fullest Market Coverage and Profit

Maximisation is Being Pursued

Workload
Method

Workload Method- 1
No. of
Customers

Frequency
/week

Weeks

Workload

(a)

(b)

(c)

(d= a*b*c)

390

52

40560

650

52

33800

260

.5

52

6760

Total workload= 81120, no. of salespersons= 81120/6*250

Calls per day= 6, Days per year= 250
No. of salespeople required= 54

Workload Method- 2
No. of
Customers

Frequency
/week

Weeks

Workload

(a)

(b)

(c)

(d= a*b*c)

500

52

78000

700

52

72800

300

52

15600

Total workload= 166400, no. of salespersons= 166400/8*250

Calls per day= 8, Days per year= 250
No. of salespeople required= 83

Geographical
Concentration
Method

Geographic
Concentration Method

Suitable when a Large Geographical Area is to

be Optimally Covered

Sales Potential
Method

Sales Potential Method

Sales Forecast/ Target = Rs. 100 Cr.

Sales achievable by one Salesperson = Rs. 2 Cr.

Salesperson Turnover = 10%

Sales Potential Method

Sales Forecast/ Target = Rs. 100 Cr.

Sales achievable by one Salesperson = Rs. 2 Cr.

Salesperson Turnover = 10%

Salespersons required = (100/2) * 1.1 = 55

Addition to
Sales Force
Method

Additions to Salesforce

Estimated Requirement = 30

No. of Salespersons on rolls = 20

No. likely to get promoted, resign, retire = 5

No. likely to join in normal course = 4

Additional number to be recruited =

Additions to Salesforce

Estimated Requirement = 30

No. of Salespersons on rolls = 20

No. likely to get promoted, resign, retire = 5

No. likely to join in normal course = 4

Additional number to be recruited =

30 20 + 5 - 4 = 11

End of Section