One of the most common questions I get asked by business owners is;
I want to take on a new sales resource but I don’t know if I can afford them.
Now I know what that actually means! I need more sales but what happens if this person does not generate more sales? How do I target them and how much can I afford to pay them based on when I need to see some upturn in sales? It is this type of decision making that small businesses will find themselves procrastinating over.
My first question is, what will be the payback time? So, if you are thinking of bringing on board a new sales resource, how much time do you need to give them to get up to speed and start to generate new sales?
Are you able to put together a trajectory of how you would expect or like your sales to increase from month 1 onwards for the next year?
This is of course the hard part but I always feel a crucial part to the recruitment process. The sales resource needs to know the size of the challenge and what is expected of them in their first year. Typically however, you should review monthly with them on their progress. How close are they getting to the first sale, how is the order and sales funnel filling up and can we quantify and assign some figures around the likelihood of those orders materialising?
If we are talking about the salary to offer, this is best thought of in terms of when do I need this new resource to payback.
Payback means, if I spend £60,000 in a year for a new resource, when they will generate sufficient sales, which creates £60,000 profit. At that point this resource has paid back.
Here is an illustrated example:
A company has the following profit shape.
Less Cost of sales 250,000
GROSS PROFIT 250,000
Net Profit 150,000