I want to calculate the ROI for adding a new Director of Sales. The management team agrees with my analysis and owners do not. Looking for recommendations on how others would calculate this.
Calculate ROI for New Position
Why not tell us what was in your ROI (i.e., person comes with book of business worth..., person's leadership skills will help focus current team, which should increase productivity X%) so we don't repeat what you already provided.
The reasons for the position are all there (i.e. existing sales team needs focus, leadership needs training, need for outside prospecting, and social media presence etc). They want it quantified (e.g. $XXk total comp yields X in profit over X time). The concern is a position like this will take at least 6 months to begin seeing fruit so you've already lost $XXk over a 6 -9 month period. I do not see it that way. I believe we will see small ROI pretty quickly from the refocus of the existing sales team, I believe we will see ROI from increased social media presence, etc). How much? Likely not a lot in terms of booked business because the current quarter is already booked and Q1 is slow, etc. My analysis used the total comp at the current yielded GP %, but due to the projected loss over time they feel it needs to be double that. I do not see it possible to generate double that business. The position is needed and over time will change the culture, which will bring business. I just need to convince the board and they want #'s.
What empirical data can you use from the recent past to support your projection that this position will mean better results? e.g.
1. What has sales growth been like last few years-flat, declining, growing, better/worse than the competition?
2. How many new customers have been acquired last few years? How-via sales prospecting efforts, or opportunistic/customers "found" you? How many new markets have been opened up by sales?
3. What is your pipeline management like? What's the win/loss ratio last few years?
4. What surveys have you done with key customers that would indicate you need sales management improvement?
5. How many new products have been introduced as a result of sales team initiatives?
6. Would you think any of the existing sales staff have the potential to assume a sales leadership role (caution: not always the best producer:) ).
Finally, has anyone asked, what if we do nothing, just keep going as is?
Thanks Len. Great feedback.
Are you wanting growth and consistency?
I also would consider turnover in salespeople as a potential measurable. If you don't currently have this position, who is monitoring their activities and the recording of those activities? Are you getting results or is the sales team happy with status quo? One of the things that sometimes happens is a salesperson builds relationships and the contact data. You can't do much if the salesperson leaves and takes the relationship, but you want to make sure all of their notes and activities have been logged. A sales director would help ensure consistency if a salesperson leaves the company.
You are also referring to "marketing" type activities concerning the social media. Some companies prefer some standards concerning the use of social media for generating leads.
If you are NOT looking at this in terms of overall market share and how mucho that (how much that individual is going to bring) is worth to your company and it's visoion, then from a strategic stand point, you are already behind.
I have seen companies labor over ROI computations while their competitors eat their lunch. Heck, I have even seen companies do negative ROIs just to get more piece of the market.
IMO, and in this day and age, market share is more important. The more important question you should be asking is....how do you quantify getting more share of the market.
But that is just me.