What’s the total cost of replacing a sales representative? Is it your sales recruiting and training costs plus lost productivity? Or is there something else to consider? When a sales rep leaves your company, you not only lose that person’s skills, but also connections with customers. Missed connections mean missed sales, and that impacts your revenue. The truth is that the cost of sales rep turnover isn’t just about what you spend on replacement. It’s about the total impact to your top and bottom line.
What Does Sales Rep Turnover Really Cost?
Numbers vary, but a reasonable estimate is that the impact of employee turnover on your bottom line can reach 150-200% of that employee’s annual salary. That’s not the whole picture for sales reps, but let’s start with those hard costs:
- Sales Recruiting and Hiring—The costs of the recruiting process include your dollars and cents investment in sourcing, screening, interviewing, and hiring as well as lost revenue while the position remains unfilled. It takes time and effort to replace a competent sales rep, and during that process you’re losing opportunities to follow new leads and close deals.
- Onboarding—A strong onboarding program involves weeks or months of investment in the new employee. It includes not only the nuts and bolts of paperwork and training, but also helping them engage with your culture and bringing them up to speed on current clients and new opportunities.
- Training—Insufficient training is linked to poor engagement, with 44% of employees citing lack of training opportunities as a reason they left their former job. Effective training not only teaches specific tasks and skills, but also provides the coaching needed to help employees grow in their roles so they become more valuable to the company.
The other half of the equation is how unfilled positions impact revenue generation over time. Open sales rep positions cost your company in terms of lost opportunity and lost productivity. Let’s take a look at some of the specific ramifications:
- Lost Productivity—Every day that a sales position remains open translates into lost productivity and lost revenue. When you multiply that cost across turnover percentages and days or weeks of unfilled positions, revenue impact can escalate quickly.
- Opportunity Cost—Vacant sales territories and leads that can’t be followed result in lost opportunities. Even if you split the responsibility among other team members, those territories and leads must be managed at the expense of pursuing new accounts or serving an existing account base.
- Sales Representative Ramp Rates—It takes several months for new sales reps to reach their full productivity level and even longer for a company to break even in terms of cost vs. revenue. You can increase ramp rates by strengthening your recruitment process and designing a more effective onboarding strategy, but you’re still going to see a dip in sales as the new employee learns the role.
- Team Morale—Turnover is often linked to a drop in team morale, which creates an additional impact on productivity. The higher your turnover, the harder it is for team members to remain engaged and to function at peak capacity.
Calculating Your Lost Revenue Due to Turnover
Sales rep turnover will always carry these costs, but their affect on your company will differ based on your turnover percentages and average sales numbers. Our new Financial Impact of Sales Turnover Calculator below makes it easy to quantify the impact of specific metrics on your bottom line by looking at:
- Average sales per year
- Average days working
- Average percentage turnover
- Average days to fill
- Number of Sales Representatives
Using these numbers, you can calculate your average sales per day, days open from turnover per year, and your total lost revenue per year as a result of sales rep turnover. You can use the results as a benchmark to analyze the impact sales rep turnover has on your company’s revenue and bottom line. When you look at the numbers, you’ll see that reductions in time-to-fill can yield significant savings for your company.