The True Cost Of Sales Rep Turnover
It’s important to understand what it’s really going to cost you when you lose a sales rep — and what steps you can take to minimize your turnover rates.
Every sales leader can relate to that pit-in-the-stomach feeling when a star sales rep says they’re moving on. There goes the talent, the institutional knowledge, the continuity of relationships, the momentum.
Of course, that’s the case when any employee leaves, but the full cost of sales rep turnover can be particularly high. In most organizations, salespeople are the pivotal drivers of growth. Their work directly impacts the bottom line. What’s more, truly effective salespeople spend time building up a deep understanding of and trusted relationships with their customers. They become the face of the organization and the partner in their customers’ success. When they leave, it’s not just future new business that could be at risk; existing deals and client retention and expansion efforts could also be in jeopardy.
If you’re in a high-growth or competitive industry, you can bet there’s some fierce competition in the market for your salespeople. In any economy, the best are always in high demand and always keeping their eye on the horizon. Various studies have shown that salesperson turnover rates are up to three times as high as rates for the overall labor force. In some industries, average sales rep tenure is just two years.
While it’s a good idea to put some defensive moves in play to reduce the negative consequences of salesperson attrition, it’s also important to understand what it’s really going to cost you when you lose a sales rep — and what steps you can take to minimize your turnover rates.
Understanding the True Cost of Sales Rep Turnover
Conventional wisdom says it will cost a company about 1.5 times the exiting employee’s annual salary to hire a replacement. But when it comes to salespeople, the true cost is usually much higher.
Hiring, training and severance and bonus packages all figure into the hard-dollar costs. U.S. firms spend $15 billion a year training salespeople and another $800 billion on incentives. But there are also plenty of “soft-dollar” costs that can quickly add up. It takes time to onboard and ramp up a new salesperson before they’re closing deals and delivering a return on the investment the company has made in them. This ramp-up time can vary depending on industry and the complexity of the sale, but as an example, at an SaaS company it can take between 12 and 18 months before the company breaks even on the new sales hire. Profitability finally comes around month 21.
In the meantime, the sales manager has to invest time in helping that new hire get ramped up. Other salespeople have to take up the slack with existing clients who’ve lost their sales rep, making sure the transition period is seamless and that no issues or opportunities fall through the cracks. And they have to make sure any deals in the pipeline get the necessary attention and follow-through to close.
As a result, the loss of that one salesperson can have a ripple effect on productivity and morale across the sales organization. And it gets worse: It might even cause more sales reps to leave. One study examining why salespeople quit found that peer turnover (both voluntary and involuntary) greatly increases a salesperson’s turnover probability.
One reason for this is that salespeople who are “left behind” can feel overburdened and demotivated. Particularly when turnover is the result of downsizing, they may lose trust in management and feel disengaged from the work. Even if they don’t leave, these negative attitudes have a hidden opportunity cost because they’ll drive down productivity and engagement even further.
How to Reduce Sales Rep Turnover
So now that you know how expensive it is to lose a sales rep, what can you do to mitigate those costs? The best way to reduce the costs is to reduce the rate of turnover. While sales rep turnover happens, there are some specific things you can do, particularly if you lead a sales team, to lower the attrition rate and retain your good reps longer:
- Coach them — effectively and frequently: There’s a misconception among some sales managers that the only reps who really need or want coaching are new hires and those whose performance is struggling. In fact, high achievers want to keep growing and reaching new levels of success. That’s why sales coaching is one of the most important things you can do to build trust with your team and demonstrate your commitment to their continual growth and success.
Because so many sales managers are lagging in this area, coaching, when it’s done frequently and effectively, can become one of your biggest strategic differentiators, helping you attract and retain sales talent. High performers who know their leader is invested in their development are going to be less likely to leave and more likely to keep delivering results for the company. Our research shows the companies that provide sales coaching to high-performing salespeople realize 10% higher sales goal achievement.
- Build a learning culture: In a fast-changing, increasingly complex business environment, no one can afford to stop learning. As we saw when the pandemic forced sales teams to move to virtual selling, even some of the most seasoned reps faced a crisis of confidence, questioning whether they had what it takes to succeed in the world of remote sales.
Since sales success is more about inner drive, attitudes and beliefs than it is about a particular technique or methodology, you can’t view training as “one and done.” To reduce salesperson turnover, think of training not just for new hires or when you’re rolling out a new product but as part of a culture of learning — and be sure to focus on the right kind of sales training to keep top performers motivated and engaged.
- Instill a sense of purpose: People who believe in what they do and feel that they’re making a difference for their customers and their customers’ customers are more engaged and motivated by their work — and more likely to stick with it, even in challenging times.
Consider whether your salespeople have that connection and alignment with the organization’s mission and purpose. Are leaders walking the talk and reinforcing the right attitudes and behaviors through their own example? Most companies espouse values like integrity, trust and mutual respect, but many don’t live up to them. If your company does, you’ll stand out — and retain more salespeople and customers alike.
Each of these requires some investment, whether of time, money or attention, but that pales in comparison to the high cost of losing good salespeople. The best part is, these steps will pay for themselves many times over by helping you attract talented people, keep them engaged and growing as your market evolves and deliver even more value to your customers.