The Cost of a Direct Sales Representative Revealed by VP Marketing On Demand
Sales is a critical component of any go to market strategy and the annual cost of a direct sales representative is very high, however, most direct sales representatives spend only a small fraction of their time actually selling.
After analyzing compensation packages for direct sales representatives in B2B technology sales, the fully loaded cost of a direct sales rep is estimated at nearly $380K per year or $2K per business day.
The base and bonus for a direct sales rep will vary by employer, but a general statement is that a typical B2B direct sales rep with a sound track record is one of the most expensive components of the go to market strategy. Below is a guideline of how to derive a meaningful number for a company’s specific situation:
• Base is assumed to be $125K – $150K annually
• Variable compensation at quota is approximately $150K annually
• Overhead (benefits, office, taxes, phone, etc.) is estimated at 20% of total on target earnings
• Travel and entertainment is estimated at $50K annually
Tip, tax and out the door this total approximates $380K annually. In addition, this estimate does not take into account any equity awards, spot bonuses or car allowances.
In general, it can be said that the average direct sales rep works a 50-hour work week, and their time is spent on the following core selling and non-core selling activities:
• Direct selling, 21%
• Administration, 18%
• Account management, 12%
• Travel, 13%
• Planning, 5%
Peter Buscemi, CMO and founder of VP Marketing On Demand, states that “if the goal is to optimize the amount of direct selling for a sales team, then one step may be to conduct an assessment to understand the current state and the desired state for the sales organization. From here, an incremental plan can be developed and executed to optimize the sales process.”
Buscemi continued by saying that “if he key is to it is to align the most efficient and effective resources to each phase in the sales cycle, in most situations, it is better to have dedicated and focused resources for specific tasks rather than spreading the responsibility like peanut butter across many expensive resources that may not have the appropriate skill-set.”
One successful approach to increase selling time is to delegate the front-end of the sales process to market development. Here, sales and marketing need to partner and collaboratively draw a line in the sales process as to the tasks a direct sales rep will focus on and those tasks that should be executed by market development. The lynch pin to make this model work well is the investment in demand creation planning and execution that summarizes what percentage of the pipeline direct sales reps and marketing will be responsible for generating. This plan will be the foundation for aligning scarce resources to the right companies, with the right message and the right offers. The result will be qualified leads that fit the target account profile and e exhibit a high propensity to purchase. The other investment an organization will need to make is in a demand management plan to ensure that qualified leads are efficiently and effectively converted into qualified opportunities in the sales funnel.
About VP Marketing On Demand
VP Marketing on Demand was founded by Peter Buscemi, a CMO with 30 years experience that spans start-ups and Fortune 500 companies. The sole purpose of VP Marketing On Demand is to provide marketing insights and a huge head start to those developing and executing go to market strategy through managed, repeatable processes. Over decades, in working with various boards and executive management teams (CEO's, COO's, VP's Sales and Development)
Page Updated Last on: Jul 02, 2013