Blog Cover Image 1

What is the true cost of an unsuccessful sales hire?

Posted by Carole Mahoney on 3/20/20 7:15 AM

What is the true cost of an unsuccessful sales hire

The news is scary out there. 

How certain are you that the salespeople you hire today or tomorrow will be able to sell in an even more competitive and price sensitive market?

 

 

I’ve been through this cycle more than a few times and seen first hand what happens. People move companies, budgets freeze or decrease, decisions get delayed, discounts start skyrocketing... The most successful sellers in a good economy stumble without intensive training and coaching. 

The good news is when the bigger companies are slowing their hiring, or laying off, smaller and medium sized businesses have more opportunities to hire sellers. But there is a lot on the line.

The cost of an unsuccessful sales hire could cripple a business because many aren’t calculating the actual cost of a sales hire gone wrong. If they are on 100% commission, it doesn’t cost you anything right?

It still surprises me that so many sales leaders I talk to and work with don’t know what their true number is. Some have said they have back of the napkin math, and in the next breath complain that their CFO cut their hiring budget.

That’s because if you are a startup, the cost of a unsuccessful sales hire will ghost you for years- and it can cost you a round of funding. And if you are a small or mid-size business, the cost of that salesperson who leaves or doesn’t work out can be 2 to 3 times the salary you might pay.

So what is your number? What does a failed sales hire really cost you?

Let’s do some math, who doesn’t love math?

To calculate the true cost of an unsuccessful sales hire, there are a lot more factors than just how much you pay them.

First, how many sellers have you hired in the past 5 years? Then, how many of those sellers either quit or were let go? Those two factors tell you what your turnover percentage rate is.

Next, how many people did you interview to hire the ones who made it through the process? What is the average length of an interview? How many times does each candidate get interviewed? How many hours are spent coaching those hires? (That’s right- your time and your team’s time has a cost to it!) What is the value of your time? (How much do you earn a year divided by 52 weeks, divided by the number of hours you work a week.) What fees are paid to recruiters? What are the ad costs for each position?

These additional factors will give you what your actual recruiting costs are. But there is also a cost to onboarding, training, and coaching each of those new hires. So you will also need to calculate that by adding in the number of hours spent coaching and the cost of training each seller- in both time and resources. Plus you have to add in whatever base salary you give them outside of commission.

All these together will give you the cost of your sales ghosts, or unsuccessful hires. But those are just the out of pocket costs.

What about the lost opportunity cost? 

If you add in the business not closed (missed quota) and the business to be lost by those that are likely to leave, that is where you see how unsuccessful sales hires can cost you a round, if not several rounds, of funding or available capital.

Now, maybe the larger companies can make that gamble, but can you take the 50/50 chance?

Click on the button below to download the excel spreadsheet to calculate your own cost of an unsuccessful hire. 

Calculate Your Sales Ghosts

Why is the rate of sales turnover so high for so many?

We have to consider how they are hired and onboarded. Stay tuned for the next installment of this series where we talk about the Scientific Secrets of Building Superhero Sales Teams- starting with how you attract and source your ideal sales hire candidates. We will talk with other sales leaders about what an ideal seller profile looks like for them and what you can learn from them on how to build your own.

If you can’t wait until then, let’s talk about what you need to do next to raise your sales hire success rate to just over 90%to ensure you continue to grow despite the next economic downturn.

Topics: sales hiring