As a sales operations leader, you are under continual pressure to deliver better analytical insight. But your team’s time is limited, and developing custom analyses can’t interfere with supporting sellers. How do you improve the quality of your team’s insights in this situation? One way is to build analyses that add value to many different use cases. Sales capacity is a great example of such a metric, though its uses are sometimes overlooked.
Sales capacity is a predictive measure of a sales team’s ability to deliver revenue based on expected headcount and productivity. Much like revenue forecasts, capacity projection is a moving target. Your capacity projection will fluctuate over time as common events occur:
- product launches
- marketing campaigns
- new-hire onboarding
As you can imagine, a reusable model pays dividends when projecting sales capacity. But it also requires ongoing care and feeding. So what’s your return on investment?
Calculating sales capacity at each level of the sales organization will allow you to quickly identify issues threatening sales’ ability to deliver on commercial goals. You can apply insight from sales capacity analyses to many operational processes, including:
1. Sales force sizing & headcount planning
Organizations use different methods for sales force sizing. Some organizations assess the number of accounts to cover and the average seller effort required per account. Others may be looking at revenue per activity (i.e. average call value) to determine how many sellers they need. You can supplement any of these approaches with a sales capacity analysis. If you can measure average seller productivity by region and sales role, you can confirm the number of sellers needed based on known market opportunity and sales targets.
2. Quota setting
During quota setting, you work with sales leaders to set realistic quotas for managers and sellers. At the seller level, understanding productivity trends by sales role–a side benefit of calculating sales capacity–enables you to set realistic guard rails for quotas. Additionally, you can determine what the typical productivity curve is for new hires and use that to set appropriate quotas for sellers during their on-boarding.
At the manager level, you can compare capacity projections with managers’ targets to identify gaps or risks. An interactive model will show the impacts of headcount adjustments or productivity improvements on sales capacity. With this information, you can validate manager quotas and recommend action plans where gaps exist.
3. Sales forecasting
Projecting sales capacity at each level of the sales organization will also allow you to validate managers’ forecasts. This is particularly useful during periods of attrition when headcount is in flux. If forecasts are inconsistent with expected capacity, you can flag and investigate each submission. Sales leaders can then challenge specific forecasts based on your analysis. This practice adds accuracy to the forecast and provides a clearer understanding of the manager’s forecast drivers.
By constructing a model of sales capacity that responds to changes in headcount and productivity, you can offer your sales leaders and managers increasing insight. Gartner for Sales Leaders clients can learn how here: Modeling Sales Capacity to Avoid Attainment Risks.