A question came up yesterday on our Sales Leader Webcast about Sales capacity and I promised to answer it on the blog today. “How do you measure sales capacity and can you provide an example?”
Peter Drucker has been often quoted as saying: “What gets measured, gets managed.” For sales management, a key element that gets measured is sales capacity.
Your sales capacity is the answer you obtain from the following equation: the number of sales reps you have on the team, multiplied by the number of weekly hours that your team works per year, multiplied by the percentage of time spent selling and finally multiplied by the closing ratio of your team (typically about 30%).
The number is just a benchmark that you should aim to improve WITHOUT ADDING to the number of weeks worked in a year or number of hours worked in a day.
Lets look at a couple examples.
Example #1 An Individual Seller
If you are a rep that works 40 hours a week, 45 weeks a year has a 30% closing rate and 40% selling time you would do the following calculation:
1 x 40 x 45 x 0.3 x 0.4 = 216
Example #2 A Sales Team
If you have a team of 7 that on average works works 40 hours a week, 46 weeeks a year has a 28% closing rate and 30% selling time you would do the following calculation
7 x 40 x 46 x 0.28 x 0.3= 1081.92
To help illustrate how this calculation works, let’s look at some average numbers in a sales organization. We find that organizations typically report that their teams spend:
- between 40% of their time selling
- about 10% of their time conducting research and
- about 15% of their time performing administrative tasks
Test your own organization and see where you place. The key thing is to note your current score and work to improve it over time – this will translate directly into the number of deals you close. And, while you do not want to the number of hours worked in a year, as a sales leader you can help your team focus more on actual selling (Hours Worked per Year) and improving negotiation and closing skills (Closing Ratio).
Dedicated to making this your best year yet
2 responses to “What is your Sales Capacity?”
Thanks for a very interesting blog post!
So what sales capacity-nr would you claim all sales reps shouls aspire?
There is no number that you should aspire to but you should aim at improving your number each year so that you become more and more effective.