What is the real cost of a B2B sales call?

what's the real cost of a sales call?I must be living in a parallel universe somewhere. A sales manager buddy of mine was trying to convince me that the cost of a [human] sales call—the face-to-face variety—has stabilized or is going down. And further, that the cost was somewhere close to $50/call.

Why do you care? As you know, the cost/sales call is critical in the calculation of a marketing budget. If sales calls are truly “cheap,” marketing can’t justify the same budget allocation as when sales calls are expensive.

So, I did a little research… and sure enough… the devil’s in the details. The reason for the discrepancy is in the assumptions (and you know what they say about the word: ASSUME … that it can make an ASS out of U and ME).

Turns out they assumed the average $40k sales rep made 16 sales calls/week [that's 3.2 sales calls/day] for 52 weeks [slave-drivers...no holidays] = $48.08.

But in my parallel universe, sales reps can’t physically make 16 calls/week. In fact, for technical products and services, I have a hard time believing anyone can do this.

Then I came across this post at Sales Laundry [a worthy read, btw]:

Let’s say you have sales representatives costing you $60,000 in base that have on target earnings at $120,000/yr.

In simple terms, assuming this sales representative is working 40 hours a week (stop laughing!), and has two weeks off a year, he is going to work an average of 2000 hours a year. Doing the simple math, $120,000/2000 hours, this sales representative costs (or really has an hourly revenue rate of) $60 an hour before you factor in benefits, cell phone, car allowance, etc. Let’s estimate his cost at $85 an hour to execute his sales work properly.

Subject Matter Expert [SME]: (Could be an engineer, analyst, auditor, etc.) $80k/yr; $80,000/2000 = a cost of $40/hr. We will keep it simple and skip the benefits add on.

Inside sales representative: $40k/yr; $40,000/2000 = a cost of $20/hr skipping the benefits add on here as well.

So let’s look at our costs for these sales representatives and their potential sales tasks.

Site Visit: (Assuming 1 hour of prep, 30 minutes of travel, 1 hour meeting) $212.50 + plus the literature he left, lets call it a cost of $215 for that sales call.

Technical Sales Call (Assumes Subject Matter Expert and Sales Representative) $215 for the representative plus $100 for the SME or a total of $315.

While this second, albeit more rational approach, differs in the process of calculating the cost per sales call, I can at least say I feel better.

But how about you? What rule-of-thumb do you use for the cost of a sales call for your company?

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  • http://www.riseinteractive.com Howard Diamond

    From a salary investment perspective, the true cost per sale would include the average amount of prospecting calls, both successful and unsuccessful, before each sales meeting is achieved. If lead gen is provided for the rep, then obviously the number of leads (at the cost per lead based on marketing investment) would also be factored into the equation.

    Then there is meeting prep, travel time (30 minutes seems low, unless your territory is small or highly populated), meeting time and follow up time. If you are meeting with the right contacts at the right company, there will be action items that result from most sales calls. And yes, these tasks may include a sales rep and a sales engineer or SME.

    Travel costs could be the .55/mile or airfare, plus other T&E. In my experience, the more successful the rep, the higher the expense report given the amount of in-person meeting activity, for which there is no substitute. While web conference technology has come far, meeting face-to-face builds trust and can reduce the sales cycle.

    If I had to pick a round number, I would say that for B2B solution sales the cost is between $200-$300/meeting, and higher with air travel. Although reps should be responsible for securing multiple meetings to reduce costs when it is feasible, the goal is to be out of the office and with prospective clients as much as possible. If this isn’t resulting in closed deals, then the strategy needs to be re-evaluated given the required levels of investment in each sales rep.

  • http://www.salesperformance.com Michael Webb

    I would argue that cost per anything (hour, call, order, etc.) is less important than VALUE per.

    If a rep has a quota of say, $1 million dollars per year (though in many industries it is a lot higher), us THAT number to calculate the required productivity per unit. Not cost, salary, mileage, etc. Those are the chicken feed.

    If you can get 1000 hours of productive (value add) time from an average salesperson in a year, then on a million dollar quota, those hours must each produce $1000 in revenue.

    Value add time is what the customer would be willing to “pay for” (i.e., with their attention, their time, cooperation, and ultimately, their money). Non-value add time (i.e., waste) is things the customer would not pay for, like sales meetings, administrative work, most travel time, etc.

    It might sound outrageous, but most companies would do well to focus on what they can do that would make their customers willing to pay (the equivalent of) $1000 per hour to talk with their salespeople.

    Thinking along those lines is likely to lead toward higher productivity.

    Michael Webb
    http://www.salesperformance.com

  • John Fox

    Wow, Michael. Terrific insight!

    Coming from a sales-process guru, like you, thinking of your sales reps as $1000/hr would lead to higher productivity… Like using these company “assets” to better understand their customer problems and how their products and services uniquely solve those problems.

    Rather revolutionary thinking!

  • Vic Ranczynski

    Twenty years ago, I did precisely this exercise as National Sales Manager for a small B2B industrial computer manufacturer. Five sales managers covering the US, making $100K at quota, a year’s worth of data/reports. Result: about $230 per call. Late 90’s (complex control software) the result was over $400.

    Both examples were not just B2B, but also OEM. High tech, long sales cycles, multistate territories. In this type of sales environment you only average 5-10 face to face sales calls per week. Many of those require an SME (systems engineer, or someone from R&D) on the call, as well as air travel.

    Your example of a $40K rep making 3 calls/day (likely driving distance) may give you $50 per call. But multiply his salary 4x, give him a 10 state territory, a complex product to sell – the cost per call easily goes into the hundreds.

  • http://www.adamlibman.com adam libman

    got to this page from John’s post on Perry Marshall’s mastermind forum…

    This really opened my mind to sales process of higher ticket items. The true cost of anything is usually a 3x higher than would you think it is.

    I’m really impressed with the quality of the comments here. wow.

    thx

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