The real reason salesreps quit

Sales reps don't quit because of bad managers or culture. Well in some cases, but usually there's another reason - and you can fix it.

Show Notes

Retaining your sales reps is the same as retaining your "quota on the street". If you can't retain sales reps, there's a good chance you'll struggle to scale.

In this episode we cover one of the foundational reasons why sales reps quit - and no, it doesn't come up in employee feedback surveys. We'll also cover what you can do to identify if you have the problem & fix it.

Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

[00:01:03] Mikkel: Today we're gonna talk a bit about the real reason why sales reps, they actually quit.
[00:01:28] And that obviously implies there's, you know, some things everyone knows out there, but this thing we're gonna cover, maybe not everyone will think about it as much, right? So the thing is churn on the sales team. It's a bit of a problem and just wanna spend, you know, one or two minutes for us to cover, Hey, what problems are actually occurring when people resign and quit and leave you?
[00:01:52] Right? So, obviously, yes, you need to kind of go and find a replacement and there's some ramp up time, right? But you know, there's some
[00:01:58] Toni: well, whoa, whoa, Whoa,
[00:02:00] You know? Yeah. You need to find a replacement. There's some ramp up time. I mean, that, that in itself is a massive issue, right? Especially b2b, you know, mid-market enterprise kind of sales reps. They're ramping for nine months, sometimes a year. I'm thinking in terms of almost a copywriter,
[00:02:16] Toni: just telling you, if Someone, if someone is quitting and there's some ramp up, that is basically creating a, a pretty massive problem in your, quota on the streets. So is basically all the quotas added up. And, usually the only way to, you know, you know, just quickly fix that gap. You almost need to hire two people, by the way. In order to kind of, you know, solve for that. So in itself, you know, let's go into all the other topics, but that in itself is an issue right there.
[00:02:44] Mikkel: Let's get into what are some of the problems of, you know, sales reps effectively leaving?
[00:02:50] Toni: Yes. And I think before we go into like, Oh, all of this is a problem, obviously you should be expecting some churn to happen.
[00:02:58] You should be expecting some churn to happen in your account executive team. And currently, you know what we see most of the time is like a 20% is good, more is a little bit worse. So 20% a year really means you have an average tenure of five
[00:03:17] That's all, you know, that's kind of the average tenure of
[00:03:20] a rep and obviously that that churn might be triggered by yourself, kind of, Hey, this person isn't worth it to keep investing in and therefore needs to leave.
[00:03:30] It could be that that person is very much worth investing in and decides to leave. It could also be that that person goes into a management role or goes into, a, a, you know, another part of the organization. So this is what you should be kind of, keeping in mind that some of that stuff will keep happening now if it does happen, and if it does happen without you planning for it.
[00:03:52] there's obviously some, pretty clear and direct revenue impact that's gonna come out of this and I. think, you know, If you were to ask me, Toni, would you rather wanna lose an account executive or lose two SDRs? So sales development reps, I would always choose, I would rather lose the ae counterintuitive answer.
[00:04:14] Why is that? Well, the reason is, a lot of those opportunities that these account executives are working with they will just be redistributed to someone else, and then that someone else will close more you can kind of live with that. For the short term, it's not sustainable long term. And the real issue that you have by losing reps, not only, on short notice, but in general is one of the hardest things to build up over time in your sales team is again, quota on the street.
[00:04:44] So how many quotas Add in on top of each others, do you have available? And building this up simply, you know, is similar to the ramp. Time Takes a lot of time to achieve this, right? And if you, short term, maybe you can buffer, you know, losing account executive long term, not having enough, account executives in your team will basically cap your growth right there.
[00:05:09] Whatever you do on the top end, you won't have enough people that can actually close those deals and that will cap you right there.
[00:05:16] Mikkel: And so I guess There are some classic reasons why people leave, right? There's the, you know, people don't leave, companies, they leave bad managers and actually, Not true. I found out
[00:05:26] Toni: Yeah. Apparently
[00:05:27] Mikkel: it's a misconception. It's, you know, that's probably fifth rank, fifth on the list.
[00:05:32] Toni: if, if you're a bad manager, don't feel bad
[00:05:34] Mikkel: Yeah. And, you know, there's the, Hey, I don't feel appreciated by the company. Or there's a bunch of things out there that's already been covered, you know, quite extensively.
[00:05:46] And the thing we are gonna talk a bit about now is, is not the type of thing that will show up in, you know, the employee feedback survey that much. It won't be, you know, on, on those slides. You click through when, when it's done right.
[00:05:59] Toni: So where, where this showed up for me many times and not subtly so, but very much in my face.
[00:06:07] Also, you know, I've been working in the US and New York City for like three years with sales reps there and I would, I would say that New York City sales reps. Very different breed than, you know, your tame, Copenhagen based, maybe Berlin based sales people. Very different breed. and, you know, I love both very, very dearly, by the way.
[00:06:28] But the difference is that, people will tell you almost in every other forecast meeting that they don't have enough ammunition, They don't have enough leads, they don't have enough opportunities. they will say things like, Toni, I'm not sure if I can make money here. Toni. I think, the team is being set up for failure.
[00:06:52] You know, they will kind of start using that language and that language translated means. I started reacting to those recruiter outreaches on LinkedIn. I started taking some calls to see what else is out there, because apparently quote unquote, I can't make money here. Yeah. those will be the things you hear from your strongest reps, which basically, you know, flip you into panic mode, immediately. right?
[00:07:16] And, those are, those are some very strong signs that, you know, someone is probably on their way out and they're giving you a nice heads up and, you know, you don't need to wait for the culture Amp or the Peakon or the lettuce, report to come through. You will, you will see this by just sitting in a one or two of those, sales meetings and, and you will hear, it,
[00:07:37] Mikkel: and won't they always say it one, I mean, will there ever be enough?
[00:07:42] Toni: Well, the thing is, especially if you start pushing them, right, it's like, okay, why aren't you hitting your target? Why don't you have anything in forecast? why aren't we as a team not hitting target? And hey, you Mikkel, you really need to work harder and it's really your problem. Very quickly, they will go into, end to a degree, this is not the right way to do it, but very quickly they will obviously kind of, you know, blame the product.
[00:08:08] That's like second nature, right? But very click. they will be like, Well, wait a minute. I'm converting higher than most of my peers.
[00:08:16] I'm converting at a higher ACV than most of my peers and faster potentially. so I'm doing my work as best as. possible, but I'm just not getting enough. And you know, this is now the US version swings at the plate.
[00:08:27] Yeah, right. I just don't get enough, you know, opportunities in order to show my skills. And if I don't get that, then how, how am I supposed to hit this target? Right. And the the terrible thing is they're right. Yeah.
[00:08:41] Mikkel: Yeah.
[00:08:42] Toni: They're totally right. and basically having this feeling of being, you know, you know, behind and not able to hit your target and then getting pressure on top, I mean, Sure. I, I understand why people would leave then. Yeah.
[00:08:53] Mikkel: Yeah. That's, that's where the going gets really tough. And I mean, the, at the end of the day, if you, if you're performing really well relative to the amount of, opportunity swings at the bat, you're getting, but not then completing your quota, you won't get that commission check.
[00:09:10] Yes. And that's, you know, the ultimate motivation at the end of the day. I think you and I talked a bit about, I actually think a lot of sales reps, they will, they will not care that the manager is not the greatest or that there's not, you know, a bo bountiful of career opportunities. If they can consistently hit and unlock that commission check, they will probably stay.
[00:09:32] Toni: I, and, and I'm not, I'm not a thousand percent sure if I fully agree with that, but I think especially in a very numbers driven world like sales and a commission being paid out to your bank account world like sales, I think it basically leads to that even smaller issues are being amplified, and leading to career changing decisions, that in other roles where that is not so, you know, deeply crystallized where you as an employee could just live with it a little bit longer.
[00:10:03] Right.
[00:10:04] Kind of, I, you know, I'm a marketing guy. Sorry,
[00:10:07] I'm a marketing
[00:10:07] guy and I don't get the resources I need. or I don't get whatever. It's like, okay, cool. You know, I'll, I'll do the best.
[00:10:13] but
[00:10:14], you know, in the sales world it's very much, gun to the chest. Why aren't you performing? And then while it's kind of, you know, not because of me, it's because of you that are not performing, you know, then kind of these problems just surface faster and then lead to a resolution much faster.
[00:10:29] Mikkel: So, I mean, you kind of said it. Is it you or is it them? That's the problem. And I think we need to get into some of the practical things that are happening. Effectively, you know, potentially causing these wonderful sales reps to leave and we don't want that.
[00:10:46] Toni: Yep. So I think it starts number one with, you know, you being RevOps, CRO revenue leader, knowing your numbers.
[00:10:56] and as much as you know your numbers, your reps will probably also start understanding their numbers a little bit and start using them to argue for One or the other case and what a lot of organizations are doing out there, essentially in trying to generate the target for the rep or the quota in that language.
[00:11:19] There's kind of research out there, Hey, you know, every rep should be hitting, you know, between three and a half and five x. They're on target earnings for the year.
[00:11:27] And what that means. If, if a sales rep is generating $250,000 a year, which is by the way, a, you know, benchmark for the US you know, you then apply A 4 X and Okay? So it really needs to be a million in quota that that person needs to rob in. Okay? Cool. Now we know that it's a million that they need to, generate and now we need to go the other way as Okay? A million, if I'm selling, you know, 20,000 euro.
[00:11:55] tickets,
[00:11:56] That means if I do the math right, you need, you know, 50 of those that you're closing. and maybe you have a 10% conversion rate that would then mean you need a 500 opportunities throughout the year that are being served to that person.
[00:12:12] Yeah. And I could rerun that whole math with different numbers and it would come out differently. But in this case, let's just say 500. are you actually serving 500 opportunities to that sales rep to then close them, turn them into revenue to hit the 1 million Euro target. If you are not, and I can promise you, many of you probably aren't, then there's no wonder why that sales rep isn't hitting target, while that sales rep will basically say, Hey, I'm being set up for failure. and why? They probably will kind of start and go and, you know, go somewhere else.
[00:12:47] And, you know, from, from their perspective. they see that very clearly, right? So they, they do this math by themselves. and, um, it's, it's almost a metric is present for them every single day. It's like every day, how many new meetings do I get?
[00:13:04] And then this, you know, maybe this 50 example is a, you know,
[00:13:08] Is a bit, you know, overblown. But what is that? That's roughly, Yeah, that's 40 per month and that means, two per day. If you don't get two new opportunities served every single
[00:13:18] then you know that basically this will drag you down, drag you down, drag you down, and the only way you can fix that is by being even more awesome on the conversionrate.
[00:13:28] Yeah. And in some channels that it works out like inbound and some channels like outbound, You won't be able to pull this up much. same on the ACV side, same on the velocity side and so forth. And then the only thing that's left is self prospecting. But, you know, have fun and, you know, ask someone, Hey, why don't you just self pro, you know, on top of your 1 million quota
[00:13:49] Mikkel,
[00:13:50] Why don't you self prospect, let's just say 250 opportunities yourself and, you know, keep in mind an SDR for that kind of product. Would probably do a good one. 120 opportunities a year. Right. So you're basically asking an AE to on top of, you know, closing the million, also self prospect for the worth of two SDRs.
[00:14:13] And you know what I could see like, screw this. You know? No. You know, and I think this is where a lot of revenue teams actually get it wrong.
[00:14:21] Mikkel: Yeah. No, it's the equivalent of going down to marketing saying, You're not hitting your target. Why don't you start calling people to get some more leads? It's Reasonable
[00:14:29] It's, it's totally unreasonable. Yeah. and I think the, one of the stories I heard, I think last week was this kick ass, person used to be an accounting exec, I think started, the first month together with four other AEs just sitting there. Yeah. Nothing happening. Yeah. You know, one meeting per week, how on earth?
[00:14:50] I mean, and this is in the, in the, in the, even the honeymoon period,
[00:14:54] honeymoon phase, you lose them. So you will never be able to retain them because you're not feeding them anything.
[00:15:00] Toni: No. one.
[00:15:01] So I think there like a couple of ways where this is just also difficult to manage, by the way. kind of, you don't really know how many opportunities you're able to generate sometimes.
[00:15:11] And you kind of still need to pre-plan the AEs coming in because of the ramp time. But you know, you can also turn it around and be like, Well, maybe my ramp time is so long because I'm just not giving my AEs enough meetings to begin with. Right? So I see this a lot of times where sales teams are basically saying like, Hey, we don't get it.
[00:15:32] Our ramp time gets longer and longer and longer, and all of these guys are kind of unsuccessful. without realizing, Oh, wait a minute, we didn't give them enough opportunities to actually accelerate in their ramp time. If you wanna be really crazy, about it, you basically have an AE starting, I don't know, first of the month or something like that, the resources to support her, sdr, outbound inbound, that basically would've started a month or two early.
[00:15:59] Ramp up for them has happened, and then opportunities are being set up for the second week of that ae. so after a little bit of onboarding and here's a product they can hit the ground running and start running demos, which then kicks off the sales cycle of three to six month, whatever it is. And You know what, you will probably see that after two quarters that person is fully ramped.
[00:16:18] Right? Which in other cases then just takes longer and longer and longer because maybe the SDR started at the same time. And opportunities for marketing are only being rerouted at some point. And then, you know, obviously they, I think the difference is ramp up between, Hey, I understand how to sell this product, which is the true meaning of ramp.
[00:16:38] up. And the other one is I'm able to hit target. Yeah. And, and you know, obviously everyone will lean with the second definition here, but that also requires to have enough opportunities at the right time in order then to get to that ramp level, right? so I think there's, ramp is a complexity, but it can mana be managed, and I think it, sometimes leads to, just a confusion and, and trying to make sure that all of these guys are hitting target.
[00:17:04] Mikkel: No, I, I buy into that and I think, at the end of the day, they have to be able to hit target if they want that check. And you have a responsibility as a business to ensure you actually give them enough to work on. And what a wonderful way to start a new job as an accounting executive, that there is actually meetings lined up you can get, you know, going
[00:17:21] Toni: Yeah.
[00:17:21] But also see it from the other perspective that, that AE is gonna be, efficient so much faster than any, you know, all, all the other ways you can spin around this because the really expensive time for your kick payback, customer acquisition cost payback really is, the time for thee where he or she starts until he or she keeps delivering the number that they need to deliver.
[00:17:45] Yeah. That's really the expense of time. If you can shorten this or accelerate that or whatever, that's really powerful. Right. And, and I think one way how, how some of those, you know, newer reps or seemingly maybe not so strong reps are sometimes being even screwed over a little bit is by something that, I started calling, basically distribution of those opportunities.
[00:18:09] Opportunity distribution, right? and, and here's the logic from the top down it's like, Okay, I'm the ceo, I'm the CRO, I'm the VP of sales. I need to hit a specific target. And, I have so many opportunities here. If I could, I would actually send all of those opportunities, all of them, to my best performing rep with the highest conversion rate, highest ACV.
[00:18:32] and I would probably maximize the revenue output coming out of this right now. We all know that that's not possible. At some point, at least you know, that that person would simply run out of daylight in order to deal with all of that stuff. So you need to give it to someone else.
[00:18:46] And What usually happens is, the new rep that is, you know, by him or herself, just not as experienced yet, doesn't know the playbook well enough, doesn't know how to react to some of the tricky competitor questions that are gonna come up.
[00:19:00] They are just not gonna be so good, and the only way for them to get better is to have more opportunities and go through this. thing. And That would basically in this case, need to be your investment as a, as an organization to build up those people. But if you are already behind and everything is, you know, really tight already, you might not be feeling like you have that luxury to do that.
[00:19:22] And then basically, you know, someone comes out of ramp or never comes out of ramp and then you say like, you know what, all of these new sales reps, all of them are kind of shit. We don't get it. You know, we spend so much time hiring and we onboarding and all of that. No one of them is sitting target and, see there we have someone else doing 300% and these guys are doing 30%.
[00:19:43] I just don't understand it. And, and the reason is opportunity distribution. It's like you just, you know, you're routing these things to all of your best guys all the time. and that usually ends up basically creating, success in the short term. going to that, but basically will end up not having a sales. team that is large enough to, to help you grow, you know, in a year or two from now.
[00:20:06] Mikkel: I mean, the whole opp distribution is a science of its own. I mean, I've been, I've been in those meetings where it's sales marketing alignment on what's happening, how we're progressing opportunities and, and creating pipeline.
[00:20:19] And we've notice, for example, a few people getting the opportunities. they already had a lot of opportunities in the backlog. And so you start looking into that and it, it's just to say it is a whole science that you really need to be on top of. Yeah. And there has to be a process, not just a, you know what, I'm gonna help this ae over here and give the meeting to that person.
[00:20:40] Toni: So two, two pieces. Pieces of advice. Number one, don't only judge your ease by how much they're close to their target. Also judge them by how much input they got and apply your Average conversion rate, average acv and sometimes you'll be like, Oh my god.
[00:20:58] Mikkel: Yeah,
[00:20:59] Toni: he or she got so many opportunities he got to target.
[00:21:02] Cool. But actually it should have gotten to 150%. right. This, you know, number one. And then number two, what is the super scientific solution to opp distribution? And you know what? Everyone here will probably shock me saying it. It's gonna be the sales manager distributing those opportunities.
[00:21:19] and sure they know that doesn't work in some SMB cases and so forth. I totally get that. But, sales manager will always say something to criticize in the automation that you build somewhere and the sales manager, basically wielding that power, can, you know, quote unquote throw a bone sometimes, you know, to help someone out, but also can adjust to, Hey, you just said this really hot one.
[00:21:42] I don't wanna give you just, you know, another one on top. You're gonna give it to someone else. And then you think like, Wow, isn't there's a lot of admin work? Well, it's really usually isn't, right? You have eight reps. This is what between eight and 16 new opportunities a day that you need to distribute. And this is one of the, Oh yes, please give me that task
[00:21:59] boss
[00:22:00], in our task that a sales manager actually wants to have. Right?
[00:22:03] So don't, don't overcomplicate it. You can obviously build automations according to the alphabet, according to the territory, according to round robin. but usually. If you're not distributing 50 or so per sales manager every day, usually there's actually a pretty great way to do it. And it balances out really nicely.
[00:22:21] Mikkel: Yeah. It's kind of like the coach selecting the pitcher that goes on, right? Yes. To get the at bat. So feeding the team.
[00:22:30] Toni: Yeah.
[00:22:31] Mikkel: Making sure you distribute the opportunities. Do we have a last and final.
[00:22:38] Toni: Well, we do
[00:22:39] Mikkel: maybe. that's fortunate. otherwise show over.
[00:22:43] Toni: and and then this is kind of a, I'm not sure if it's a boring one or not, but quota.
[00:22:48] Toni: thinking about quota, it's really just setting a target and ideally you set the target in a way where basically have, Hey, this is how many opportunities we can give. This is the conversion rate and, you know, processing that we expect. And That's then the target we want them to achieve.
[00:23:09] And you usually would say, Hey, we're gonna set that target 10 or 20% higher simply due to the fact of, you know, hitting target, should not be a given or normal thing or, you know, something like that. There should be some, hey, someone was beating the, the average someone was outperforming on conversion rate on ACV and so forth. Or creating great opportunities, him or herself, right? That's my usual rule of thumb. But what is dangerous is to see quota the other way around in, you know, basically saying, Hey, let's put the, the cart from the horse and say, Hey, let's increase quota.
[00:23:45] And, and that's it Now. really quota increase, for many sales people, sorry for many finance people is an efficiency driver.
[00:23:54] It's like, okay.
[00:23:55] so out of that head count that cost me 250 K instead of a million I could get now a million point two. Great. I just, you know, saved us 20% efficiency let's totally do that.
[00:24:10] You know, and not, not realizing it takes quite a lot quite a lot of work to get from the million to the 1.2. And I don't mean this in the sense of oh, the sales rep needs to work harder. I mean, no, you know, the organization needs to have a very good reason why they suddenly can supply 20% more ops. and Maybe they can, why the conversion rate is going up and maybe they can or where the ACV is going up.
[00:24:35] But I think you can't either of these things. Pulling up quota will basic result in you paying less commission. That's a totally fair way, by the way to think about it. But if you do that, you need to realize what happens on the flip side with the sales team.
[00:24:50] you know,
[00:24:50] Going back to, you know, why they quit is, oh, you know, finance just increased quotas. The sales manager can't sell it to them. Why? That is even the case, no one is gonna explain to them how they're gonna hit that new target. And basically you're gonna say, You know what, actually, maybe I'll just go and look
[00:25:04] somewhere else.
[00:25:07] Mikkel: You know what? I think that's the perfect way to almost end the episode. You know that that really sets up and ties it all together. So you wanna make sure you. Actually can have AEs that can hit their quota if you wanna retain them. At least that's, that's key. And whether you do it through the ACV or the amount of opps or the distribution or whatever, it's just one of those that you can't really look over while you, you know, analyzing the employee feedback surveys and all that stuff.
[00:25:33] Pay attention in the meetings. You, I think you set the. Was it the forecast, meetings
[00:25:38] or Yeah,
[00:25:39] the weekly with sales. If, if you're being thrown some of the curve balls, we just discussed, try maybe looking a bit inwards at what's happening. Are some of these things being exhibited?
[00:25:48] Toni: And I know it's really, it's really hard to admit, but sometimes, and that has happened way more often than you think these sales guys are right.
[00:25:59] Mikkel: No way.
[00:26:00] Toni: They say something and you're like, No, come on, shut up. It's like, no, they're actually, right. Yes. And listen to them once in a while.