For many years, HR and Talent executives invested in training and developing their teams. Training offered clear value that was rarely questioned.
Then came the great recession. Everything changed. Every investment was scrutinized, and the cost of sales training became more of a consideration. Companies scaled back all possible expenditures. Training investments diminished.
Eventually, the economic recovery took hold. With cost avoidance measures exhausted, productivity maximized, and acquisitions prohibitively expensive, executives seeking competitive advantages renewed their focus on sales skills training for employees.
Gaining Buy-In for Investment
Getting the support and buy-in for putting people in the classroom today is not as easy as it used to be. Nor should it be.
A decision to move people from the field to the classroom requires a meaningful ROI. Moreover, leaders need assurance that the return is superior to what can be expected from other investment options. They need to know that it will yield benefits within the timeframe established by the critical stakeholders.
At Richardson, we understand the immediate value that can be created when your customer-facing teams change the way in which they interact with your buyers. Yet, all too often, the analysis around the true cost of sales training misses the mark.
Understanding the Cost of Sales Training
Understanding the cost when skills plateau or the upside that comes with elevating your game sets the stage for a decision on whether to train.
Then, these three simple variables determine a sales training program’s cost:
- Explicit Cost
- Implied Cost
- Benefit Realization
Explicit costs are those incurred when training design, development, and delivery are sourced from a third-party provider.
More than anything else, these are easiest to understand and influence (based on scope), and as such, it’s these costs that typically get the most attention in the economic analysis.
Purchasers spend considerable time seeking strategies to drive down explicit costs (and there’s nothing wrong with a well-run procurement process), but gains made here have little effect on the overall economics of training.
Why? Because our next two variables have an exponential effect that outweighs any pluses and minuses here.
Implied costs often run at three times or more of explicit costs.
Taking quota-bearing, expensive, and often distributed sales professionals out of the field for training should never be done without very careful consideration for what is at stake.
Easy to measure costs, such as travel and accommodation, need to be added to the cost of lost productivity for sales professionals and managers alike.
Understanding contribution by rep per day and building this into the cost side of the equation must be done to really understand what’s at stake when you decide to train.
At Richardson, we minimize time out-of-market while building skills by combining instructor-led classroom learning with mobile-optimized digital learning programs. This dual approach offers efficacy and cost efficiency.
This is why you train, right? All too often, we neglect the other side of the training balance sheet. Leaders must quantify the benefit expected, with a reasonable degree of confidence, for a number of reasons including:
- Unless you understand the economic impact of how changes in customer-facing behavior influence critical operational metrics, your analysis will only ever be one-sided. The case for training will likely never pass the common-sense test.
- It is the very act of working through understanding the economic impact of sales training that drives consensus with stakeholders on what you hope to achieve and how you know that you have achieved a successful outcome when it happens. Without this step in the process, most training initiatives will falter as time passes.
- Critical Selling Metrics across three dimensions (operational, talent, and financial), such as Average Sale Price, Time to Revenue, and Reps at Quota, allow you to create a financial model and calculate return based on a range of outcomes anticipated. You should expect your training provider to help you build these financial models based on results that they have delivered with similar clients in comparable industries.
- Just as Implied Costs significantly outweigh Explicit Costs, so too should the value of improved operational metrics significantly outweigh the cost side of the equation. These costs are the hardest to defend, and therefore need to withstand discounting by skeptical stakeholders and still leave a credible and powerful argument in place.
Never anchor your economic analysis or your assessment of the cost of sales training for your organization to one data point. Rather, develop a financial analysis that simulates a range of outcomes based on the cost and benefit variables.
This approach engages stakeholders in a discussion on the variables and, through a series of likely iterations on your model, builds consensus and buy-in.
Results will vary of course. To put a stake in the ground, at Richardson, we’ve seen an average revenue gain of 5-12 percent per annum across our clients. For one recent client, that translated into a 22:1 ROI.
Measurable gains like this come from executing deeper dialogues with customers and revealing unfulfilled needs. These results underpin the meaningful, long-term value of taking a little time to step off the field and review the playbook.
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