Sales reps who receive just 3 hours coaching a month, boost their revenue by 17% according to a study by the Sales Executive Council. So I was keen to see how much that could be worth for a B2B SaaS business.
Your team may well be broken into the specialisms of Lead Generation, Closing, Inbound Leads and Customer Success, as has become the Aaron Ross inspired playbook. We’ll focus here on the quota carrying reps, albeit I think the math works as well for any of the above.
Calculating coaching $$$ Value
We need to make a few leap of faith assumptions here, so I’m going to assume the following:
The average performance of a rep is $200,000 in ARR – quota may be a little higher but let’s assume there are a few mis-hires, take account of onboarding time to effectiveness and assume an average.
Based on the study by SEC, a $34,000 ARR uplift is achievable with a mediocre investment in coaching. I’m going to be bold (and keep the math easy) and assume that your SaaS business has an equilibrium of churn and growth. You may well be lucky enough to have ‘negative churn’ or maybe churn is a burning issue, but hey, I’m a salesman not an accountant, let’s keep life simple.
Committed to world-class Customer Success, I’m going to factor 20% of incremental revenue to deliver the support and Customer Success to this additional revenue clients, we’d have missed without coaching.
We’ll take a time to exit of 5 years, which after deducting our 20%, gives us an extra $136k ARR on the bottom line. Now this is where the variables start to become wider, but I’m going to take a x20 profit exit. Your well coached sales team are tearing it up, you’ve got a hockey stick growth curve to prove it – be fair, we’ve all seen higher multiples.
So this gives us $2.7m exit value. That’s per rep! How big is your sales team?
Coaching just 10 reps for 5 years could be worth $27m
Hidden benefits of coaching
But here is the best bit. I’m ignoring all the other benefits. Coaching has a similar impact across all your teams – Lead Gen, Customer Success, Inbound teams = more leads, more sales, increased growth and retention.
And it doesn’t end there. We all make hiring mistakes but finding out which ones are ‘uncoachable’ early allows you to coach up or coach out.
Time to effectiveness is reduced, with coaching from managers and peers allowing reps to hit quota faster.
And you’ve given away less equity and raised more money because revenue growth has accelerated 17% and profit margins by much more than just this incremental revenue.
I appreciate, this is based on a few assumptions but whatever you want to change the figures to for your business, the numbers are compelling. The benefit of coaching is clear for all organizations, but for SaaS, the benefit is compound and the effect on funding and exit are eye-watering.
Why don’t we coach?
So why doesn’t every SaaS sales team make sure that each rep gets 3 hours a month coaching? 3 primary reasons according to the Sales Management Association, whose study show 73% of managers spend less than 5% of their time coaching:
-Don’t know how or what to coach – It’s not an inherent skill. Giving feedback, isn’t easy. A study published by HBR shows we are neutral about giving praise and tend to avoid corrective feedback.
-Don’t value coaching – We live in a world of KPI’s and reporting, and coaching isn’t normally one of them. Few organizations know how much coaching occurs, or the quality of coaching.
-Not enough time – We’re busy people, we can’t always juggle diaries with reps and prospects to ride along on calls, demos or meetings.
Fortunately, Refract – a sales coaching platform to profile ‘coachable moments’, create libraries of best practice and encourage peer coaching and collaboration addresses each of these issues. We’d love to show you ;-)