Get a Demo
Get a Demo
5 min read

Employee Turnover Calculator: Why Companies Should Check ROI

Apr 1, 2019 1:28:01 PM

A sales person who quits your company will not only leave an emotional gap in your organization, but also a monetary gap in your annual balance sheet. Turnover causes surprisingly big costs, especially in your sales department. Now, you have to hire new sales people. The true costs are hard to estimate but can be calculated in order to know how to reduce them.

Sales representative leavingA good sales representative who leaves your company is an expensive loss.

Understanding the quantitative impact of sales turnover is important

According to the Harvard Business Review How to Predict Turnover on Your Sales Team, annual turnover among U.S. salespeople is almost 30%. This rate is alarming as it results in huge annual costs for every company that loses one of their sales representatives. On the other hand, this offers enormous potential to save thousands and millions of dollars and to outperform your competition. So let's take a look at the costs incurred to hire a new sales representative.

In general, the costs of replacing a sales representative can be divided into four types:

  • General recruiting costs: Hiring good employees is a challenging task that takes time and money. But if higher costs translate into better people for your team, your investment is worthwhile. Make sure that your company is perfectly positioned and makes the best use of internal resources.
  • Opportunity costs: Every vacant position results in losing revenue. The longer the vacancy, the greater the overall revenue loss. Opportunity costs are often underestimated, but can quickly cost your company hundreds of thousands of dollars.
  • Ramp-up: Onboarding new sales reps takes about six months, and requires a significant investment in training and coaching on one hand and a reduced achievement in revenue on the other hand. Reducing ramp-up time for new sales reps might determine the success or failure of your business.
  • Customer risk: It is usually the human-to-human interactions that take place between salespeople and your customers. Customers become irritated when there is not a stable sales relationship which creates an opportunity for your competitors.

Without being aware of it, many companies lose millions of dollars every year. In the following example, we want to show you some representative numbers.

A mid-size company loses $2 Million a year through sales turnover

Let's take a look at an exemplary mid-sized SaaS business with $30 million in revenue. According to the Sales Development Report, we can assume the following numbers:

Annual revenue Sales representatives Time to replace position

$30M

30

30 days

Individual quota Annual turnover  Ramp-up time

$1M

30%

 3 months


The quantitative impact of the annual turnover can be calculated as follows:
  • General recruiting costs: Recruiting costs depend on each company’s needs. According to Workable a good benchmark would be $5,000 per hire. 
  • Opportunity costs: With an individual annual quota of $1M your company is losing $2,739 of revenue every day. Every day counts: If you have not started hiring early enough, your company will lose thousands of dollars. A direct replacement is not always possible and leaves the position vacant. Let's assume that the average position is not filled for 30 day: This costs your company $75K per single replacement.
  • Ramp-up: Assuming that your sales representatives generate 50% of their annual quota during a ramp-up time of 3 months. This will cost your company additional $120K and does not include the training and expenses that your organization invests. 

In summary, a single sales hire can cost you $200K(!). Now, assume that based on your company's growth and the annual turnover (i.e., 30%) you need to hire 10 new sales representatives each year (originally you had 30). This results in annual costs of $2,000,000.       

Time to hire and time to ramp-up annual costs example 

 

The calculation above shows that two parameters have a massive impact on your annual costs: Time to hire and time to ramp-up. Therefore, it is essential for companies to measure and quantify these variables in the first step in order to reduce the annual costs. At this point, using the right tools can be a decisive factor of success and offers the potential of outperforming your competitors. To estimate your annual costs due to sales turnover you can use our Sales Turnover Loss Calculator. 


Sales Turnover Loss Calculator 

Please type in the following information to calculate your annual loss. 
 

Annual quota ($)
Annual salary ($)
Hires per year
     

Ramp-up (months)

Time to replace position (days) 



 

     

 
 

Your annual loss is ($) 

Retorio helps you to reduce your time to hire and your time to ramp-up by up to 30%. Curious? Start your trial for free!

Start My Trial

 

Written by Blog Team

Featured