Recently, I was asked about the investment required to establish an in-house B2B sales team. Unlike B2C models with online sign-ups, B2B sales involve a different, more complex process. And this can be hugely expensive and high-risk if you don’t get it right.
This is true for both in your home market and when scaling into a new market: the same basic factors remain.
We thought it would be helpful to share what the risks are, the investment required, and how to get it right.
Setting Revenue Targets
First, begin by defining your annual revenue target. This figure is crucial because it will determine the number of salespeople you’ll need. Typically, a B2B salesperson can generate between $1 million and $2 million in revenue annually, where exceptional performers will average towards the higher end of this range. For deal sizes that exceed the $2 million per annum range, you will need to invest in a multi-disciplinary sales team, where revenue is apportioned based on role.
It’s important to understand that B2B sales are closely tied to the time invested in each deal. For example, a $50,000 sale might require three meetings, while a $500,000 sale could necessitate around 30 meetings, involving more stakeholders and extended negotiations.
Therefore, if a company expects a salesperson to achieve $4 million in sales annually, experienced professionals will likely want to see evidence of such performance or will be hesitant to accept the role: the $1-2 million range is a commonly understood law in the market.
Compensation Structure
Industry standards suggest that a salesperson’s total compensation is approximately 20% of their expected sales. Thus, for a $1 million sales target, this equates to a $200,000 package, typically split evenly between base salary and commission.
For example, if your business aims for $2.5 million in annual sales, you might hire two salespeople, each with a $1.25 million target. To set stretch goals (knowing you want to achieve $2.5 total and you might have underperformance), you would position this as a $1.5 million target per person, offering a $150,000 base salary and a 10% commission on sales.
Some larger organisations get away with a lower sales commission rate (ie, 7%). These are companies with defined sales processes, mature lead generation engines, and demonstrated sales momentum. If you don’t have this in place (and if you are hiring your first salespeople, by definition, you won’t), salespeople will expect a higher commission rate to cover the risk of not having well-defined processes and lead generation.
Hiring Considerations
Hiring two salespeople is often preferable to one:
- Performance Benchmarking: With two hires, you can better assess performance and determine if issues are individual or systemic
- Risk Mitigation: If one leaves or underperforms, the other can maintain sales momentum. Noting that you also put yourself at risk with only one salesperson: if they gain traction, they can renegotiate against you, given that you don’t have a fallback to maintain momentum.
- Healthy Competition: Salespeople are inherently competitive; having peers can drive performance
Recruitment Costs
Recruiting sales talent can be challenging – given that they are adept at selling themselves, it can be difficult to assess their true capabilities, especially if you don’t have experience. You also need to understand what particular set of skills you need: what role will require a product mindset and solution selling to succeed?
This is where recruiters come in. Recruiters can assist in identifying candidates with the right skill set and save you time in the hiring process. A typical job posting will now receive at least 100 applicants. Do you have the time to screen them all and conduct the screening calls, multiple rounds of interviews with multiple candidates, etc.?
Recruitment fees typically range from 15% to 20% of a salesperson’s first-year salary. Thus, for two salespeople with $150,000 base salaries, you can expect to pay around $45,000 in recruitment fees.
As for the duration, you should expect 3 months from being in market to your sales hire starting across interviews, offer negotiation and acceptance, notice periods, and any leave before they start.
Time to Value
Once you have your sales teams’ “feet planted under the desk”, the question is at what point will they be able to close sales and be able to pay for themselves. This is critical as it feeds into how much of their salary you need to cover before they make that first sale (and hopefully 2, 3, 4, etc).
There are two aspects to consider when estimating how long it will take for time to value:
- Sales enablement
- Marketing and lead generation
Sales Enablement
Sales enablement is all the factors that enable sales. For example:
- Ideal Customer Profiles: Clearly defined target companies
- Buyer Personas: Understanding who is involved in the buying process
- Sales Materials: Industry-specific presentations and case studies
- Pricing Information: Transparent and accessible pricing structures
- Processes and Resources: Established procedures for custom implementations
- Legal Documentation: Ready-to-use contracts and agreements
If you don’t have this in place and are expecting to build this out as your team onboards, you will likely wait 6 months for the first deal to close. The best expectation is that with this in place and set up, your first deal will close in 3 months and ramp over the following 3 months.
The other factor to consider is your marketing activities. This can be measured across two factors:
1. Lead Generation
Do you have a steady stream (or way of turning on) leads where potential customers are reaching out to you for your solution? If this doesn’t exist and you are planning on building out, you will be relying on your sales team to generate leads through outbound and other means. While this is possible, it takes time to generate and pulls time away from the ability to prosecute opportunities in the pipeline.
2. Brand Awareness
This simply means “Does anyone besides friends and family know about your company?” This matters because it helps drive leads (as above) and helps accelerate your lead generation (or outbound outreach). If your salespeople ring up someone and they have no idea who you are, it’s often a very different conversation from having to introduce the company. While good salespeople can overcome this, there is a time cost in doing it that slows down all sales. Furthermore, especially in B2B sales where multiple stakeholders must sign off on sales, it is easier to obtain approval if you are a well-known brand than an unknown one. Remember, no one was fired for buying IBM.
This can have the same impact on the time needed to get sales up and running:
Retention Risks
If salespeople don’t see results within six months, they may become disengaged or actively start looking for new opportunities. As experienced sales professionals, they expect their commissions as part of their take-home pay. Without them, they might seek opportunities elsewhere or request base salary increases/bonuses to remain.
Estimated Investment
What does this mean from a worked example? From the hypothetical example we raised earlier, where:
- 2 x $150,000 base salaries
- 20% salary on-costs
- Hiring fees of $45,000
- Once they reach sales cadence, no further investment is required:
Here is an estimated investment:
Conclusion
While we have prepared this introduction to provide a way to estimate the investment, the reality is that if you don’t have Sales Enablement and Marketing in place (or investing alongside your recruitment), you will risk getting nothing out of the 12-month investment.
This is because sales is all about momentum. Confidence matters.
Securing that first deal is often the hardest part, for both your company and your salespeople. The next one is a bit easier, and eventually, you hit a rhythm. But without the right support systems, it becomes a slog. Converting leads is slower. Building trust with prospects takes longer. And reaching sales cadence may remain just out of reach.
If the early wins don’t come, your team won’t hit its stride, and that’s where the trouble begins. Talented salespeople don’t stick around if they can’t see a clear path to hitting their On Target Earnings. They’ll move on to opportunities where the runway is shorter, the systems are stronger, and the commission is more predictable.
Ultimately, the risk is that they (or you) never reach the point of sustainability and abandon the exercise (or have to start again). In the case above, this can be a year of effort and more than $300,000 in investment. Unfortunately, this is the most likely outcome.
If you want to avoid this outcome, that’s where we can come in. We can help you assess the maturity of what you are currently doing and what the likely outcomes are. We can deliver a clear playbook on what you need to do to bring your onboarding time down to the shorter end of the scale and set yourselves up for success. And, in most cases, they can be done in parallel during the hiring phase.
And the other point of failing in market entry with your own sales team: the next time around becomes even harder. Potential recruits will look at what happened previously and be less inclined to join you – increasing your hiring costs and reducing the availability of tier 1 talents.
Book a discovery call today to start to understand your readiness to invest in your sales efforts.
