When modern sales teams reach a certain size or maturity, assigning territories becomes a crucial exercise.
Sales territories have a slew of benefits: They enhance prospecting because reps can build a robust network of contacts in a specific region and ask current customers for local referrals. They also make customer success more efficient since reps can visit all their customers and prospects in one trip.
As you set sales goals for 2017, this is the perfect time to build a territory management strategy for your team. But defining and delegating sales territories is no easy task. Here are three simple steps to help guide you through the process.
1. What is your total market potential?
Use your ideal customer profile to refine the list of potential customers. If your primary focus is the United States, determine how many companies you can actually sell to that match your ideal customer profile.
Note the attributes of your most successful customers, including number of employees, industry and go-to-market strategy.
Let’s say you’re going after companies that have 250+ employees in technology, manufacturing and healthcare industries. How many companies match that profile? If you’re in advertising, you’d only want to include companies that spend money on media.
Use filters like these to refine the list of companies in your target area.
2. How many companies can an individual sales rep handle?
Next, divide the total number of potential accounts by region. Here’s a common way for sales leaders to break up U.S. regions:
Within the geographic regions, how many prospects and customers can each of your sales reps handle? By handle, I mean maintain solid penetration and coverage. Use your experience as a sales leader to make a judgement on the number of accounts they can call multiple times throughout the year, schedule meetings with and keep tabs on.
That number will depend on the size and setup of your sales team. Enterprise reps might be able to handle 100 accounts, and SMB or mid-market reps could probably take on 150 to 300.
3. How many territories do you have?
Determine how many accounts are in each region. Then divide that by the number of accounts a rep can handle. That’s how many territories you have for that region. Here’s an example:
1,000 accounts in region / 200 accounts per rep = 5 territories
Then assign those territories to the appropriate reps. But don’t just give reps a list of 200 accounts. Set the expectation that every contact should be contacted at least once every other month. You might uncover that there are more territories than there are salespeople on your team. That’s okay as it tells you how many salespeople you could have, and for now you may not staff all the territories. If an inbound lead comes your way in an unassigned territory, you can then assign that lead as you see fit.
Another thing to consider: One geographic region might have 1,000 small and medium-sized businesses, but only 100 enterprise companies. In that case, the region may have 4 SMB and mid-market reps and 1 enterprise rep.
Remember to create transparency for your reps when defining and launching your territory management strategy. Even after you assign territories, let reps provide feedback on what works and what doesn’t. Including them in the process creates buy-in.
Note that after assigning territories, you might need to re-examine your sales process. If needed, here’s a quick guide to restructure it to ensure that your salespeople are truly focused on the sales activities that matter and will lead to closing more business.