This is the sixth post in our series about how to hire a new business development person for your agency. Read our first, second, third, fourth, and fifth posts here.
Rick Kranz of OverGo Studio did the math (on Hubspot’s Agency Post) to show what one new business professional could bring in for his agency by closing eight retainers a year (8 retainers x $7K (monthly retainer package) x 12 months (annual contract) = $672,000. Who wouldn’t like to grow their business by $672,000 more in revenue this year? It’s compelling. Theoretically, this growth should be exponential as additional new business people are hired. So why might that kind of growth elude your agency?
Work the math. For one thing, as John Heenan has pointed out, the average agency may lose three accounts a year. So if your new business person brings in eight new accounts, it’s only a net increase of five for the year. Okay, you may say, that’s fine because that still leaves $420,000 in new business revenue, which you can live with.
But wait. . . The average time for new sales reps to ramp up, according to CSO Insights, is over ten months. And the sales cycle to close agency new business is often quite long — an estimated 18 months to three years long (as in this Act-On case study). So closing those five new accounts isn’t a realistic expectation before the second year of hire.
Unfortunately, a 2014 survey found that most new business directors don’t even last two years. I subscribe to Zappos CEO Tony Hsieh’s philosophy of “hiring slow, firing fast,” but you have to be careful not to fire people when they haven’t had the chance to succeed (rather than because they just can’t perform).
Keep in mind, the pool of available candidates for agency new business — ones who have what it takes to succeed in the role — is extremely small. The work can be thankless, with long days and high-stress situations, while successes are few and far between. We are also in a candidate-driven job market, with record low levels of employee loyalty. If you are intent on agency growth, you must hire the right people, and do everything you can to keep them. If your agency isn’t in a position to do that, it may be better to re-consider hiring a new business person at all.
Retention isn’t just about not firing. Good salespeople may “sign out” upon realizing that it’s “nearly impossible to succeed” in their role, based on agency resources and conditions. The expectation that new business people will be able to magically get results out of thin air is unrealistic, as Drew McLellan has observed. Unlike mis-hires who never had what it takes to succeed in the role, some of those who move on after a short tenure likely could have performed, had the agency only invested a little more. What agency owners may not consider is how much it hurts their business to replace a new employee within 18 months; likely as much as a mis-hire.
Hiring the wrong person is costly and often avoidable. When the mis-hire is in a sales position, instead of realizing your projected growth, you may face declining revenue, making the loss (relative to your projections) twice as severe. Hubspot has estimated their total cost to hire, onboard, supervise and train a new hire is $84,000. You can use this worksheet from Sandler Training to estimate your whole cost of sales mis-hires.
Depending on your numbers, your agency’s cost of mis-hiring may be in the hundreds of thousands. When you factor in lost opportunities, damage that may have occurred to your relationships with clients and prospects, and the negative impact on agency productivity, performance and morale, the financial impact is even greater.
To recap from our hiring series, here are some things you can do to improve the ROI from your new business hires.
Invest in the infrastructure to prepare your agency for growth
Set your new business person up for long-term success
This concludes our series on how to hire a new business development person for your agency. If you found it helpful, let me know in the comments.
Read more about retention and ROI of your new business hire:
This article was originally published on LinkedIn Pulse by Mark Duval on June 23, 2016.
Image credit: © janka3147 / 123RF Stock Photo; modified by resizing and text overlay.