Is this how your analysis goes when setting sales rep ramps during planning? If not, that’s great, but unfortunately too many companies just make a quick decision, use minimal data, go with what they have used previously or what a sales leader or finance leader tells them to use.
What is a Sales Ramp?
When a new sales rep joins a company, they need to go through onboarding and enablement to be in a position to work leads, engage with prospects, articulate the solution and value, handle objections and differentiate against the competition. In addition, the new sales rep is building and progressing pipeline which takes time. The length of the sales cycle also has an impact on sales rep ramp time. Even if a sales rep is able to build pipeline from day 1, but the average sales cycle length is 90 days, this 90 days has to be considered when creating a new sales rep ramp model. During this period, as the sales rep is learning, they are ramping up to the productivity of an experienced sales rep. Simply stated, a new sales rep ramp is the measure of time that it takes for a new sales rep to be fully productive. A representative 5 month sales ramp schedule is below.
Sales ramp includes both the timeframe of the ramp and shape of the ramp. Shape is just as important to planning and forecasting as it determines the pace at which a sales rep ramps over the ramping time frame. From the example below you can see that even though both ramp models have a sales rep ramped in 7 months, the shape makes a difference by month and for total annual quota on the street.
Why do we care about Sales Ramp?
We care about sales ramp because it is the direct connection between revenue that needs to be delivered and timing of sales rep hires. When preparing a sales capacity plan, a key goal is to ensure that for each month or quarter you have enough sales capacity or quota on the street to cover your revenue targets. Quota on the street is the sum of the assigned quota of both fully ramped and ramping sales reps for each period. The ramp period dictates when a sales rep needs to be hired in order for them to ramp up and fully contribute. The longer the ramp period, the earlier they need to be hired.
Finance cares about sales ramp because they need to model expenses and generate productivity metrics. The longer the sales ramp, the earlier a sales rep needs to be hired and so the earlier the expense is incurred. During the sales ramp period, a sales rep is less productive than fully ramped sales reps so productivity metrics are negatively impacted.
Sales leadership cares about sales ramp because they need to deliver against their targets. They need to align their recruiting and hiring cycles to ensure that sales reps are hired and in seat at the right time, in order to build up their productivity during the ramp period to support revenue targets in future quarters. If not, the risk of delivering materially increases due to lack of quota on the street. In addition, sales leaders are also measured against productivity metrics. Improving ramp time improves these metrics.
What does Fully Productive mean?
Determining what “fully productive” is for a sales ramp needs careful consideration when building a sales capacity plan, forecasting quota on the street and using that forecast as a component of your revenue forecast. Most sales reps do not consistently attain their full quota and the average attainment always falls below. In planning for quota on the street, you would typically use an overassign target, often expressed as a percentage of full quota, that you are targeting a sales rep, on average, to attain. This is called Attainment Factor and more information on this can be found in a blog I published a few months ago “How to calculator quota, attainment, over-assignment and number of sales reps”. The consideration then becomes, do you use a) full quota, b) full quota adjusted by the Attainment Factor, or c) the average attainment of sales reps as the basis for your ramp build.
So which method should you use to determine full productivity for new sales reps? The recommendation is to use the average attainment of ramped reps for the development of a ramping schedule. This is the most equitable because new sales reps will be measured and evaluated consistently with the performance of experienced sales reps. Using the average attainment of ramped reps for the full productivity target will also give you the most accurate plan and forecast compared to the reality of real world performance.
How do you build a Ramp Model?
A simple method for building a ramp model is to consider the average time of the sales cycle, the time it takes to build qualified pipeline and the onboarding time that it takes for the new sales rep to be enabled to effectively sell your solution. For example, if the initial onboarding bootcamp is 1 month, it takes 1 month to build a qualified pipeline and the average length of the sales cycle is 3 months then the ramp time to full productivity is at a minimum 5 months.
The better method is to build a ramp model using the historical ramping performance of new sales reps. The table below shows the data that you could use to help determine the ramp for new sales reps based on a full productivity target for each of the full productivity options mentioned earlier.
From the historical sales rep ramping performance, you may create a ramp schedule that looks like the following for each alternative. Given that both the Attainment Factor assumption that is being used for planning and full quota are both higher than the average ramped rep attainment, if you use those as the basis and targets for creating a ramp schedule, the ramp time will be significantly longer and disconnected from actual sales rep performance.
Although the above analysis assumes that a sales rep is new to the company, the same analysis can be used to create ramp schedules for existing reps that are being promoted to a new segment, such as a sales rep promoted from Small Business to Mid-Market. Their ramp time is typically shorter than new sales reps to the company because they are already enabled on your company's solutions but still need time to develop some additional skills to sell into the new market segment and to build pipeline. Instead of just taking the first month or two off the ramp schedule, it's beneficial to conduct similar historical analysis.
There are many visuals that can be used to both determine sales rep ramps and measure the performance of ramping sales reps. My favorite is below. It shows performance of ramping sales reps starting from the first month and each month+1 after that. It allows you to see both the shape and time of ramping reps, spread and variability of performance as well as any outliers.
What is the impact of setting the wrong Ramp during Planning?
When you overestimate ramp for a sales rep (use a ramp timeframe that is shorter than the actual ramp timeframe), you will end up in a situation where more quota on the street is added to the plan sooner. Although this likely means you will have less sales rep hires in your plan, so the plan will be more efficient and less costly, you are adding risk to achieve your revenue goals because those new sales reps will underperform against the planning expectations.
When you underestimate ramp for a new sales rep, the opposite is true. You will likely have more new sales rep hires in your plan, making the plan less efficient and more costly, but also less risky in terms of achieving your revenue goals.
In the example below, you can see the differences in quota on the street for setting sales ramp planning assumptions based on actual vs over and underestimating. Let’s assume that the target quota on the street is $40m, the value for the model when using actual sales rep ramp. If you are underestimating ramp, you would end up hiring more new sales reps for that plan to make up the gap and under hire new sales reps for the plan that overestimates ramp. In the case below, you might over hire by 4-5 sales reps for the underestimate and under hire by 5-6 sales reps for the overestimate. As stated above, this materially changes the overall risk profile of the plan, the efficiency and costs.
How should you use Ramp for Planning vs Quota and Forecasting?
There is no hard rule that the sales rep ramps used in planning, forecasting and quota need to be the same. Most companies do use the same values, but there are reasons why you may want to use different models for each of the above.
For planning, you may align on driving and accepting a riskier plan by using more aggressive planning assumptions for both sales rep ramp and attainment factor. This assumes that you have programs in place to work towards delivering against those aggressive assumptions. But, as you are working your way up to improving the actual performance of both of those assumptions, you may start off by using the actual sales rep ramp performance in forecasts, especially for next quarter. If not, you will be in danger of having an inaccurate revenue forecast and missing both your forecast and targets.
On the quota setting side, there are several methods that can be used on setting quotas and payouts for ramping reps. Let’s assume that you use one in which a ramping sales rep receives their full variable for hitting their ramping quota. For example, if their ramping quota is 50% of the full monthly quota of $50,000, and they deliver $25,000 in revenue the ramping rep will receive 100% of their variable for that month. You may not want to extend this over the entirety of the planning ramping period and use a more aggressive ramp schedule for quota and compensation plan. This also drives an incentive to ramp faster and allow for better management of commission expenses.
How can you improve Sales Rep Ramp?
Ramp is such a critical assumption in deploying the capacity and quota on the street that is needed to achieve your revenue targets and is a material driver in the efficiency and costs of a plan and performance to that plan. You should strive to always improve sales ramps – it delivers benefits to the company, the sales team and individual sales reps. Some recommendations for improving sales ramp include;
- Measure: Know your actual new sales rep ramp timeframes and shapes for each role, across each segment and geography. We all know that you can’t improve what you don’t measure.
- Analyze: When ramp times and shapes vary between the same role, segment and geography or overtime investigate the drivers behind that. It may be cohort based, a change in onboarding, isolated to an office or a manager. Identify the practices and differences and make the ones that are delivering better performance global.
- Onboarding: Developing a solid onboarding and enablement program that includes content and knowledge, in person and virtual training and exercises, measurements of progress and a buddy system with an experienced sales rep are critical to driving consistent and successful onboarding. If you don’t have a dedicated onboarding specialist on your enablement team, you should think about hiring one.
- Coaching: Managers play a key role in accelerating the ramp timeline. The more involvement and time they spend helping and coaching a new sales rep the faster they will ramp. Their expectations and requires for involvement should be documented with oversight by enablement and sales leaders.
- Hiring Profile: Identify and evaluate the attributes of a sales rep that can be and is successful at your company. Recruiting and hiring should then be targeted at this profile. The profile could include industry, type or even specific companies that a sales rep has previously worked, types of deals that they have sold, behavior aspects, skill set or sales style.
- Tools: Invest in onboarding solutions that drive the onboarding activities, allow for access to content and knowledge, allow for exercises and practices and track completion and success metrics.
- Incentives: Align incentives or create bonuses, for both ramping sales reps and their managers, that rewards them for sales rep ramping on and ahead of schedule. For new sales reps, this can be higher commissions percentages for closing deals sooner or attainment bonuses on reaching their ramped quotas. These can also be extended to managers.
Sales rep ramps are so important to building a reality-based revenue capacity plan for accurately forecasting and reaching your revenue targets. Do not take shortcuts when analyzing historical ramp performance, identify tactics for driving improvements, measuring performance or setting plan assumptions. A well-thought-out ramp strategy can significantly impact a new sales rep's productivity and overall company performance.
Author’s note: Revcast does this work for you. Get shared access to historical ramp data and ongoing visibility into current ramp performance so you can model different ramp scenarios based on varying risk factors and identify areas of improvement in real-time. Set up some time to chat to learn more about how we can help you hit revenue goals with more accurate ramp periods.