Salesforce attrition - A financial model

21 July 2015

Voluntary attrition is costly. This fact is well known. This becomes more prominent in industries where salespeople play a much larger role in driving the top line. It is desirable to keep track of the salesforce voluntary attrition rate on an ongoing basis and analyze attrition trends and patterns. You can read about this more here.

The important question however to ask is “how do we quantify the effect of attrition on a salesforce?”. Is it possible to estimate the financial impact of losing one salesperson? Can we create a model to understand the impact and implications of various factors?

Attrition Model

The key aspect to consider when calculating financial impact of salesforce attrition on an organization is the loss of productivity. While fixed transition costs like hiring, termination, interview costs are important the loss of productivity during the transition period between losing one salesperson and replacing him/her with another is the single largest source of financial loss that impact an organization on the whole from attrition. This is especially pronounced when you have a recurring revenue model. Loss of productivity happens during the ramp-down period (reduced productivity period before a rep quits), the ramp up period (reduced productivity period just after a new rep joins) and the vacancy gap (zero productivity period when no rep exists in the seat).

Incentius has created a standard cost of attrition model which you can tweak to your needs by using attrition parameters you’ve estimated for your salesforce. Use it to estimate the budgetary impact of attrition within your salesforce. Also estimate the savings you’ll create by reducing attrition by a certain level. This helps you allocate budget to HR activities that help reduce attrition.

Access the model here

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