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Loss of Effective Revenue When a Salesperson Leaves January 19, 2012

Posted by Ivor's Window to the IT and CRM World in Microsoft CRM.
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I have been looking through some old documents at home and found a formula that I wrote and published in 1984 (27 years ago) when I was first working in the fledgling CRM space.

This was aimed at companies that had sales teams who were in a competitive calling cycle on B2B clients and prospecting at the same time. There always are costs involved with replacing a sales person, they are often difficult to compute. Remember in 1984, there were no computers on any sales managers desks, Excel had not been invented yet.

It will be interesting for current sales managers to have a look at this and comment

LOSS OF EFFECTIVE REVENUE WHEN A SALESMAN LEAVES

CSV = Current Sales Volume in Dollars (Per Month) is equal to Factors of Activity + Company Goodwill + Salesman’s Goodwill + Product Penetration + Salesman’s Effectiveness + Company Market Profile

RSV = Reduced Sales Volume is equal to Activity + Salesman’s Goodwill + Salesman’s Effectiveness (expressed in Dollars, calculated as a % of CSV)

CSV Factors Activity ___% not less than 30%

Company Goodwill ___% not less than 25%

Salesman’s Goodwill ___% not less than 5%

Product Penetration ___%

Salesman’s Effectiveness ___%

Company Market Profile ___%

Total 100%

CS = Calling Cycle expressed in months (i.e. six weeks = 1.5) to call on all existing customers + the same number of new prospects that the previous salesman was calling on.

T = Training cost of new salesman in Dollars

DE = Direct Expenses of new salesman (Car, Equipment, Stationery etc.).

___________________________________

Formula

LER= (CSV – RSV)*(CS*3)+T+DE (Drop in your own figures)

CSV = $_____________

RSV = Activity + Salesman’s Goodwill + Salesman’s effectiveness as total % in Dollars of CSV:

$______________

Drop in your own figures

(CSV- RSV) * (CS * 3) + T  + DE

(_________) – (__________) * (_____ * 3) + _______

+ _______

= LER (Loss of effective Revenue) $ _____________

The above formula is the personal working of Ivor Whibley and is based on research undertaken in the South African Market in 1984-85.  The author expresses his right as the Copyright owner ©.

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Comments»

1. James Goodwill - January 27, 2012

Good use of my surname over and over again there Mr Whibley. Hopefully catch up soon.
And I reckon there’s still some accuracy in this, even with spreadsheets and CRM


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