Carving Territories for the new year

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It's December and the planning cycle is starting to wrap up.

You've completed the following planning phases:

• Top down revenue targets

• TAM/SAM/SOM analysis

• Bottoms up revenue operating model

• Headcount capacity model

• High level quota allocations

• Initial compensation designs

But now it's time to start carving some delicious territories for the reps.

So this article is all about what you should consider in your territory design and execution phase.

Meme me up...

When should you start planning?

NEVER SOON ENOUGH. That’s the real answer. Ideally you’ve already started to put together your TAM/SAM/SOM together. For large, mature companies annual planning starts as early as July/August. Below is a sample view of breaking out planning into its various phases. Territory Analysis starts as early as September in the example below.

For smaller firms such as startups this starts much later, typically in November/December. The benefit of starting late is the ability to “see” how existing territories played out in terms of generating revenue. But it does squeeze the planner with a much shorter runway to develop new territories. I highly suggest starting TAM/SAM analysis no later than October and initial territory designs no later than November.

First Principles

When planning for the new year one of the first criteria to set is what are you optimizing for. I find asking some simple questions to be helpful for business planning purposes 

• Do we optimize for equal sized territories?

• Do we optimize for distributing the best territories to the best reps?

• Do we optimize for industry subject matter expertise?

• Do we optimize to reduce potential headcount churn?

Once we've decided on a set of principles to operate under it also makes practical sense to work out edge cases.

Meme me up!

Edge Cases

Carving territories can be an exercise in precision. But no matter how scientific your approach, there will inevitably be situations upon which you have no straight answer to. In these situations, publishing your edge cases rules will help to mitigate noisy complaints from the field. 

Account rotation to keep your hunters hunting

In some situations you may want to keep your hunting skills sharp. One way of doing this is to set limits for how long a rep can hold onto an account. Perhaps you have a policy where a rep can not work an account for more than three years. This constant rotation of accounts will have the advantage of reducing the farming portion of a rep's revenue base. It would also have the downside of changing POCs. However, if you have a three year policy it likely hedges against the downside since a lot can change within three years.

Stretch your reps

Part of a rep's resume for career advancement is the ability to demonstrate they could stretch themselves and achieve success on a limited basis. This is an audition to moving to the next step in their journey. For example, you have a Mid Market AE who has been asking for the promotion path to the Enterprise AE position. Why not consider adding one or two Enterprise accounts into their territory?

Holdovers

At year's end, it's never as easy as saying that on January 1st that accounts with an in-flight opportunity should move over to the new rep. Depending on your business culture, the act of transitioning accounts is either a carefully orchestrated act or one that is more informal. In a proactive organization, transitioning existing customers from one territory to the next requires thoughtful communication to the customer. 

One thought for the Revenue Operations organization is to design a template for the handoff process. Additionally, putting together a holdover policy helps to ease the feeling that the previous rep is losing the account. A holdover policy may look something like this:

"If an opportunity is open on the date of 12/31 then the outgoing sales rep reserves the right to continue working the opportunity for another 90 days should it also meet the following three conditions".

You can decide what those conditions are. At the end of the holdover period, in this case 90 days, the account will move over no matter what. 

How many accounts can a rep manage?

I'm a big fan of doing bottoms up math. So let's do the same here. Let's assume your sales reps aren't putting in crazy hours after 5 PM. If that's the case, then your reps have roughly 2,080 hours to work with (52 weeks x 5 business days x 8 hours). Subtract out roughly 10 holidays x 8 hours and you get to exactly 2,000 hours.