Sales Operations: Designing Territories

Apologies for the delay! I’ve been very busy the last two weeks dealing with some heavy handed work. We recently went through a rightsizing and dealing with it has been physically and mentally taxing on everyone involved. I still have my job if you’re worried about me, but remaining untouched doesn’t mean that you’re not touched. You know what I mean?

Also, I wrapped up my Q2 Cohort for my RevOps live course Unleashing R.O.I. (Revenue Operations Impact). If you’re interested in learning more please visit the course page.

So let’s talk about Sales Territories!

Territory planning is critical to sales success. Poor territory planning results in missed quotas, decreased revenue, lower margins, frustrated sales people, and ultimately, underserved customers and prospects. Let’s start with a definition. A sales territory can be based on a geographic area, vertical industry, or any other account attribute. Territories are owned by a specific sales rep or a team. The goal of a sales territory is to utilize a cohesive sales strategy to a targeted set of prospects and customers.

Sales territory design has long been a manual, labor-intensive, and time-consuming process. Most companies conduct territory planning on an annual cycle and with limited input from the field. When territory planning takes place just once a year, firms miss the opportunity to respond to change business conditions. Additionally, with minimal field input, you lack the ability to incorporate local knowledge into your territory design. Enabled by broader trends in digitization, emerging technologies overcome these common territory-planning obstacles and empower today’s businesses to more easily and effectively leverage territory design for competitive advantage.

By combining real-time, account level CRM information, broad geolocation data and third party market data, progressive businesses can optimize territory design to:

• Maximize the return on sales resources

• Shorten and improve the territory planning process

• Reduce travel inefficiencies and related costs for field sellers

With the increasing digital transformation of sales, businesses can now capture and access real-time information that increases the precision, accuracy, and strategic value of territory design.

One mistake companies can make is to under-invest in territory design efforts. This is a mistake. Another issue is to utilize false assumptions or errors in the territory planning process. This can lead to missed quotas, lower revenue, decreased margins, poor employee performance, low morale, and sales turnover.

There are three key drivers behind the modernization of today’s territory planning:

• Data-driven insights

• Automated processes

• Increased collaboration

Data-driven Insights

Data has become a primary differentiator in strategic territory planning. As is the case in so many areas of business today, data is everywhere. Companies are sitting on more than they know what to do with, can generate new data quickly through sales collaboration, and can easily go outside the firm to acquire other data they may desire.

By applying data insights, organizations can see where they need to improve the design, balance, and travel efficiency of sales territories. Sales leaders can focus team efforts on the accounts with the highest potential. By ensuring an equal distribution of workload and sales potential, data also allows companies to maximize sales team productivity. Applying data-driven insights to territory planning, companies can: compare sales activity with sales potential, compare sales activity with sales results, and compare sales results with sales potential.

Key questions to consider:

• Where are the opportunities?

• Where are reps spending their time?

• Are sales efforts aligned with top opportunities?

Automated Processes

With modern tools & equipment companies can speed and advance territory planning processes by replacing outdated manual processes. When firms combine the plummeting costs of processing and storage with the rising capabilities of task-specific applications, they can leapfrog their own expectations of the realm of possibility. Organizations can quickly, easily, and fairly distribute potential sales opportunities and workload across territories while simultaneously creating more cost-efficient territories through the use of advanced data computation delivered by SaaS tools that until recently were out of reach.

Increased Collaboration

Sales territory planning should be a team effort. Modern tools ‘democratize’ territory planning, enabling field sales managers to contribute to the process. With the ability to make changes to their own territories, field sales managers can bring their knowledge of local markets and account relationships. This, in turn, produces more refined and well-aligned territories, improving overall sales coverage and productivity.

4 Step Territory Process

Territory design can be broken down into four simple steps:

1. Market Definition

2. Account Assessment

3. Territory Assessment

4. Bench Strength Assessment

Market Definition

Defining the market can include factors such as geographical area, revenue or employee size, industry. Similar to setting overall company targets, it’s best to work backwards from the segments of your customer base that best match your company’s mission, values, and goals. Within your data, there is often a segment which should stand out.

Examples of a market definition could look like the following:

Account Assessment

Once you’ve set your target market the next step is to evaluate how valuable each account may be within the market. Developing an Account Scorecard can help calibrate towards fair territory distribution. For example, you may develop a score called Total Addressable Spend. Let’s say you sold a SaaS solution to the customer service department. You develop a heuristic that assumes 5% of the workforce works in customer service for the average industry, but that you have a few select industries where you’ve estimated it to be 3%. The account assessment framework you develop may look something like below.

In the example above, the average finance account is estimated to be worth $45K while the average software account is valued at $18K.

Territory Assessment

The next step is to draw a line between how many accounts are within each territory. We know how much an average account may be worth, but how does that look in terms of an entire territory? Similar to assessing accounts, the next step is to develop a Territory Scorecard. Let’s assume we know what our win rates are by industry. 

• Finance: 10%

• Software: 25%

Although finance firms have a higher average estimated value, the lower win rate suggests that the average account is worth $4,500. The average software company would represent the same amount at $4,500. Below is a look at two territories. Which one is more valuable?

Here’s a real world example of territories I carved out recently for a client.

Each blue bar represents an individual territory. On the left axis is the assumed numerical revenue value of that territory. Essentially it asks, if a rep was to close a deal with an expected value for every single account in that territory, what would be the sum total of bookings? The first three bars are the Enterprise territories. Each of those reps have access to roughly $30M in bookings. the remaining territories are normalized to roughly $13M in expected value. Having a unified metric to estimate the value of an account (see account assessment above) is helpful when adding the cumulative expectation per territory.

It simply makes the conversation with each rep that much easier in showcasing how they can make their number.

Bench Strength Assessment

One of the crucial steps is to ensure you’re mapping the strengths of your reps to the appropriate segments and territories. Perhaps you have a sales rep who has previously worked in the industry vertical you’re assigning them to. The collective years of experience working in that industry naturally speeds up their ability to service those prospects. Additionally, large customers who typically have involved buying committees would be better served with an experienced sales rep selling into large companies with complex corporate processes and politics. Match strength with strength.