Sales territories are an important part of the sales process for many companies.
Companies can waste at least 10% of sales opportunities by poorly managing territories. Or they can lift sales by 2-7% with better, technology-enabled territory design—without changing strategy or adding resources.
Effective territory management can also result in positive business benefits, like:
- 15% higher revenue
- 20% increase in sales productivity
- 15% increase in territory efficiency
- 75% reduced planning time
- Up to 30% higher sales objective attainment
But what if your current territories are outdated and underserving? What should you look out for to know that your sales territories need to be revamped? There are some signs that point to this being the case!
- You’re using Excel. Data and insights are only good if you can do something productive with them. Excel is often riddled with errors, making actionable insights pretty much impossible to gain.
- Sales are sluggish. Employees who don’t believe in their territory, or understand how it was created, don’t try as hard to attain their goal. Sales goals that are too high, misunderstood, unfair, or perceived as such can lower sales results too.
- Wrong-sized territories. Your reps could be targeting low-potential accounts because their territories are too small or they could be ignoring good leads because their territories may be too large.
- Complaints about unfair territories. Complaints in sales are natural, and often healthy, so this point is relevant only if complaining is extra high.
- Morale is super low. Territory mismanagement creates a culture of resentment, which sends productivity and performance spiraling downward.
- It’s hard to hire new folks. If word on the street says your team’s territories aren’t fair, people won’t want to join the team.
- High turnover. When goals are set and territories are assigned, you won’t always get direct feedback from your sales team. Instead, sales team members may choose to vote with their feet and make for the exits.
This is not the way you want to run a sales team, much less a company. Companies ineffective at territory design performed 15% lower in sales objective achievement compared to the average. How can leading organizations get there? Let’s look at sales territory design best practices below.
How to Build Sales Territories that Work
- Sequence correctly. Effective territory management looks different for companies in an established marketplace versus a greenfield. Startups operating in greenfield situations should first decide targets, then quotas, territories, and capacity in that order. Established organizations know what size territories they need to hit to reach the next growth stage—so they can begin with targets, then capacity, quotas, and finally, territories.
- Work backwards to set activity goals. Enhance decision making by leveraging AI to predict key metrics including ideal ramp times and seasonality in sales.
- Merge multiple layers of information about territories. Inputs may include past sales history, account potential, drive time, mileage, industry trends, and more. Be sure to represent the information graphically. Territories that are optimized for travel efficiency can reduce costs up to 15%!
- Calculate top-down and bottom-up models. Top-down models may not give enough weight to a sales team’s historic data and proven abilities, while too heavily prioritizing the board’s sometimes unrealistic expectations, whereas bottom-up models often double-count data and overweight individual contributors’ bias.
- Model a waterfall. Waterfall modeling sets your target goal at the highest level, then passes the model down each level of the dimension hierarchy. Each level can make confidential adjustments before passing the model along. This methodology works particularly well when planning is decentralized, incorporating input from regional and business line leaders.
- One is not done. Create iterative snapshots of your plans, and model important “what-if” scenarios and monthly forecasts. Make sure you analyze side-by-side comparisons across your teams.
- Learn with the machines. Deep learning built into state-of-the-art tools can dramatically up level the accuracy of your territories, quotas, and overall forecasts and plans. For example, sales intelligence will tell you if too many deals rolled over from last year, and your pipeline is too soft. Organizations using sales territory mapping software increase sales goal achievement 30%.
Benefits of Effective Territory Design and Management
Managing your sales territories is crucial to success. There are many benefits of managing your territories such as:
- Winning. Well-designed territories help companies win by creating an environment that fosters both competition and collaboration. Great territory design drives sellers to exceed their goals while eliminating disincentives for helping their peers.
- Growth. Done right, territories drive company growth—whether you’re expanding into new areas, launching new products, or adding headcount.
- Roles & responsibilities defined for success. Territories give clear-cut boundaries of which team members serve which prospective or existing customers.
- Motivation. By creating ownership across your team, you prevent deals from falling through the cracks, and boost morale with achievable goals and high earning potential. Effective coverage, balanced territories, and reduced travel costs are all additional side effects of territories that are well crafted and managed.
- Fairness. Done well, territory management ensures every territory owner can meet quota. That means matching territories with the right owners. If a rep has worked in Financial Services most of her career, she probably should own that industry. Similarly, reps living in California generally don’t have territories on the East Coast.
- Focus. Territories create advantages for sellers and sales teams by focusing quota attainment efforts on specifics regions, products, customer types, or industries.
- Prevent under-servicing. Tired salespeople, lead generation managers, and renewal specialists do your company no good. Well-constructed sales territories prevent your revenue team from producing and chasing too many leads, and neglecting a roster of customers that’s too large.
- Sidestep over-servicing, too. Territories that are too specific, just like quotas that are too small, put your team at risk of spending too many resources on serving prospects and customers.
- Change your go-to-market strategy and/or restructure effectively. Change management doesn’t have its reputation without good reason. Territories are fantastic tools to maintain market coverage, accurately size your teams, and correctly allocate resources during seasons of change.
Territory management is an important aspect of business that should not be overlooked. By following the tips in this article, you can be sure that your territories are being managed correctly and that the benefits are being reaped.
Looking for more Territory Design and Management insights and best practices? Check out our free guide “A Framework for Territory Management”; a comprehensive overview of what executives need to focus on to better their territory design and management.
If you'd like help in designing and managing territories, contact us at firstname.lastname@example.org to talk to an expert.