Fine Tuning Your Sales Staffing Assumptions in a Startup Pro Forma
Q: I'm trying to model my startup, but the sales staffing calculation seems insanely high. My pro forma is calculating a sales staffing cost of millions of Euros for one of my offerings, which makes no sense.
The beauty of our app is that you can input assumptions for all direct staffing requirements (direct labor, direct sales, and direct account management/support reason) and your staffing levels will automatically adjust with your sales forecast and will also stay in sync as you continue to adjust your pro forma plan.
What this means, though, is that you need to be careful to fine-tune your direct staffing levels to make sure they make sense, that they reflect your business model, and that they will look credible to venture capital investors and lenders.
In reviewing your pro forma, your sales staffing looks insanely high because of your Offering assumptions:
Your Offering pricing assumption is 10.50 Euros per month
Your Customer Acquisition Cost assumption is that each Fulltime Equivalent (FTE) of a sales executive will only sell 5 new customers per month at a base salary of 30,000 Euros annually
Essentially what this means is that you have a direct sales resource that - on a fully loaded basis including taxes, benefits, etc. - costs you over 4,000 Euros per month, but sales resource is only selling 50 Euros worth of product per month.
Further, in your sales forecast, you are forecasting 163,500 new customers in Month 60, so the pro forma model is calculating that you need 163,500 new customers, divided by 5 new customers per sales executive = 32,700 sales executives on staff. Hence your cost for direct sales staffing is millions of Euros in the latter part of your plan.
You can see your sales staffing by looking at the Staff report and clicking into the Total Sales & Marketing Staffing and further drilling into the Month view so you can see which offerings have staffing assumptions that don't seem to fit what you intended or that won't look credible to a venture capital investor or lender.
Please note the instructions we've highlighted in yellow in the screen shot above and also note the Tips accessible by clicking on the blue question mark. As we noted in out tips, be sure to iterate a few times on all of your offering assumptions, including direct staffing, to fine-tune them so that the pro forma passes the credibility and reasonableness test.
Pro Tip: Normally, direct sales staffing will not work when selling product valued at very low prices (such as only 5 or 10 Euros each), so our app is actually highlighting an issue in your overall business model construct. You may want to reconsider how you plan on selling your product or at least reset your expectations for how much product a sales executive can sell. For example, replace the 5 customers with 5,000 and you will have a reasonable sales staffing expense. However, it is still not a workable sales model to have direct sales staff selling such low price points. That is the realm of e-commerce sales or channel sales on a revenue share.