There are lots of factors that go into creating a successful sales team. You have to choose the right candidates, provide good training, and find the right motivational tools. But even if you’ve nailed all those steps, your team isn’t at peak performance until you’ve created fair sales territories.
As a manager, you may be wondering how to create fair sales territories and why it’s such a concern. First, we’ll take a quick look at why you should be paying attention to sales territories and why we keep using the word “fair.”
Why you need to make fair sales territories
The main reason to create and regularly review sales territories is efficiency. If your reps don’t have clear boundaries to their area, they may accidentally contact the same prospects. This wastes time, can cause conflict between sales reps, and can also be off-putting for your potential customer.
Beyond the risk of sales reps tripping over each other, you need to ensure you’ve positioned your resources where you need them most. If you haven’t reviewed territories for your sales reps, you may not realize that one sales rep is working alone in an area that’s dense with prospects. At the same time, several others are competing in a smaller town.
By redistributing those resources, everyone will have a better chance at success and your company will ultimately close more sales. This also creates fair territories. You may think that pitting sales reps against each other drives everyone to work harder, but creating fair sales territories is the difference between healthy competition and a sales team in chaos.
Take our earlier scenario, for example. The sales reps competing against each other in the smaller town have little chance when their sales numbers are compared to the rep in the city. Beyond that, the city rep has more prospects than they can realistically visit. This can cause conflict between your sales reps.
Ultimately, this can lead to a high turnover rate for your sales rep and a toxic team environment. Not only does replacing and training sales reps cost your company money, but it can damage your standing with clients who have built a relationship with their sales rep. After all, customers buy from people they like. Beyond the effect on the sales team, you’re leaving money on the table because the sole city rep can’t cover all the opportunities alone.
Start creating your first sales territory
Now that we’ve looked at why they’re important, let’s review how to create fair sales territories. There are a lot of factors you can look at during this process, but we’ll start by balancing territories based on prospect number and value.
To get started, you’ll need the location and estimated value of all your prospects organized into a single spreadsheet. If you’re not sure how to format your data, take a look at our how-to guide on preparing your location data.
Once you have your data, sign up for a free seven-day eSpatial trial. Log in and upload your prospect data. This will automatically create a pin map of all your customers. Then click on “Territory Builder” in the upper right corner. This will bring up two options – select “Create Manually.”
Since we’re working in an area that has a high density of prospects, we recommend selecting “US ZIP Code” for the region dataset. Then select your prospects file for the points dataset. When you’re ready, click “Complete.”
When there were two sales reps in suburban areas and only one in the city, the New York area was extremely underserved. This leaves room for another sales rep to move into the region, but also highlights the need to hire more reps in the area.
Since there are a fewer prospects near Scranton, one sales rep should take on a larger geographic area in order to have enough opportunity. To start, we’ll use the selection tool to create several rough territories, dividing up the densely populated city.
Try to estimate equal territories during this process, but don’t worry too much, as the next step is to add more accurate balance.
Create fair sales territories with balancing
Once you have some roughly drawn territories, click on “Add Balance.”
A screen will open that allows you to select the factors you’d like to use to balance your territories. In this case, select your prospects dataset, then choose “Potential Sales.” The names may be different, depending on what you chose as the headings in your file.
Once you’ve chosen what factor you’d like to use for balancing, you’ll be taken back to your map. In the right hand window, you’ll see a breakdown of the amount of potential sales in each territory.
You can then manually reassign ZIP codes to create fair sales territories.
After balancing, our sales reps have about the same prospect value in their territories. This is a great place to start when creating your sales territories, as it ensures your reps have the same level of opportunity. As you become more comfortable with sales territory balancing, you can look at more factors, like the geographical distance your sales reps are travelling.
Interested in learning more about creating fair sales territories? Why not book a demo with one of our mapping experts?