The Cost of Failure Calculator

What does it really cost when you hire the wrong sales person?

Cartoon Much has been written over the years about the benefits of hiring the right salesperson. The flip side of this is that much has also been written about the costs and problems associated with hiring the wrong salesperson. Many numbers are bandied about with very little in the way of explanation of what the numbers are based on. Also since each business is different, inevitably the costs mentioned are going to lack accuracy in most cases. Salestestonline.com decided to do something about this. As far as we know this is the first time anyone has come up with a calculator to figure out what it actually costs when you hire a failed salesperson. The Cost of Failure Calculator is not meant as the definitive tool for determining the costs of sales hiring mistakes. Our intention though is to give you a pretty good idea of what the costs are in your business.

If you think this calculator is useful, fun or interesting then we would be happy to allow you to add it as a link on your web site. We would ask however that you let us know so that we can supply the appropriate linking information at http://salestestonline.com. To do so or to give us your comments please email us at service@salestestonline.com.

The calculator is divided into 3 broad areas. The first is the cost to hire/acquire the new sales person. The second is the cost to manage, train and work with the sales person once he/she is hired. The third is the cost to terminate him/her and the lost opportunities associated with having an ineffective sales person occupy the position. We have combined both hard (out of pocket) expenses with soft (intangible) expenses within the three areas. You may choose to look at the costs in as narrow or as broad a manner as you wish. This way you will end up with a number that makes the most sense to you. In case we have overlooked anything or if there are costs that are unique to your business we have added 'other costs' as a catch-all category at the bottom.

Hiring and Acquisition Costs

	Cost of writing/producing ads for newspapers/job boards (graphic designers, copy writers, placing ads)	$
	Cost of running ads in newspapers/job boards	$
	Cost of writing job description	$
	Cost of internal company recruiters	$
	Cost of third party recruiters	$
	Cost of Career Fairs	$
	Cost to use outside interviewing/reference checking services	$
	Cost of testing/evaluation services (pre-employment tests, drug tests, background checks, medical exams etc.)	$
	Cost of time to use above services (your time plus time of other managers/recruiters involved)	$
	Cost of time to read resumes from job applicants (your time plus time of other managers/recruiters involved)	$
	Cost of time to telephone screen job applicants (your time plus time of other managers/recruiters involved)	$
	Cost of travel (flights, hotels, meals, car etc. associated with meeting job applicants)	$
	Cost to communicate (long distance, cell charges, postage, couriers, admin time for emails, letters etc.)	$
	Cost of time to interview applicants (your time plus time of other managers/recruiters involved)	$
	Cost of time to reference check applicants (your time plus time of other managers/recruiters involved)	$
	Cost of support/administration to bring on new sales person (orientation materials, set up on payroll and benefit plans)	$
	Cost of moving expenses	$

Managing and Training Costs

	Salary	$
	Unrecoverable draw	$
	Company benefits	$
	Automotive expense	$
	Travel expense	$
	Entertainment expense	$
	Equipment expense (laptop computer, fax, phones, pager etc.)	$
	Office rental expense	$
	Miscellaneous office expense (desk, chair, office materials)	$
	Communication expense (cell phone, long distance, couriers etc.)	$
	Cost of sales support materials (brochures, giveaways etc.)	$
	Costs of sales sample materials (sample books, demo equipment etc.)	$
	Costs of admin/support/service personnel	$
	Cost of HR personnel time (payroll, benefits, orientation)	$
	Cost of formal training programs	$
	Cost of third party trainer time	$
	Cost of informal training materials	$
	Cost of internal company trainer time	$
	Cost of sales leads (advertising, promotion, lead generation personnel)	$
	Cost of management time (Train, manage, motivate; your time plus time of other managers/employees involved)	$

Termination Costs/Lost Opportunities

	Cost of management time to terminate employee (your time plus time of other managers/employees involved)	$
	Cost of administration time to terminate employee (payroll, HR, benefits administration etc.)	$
	Severance pay	$
	Performance differential/Cost of lost sales (difference in gross margin between average salesperson's results and terminated salesperson's results for employment period)	$
	Vacancy costs (Gross margin on sales lost while position is unfilled)	$
	Other costs (misc. costs we may have missed)	$

A failed sales person costs your company

$0.00

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