To create a balanced sales territory, you need to create an index to balance the workload equally among all the sales representatives. In the past, this process involved math—a lot of math. With the advancements in technology, however, you can simply use specialized software programs to customize the parameters of your sales reps’ workload balance.
Still, it pays to know the actual theory behind the entire process. The alignment equation is listed below:
Workload, Sales Potential, and Own Sales—these are the most important components of the alignment index.
Workload is the actual number of planned calls to clients, which is the most important because it bears the heaviest weight in overall calculation. You will need real calls for Workload in order to accurately balance planned calls across all sales representatives.
Sales Potential, on the other hand, is also an important component of the calculation. It refers to your ability to grow the business within your current roster of clients. If you do not have any measure for Sales Potential, you can use a proxy or even target demographics to calculate it.
Finally, Own Sales is an optional variable but we highly recommend using it. Without it, you can still create an index but you wouldn’t be able to factor in new-territory sales from previous years. And, this is essentially why we use this component—to ensure that new territory contains sufficient sales data for reps to meet their sales targets.
Apart from creating balanced territories, another great benefit to having an alignment index is it allows you to trade off factors within the equation for other factors. This is especially handy if you do not have actual sales figures or need proxies for Sales Potential.
Once you have acquired all the data, the next step is calculation. The most basic way to do this is: take the values of each component and multiply them by their respective assigned weight percentages; after that, multiply each of them by 1000; and, finally, multiply them by the actual number of territories.
After completing the index for all of your accounts, you can proceed to creating and designing your sales territories.