Do a Reality Check on Your Recruiting Costs

Do you know what it costs you to recruit and train a new salesperson?

September 1, 1998

I recently met with 30 branch managers from different companies, and not one had a simple formula for calculating the cost.

I recommend that you take the time to do the math. It’ll drive home the importance of recruiting the right candidate.

First, tally what you’ve spent during the past 12 months on

  • Recruiting ads
  • Design, printing, and postage for recruiting brochures
  • Salary and benefits or fees for a staff recruiter
  • Career nights
  • Recruiting contests
  • Bonuses for salespeople or managers who bring in new salespeople
  • Branch managers’ time spent recruiting (calculated using a percentage of salary and benefits)
  • Sales aptitude or other profiling tests
  • Company-paid costs associated with licensing
  • Cost of trainers, space rental, and training materials
  • Start-up supplies such as signs, stationery, and business cards
  • Administrative time for processing new salespeople

Add up the costs and divide by the number of new salespeople who’ve joined your company in the last 12 months. You’ll get the cost for recruiting each new salesperson.

Second, calculate the other costs of operating your office, excluding sales commissions, off-the-top franchise and referral fees, MLS and board costs reimbursed by salespeople, and management commission overrides, but including all other fixed expenses.

Divide total fixed expenses by the number of full-time salespeople you have. That’s your cost of retaining salespeople.

Add the cost of recruiting to that of retention, and you’ll have a sense of what you’re spending to acquire a new salesperson and support that person’s share of your overhead.

You may also want to factor in how long it’ll take new salespeople to generate enough dollars to offset recruiting and start-up costs.

I’m not trying to scare you out of the recruiting business--just helping you see why it’s important to recruit carefully and invest time in new salespeople to start them on a productive path.

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