Recently I was meeting with an entrepreneur who’s startup is growing nicely. They just raised a round of financing and will be expanding the sales team. After catching up for a few minutes, he asked about implementing sales territories and I recommended against it.
Here are a few reasons most startups should avoid sales territories:
- Distribution of Best-fit Accounts – While sales territories are often divided based on certain states and their corresponding population centers, in actuality the ideal customer profile isn’t evenly distributed. Apps can automatically find the total addressable market and build smart lists of the best-fit accounts. Having each rep work a set of named accounts ensures all best-fit accounts get worked, not just the best in a certain territory (e.g. 250-500 accounts per rep is recommended).
- Growth in Sales Reps – As the startup grows, and hires more sales people, territories for existing reps must shrink to make room. Shrinking territories results in disillusionment for the existing reps and creates ongoing realignment challenges.
- Inbound Lead Distribution – Just as the ideal custom profiles aren’t evenly distributed across territories, quality inbound leads aren’t evenly distributed either. By not having territories, inbound leads can be qualified and parsed out in a more dynamic fashion.
Sales territories are a relic of the pre-internet era and no longer make sense for most startups. Entrepreneurs would do well to avoid sales territories and take advantage of the opportunity to target the best accounts anywhere, not the best accounts in a certain territory.
What else? What are some more reasons startups should avoid sales territories?
3 thoughts on “Startups Should Avoid Sales Territories”
I think this is a great strategy for growing companies. Avoiding the use of territories gives the reps who work the hardest the best opportunity to succeed. The freedom to call on whatever accounts they can find incentivizes creativity and hustle.
However, there should be ground rules set by the sales leaders of the company to prevent disputes. (i.e. A 60-day “touch” rule, where 1 rep cannot call on an account if another rep has logged activity on it in the CRM in the last 60 days.)
I love sales territories and would do them again. They become handy as you move up market and do more localized marketing / city selling. But, there’s no one right way and often at Bronto we used a combination of several things (round robin, named, vertical, …) depending on the market we were entering.
Without any sales territories, we are assuming that the Head of Sales/Chief Commercial Officer or whoever is assigning the accounts to the respective sales rep must possess a very good understanding of the capabilities/personalities of his salesforce and the nature of the industries the inbound leads are from. This is easier said than done especially when turnover is high or long sales cycle.