A Guide to Calculating ROI for Outsourced Sales Teams
As with every aspect of your business, understanding the cost breakdown is the fiscally responsible thing to do. You could have an accountant who helps track all your costs, or maybe you’re starting a new venture and need to understand the cash flow better. Calculating your business’s return on investment (ROI) is crucial, but breaking it down by business sector can be more beneficial. According to Statista, the global business process outsourcing (BPO) market will hit US $390 billion in 2024.
The more informed you are, the better long-term decisions you can make to ensure success for your business. Do you have a plan in place measuring the financial strengths of your business? It’s time to jump into the ROI formula for sales, specifically for outsourced sales teams.
What is ROI for Outsourced Teams?
Suppose you have dealt with remote workers or outsourced aspects of your business before; that’s great. If you don’t, there is no need to worry. This guide is meant to set you up for success in working with an outsourcing partner like OSI.
ROI for outsourced teams accounts for all the costs associated with retaining their services versus the value brought into the business. The value could be monetary, tasks completed, or the number of customers serviced. Still, tracking the predetermined key performance indicators (KPI) you’ve chosen for your business ensures the investment makes financial sense.
Why ROI Matters in Sales Outsourcing
Specifically, an ROI formula for sales ensures you and your outsourcing partner have clear goals and expectations for the most fruitful partnership. Before explaining what precisely goes into the ROI formula, it’s important to pull back and look at the bigger picture of why you need to be vigilant:
- Risk mitigation: Understand any risks with outsourcing and plan for contingencies. What metrics or behavioral concerns are deal breakers?
- Long-term planning: Calculating ROI is not a one-and-done activity. Consistent checking on the ROI needs to be a part of your monthly/quarterly sales numbers; you’ll use it to help forecast future revenue.
- Financial responsibilities: Ultimately, you’re answering to the business’s success or failure, so determining the full impact of every aspect could make or break your business. You might be able to spot something that needs to change with enough time to correct it.
Components of the ROI Formula for Sales
Although the formula looks relatively simple, understanding it and including the correct numbers make all the difference.
ROI = [Net Investment (Profit-Cost of Investment)/Cost of Investment] X 100%
Example Scenario:
You’ve calculated that the initial cost for a second office is $75,000. In the first six months, the profit from the sales is $300,000 minus your initial $75,000 investment, making your net return $225,000.
Formula from Scenario:
[($300,000 – $75,000)/$75,000] X 100% = 300%
With the high-level ROI formula for sales now laid out, it’s time to learn what goes into those data points.
Calculating ROI
It’s one thing to know the formula, and it’s another to ensure the data included in the formula is accurate.
- Initial Costs: Costs associated with the venture at the beginning of the process, training costs to get the outsourced team up to speed, technology improvements to match what is needed for your business, setup fees to start the business relationship, and travel costs if you need to spend time with the group in person.
- Ongoing Operational Costs: Ongoing costs would include salaries, facility costs, commissions, outsourced management fees, and anything to run the day-to-day operations of the business.
- Revenue Generated: Direct and indirect sales that are closed through the outsourced sales team.
- Calculate the ROI: Once you have gathered all the needed data, you can plug that into the ROI formula for sales:
ROI = [Net Investment (Profit-Cost of Investment)/Cost of Investment] X 100%
Here’s another item: top-performing sales organizations conduct at least six annual role-plays with their sales force. That could be with a company or you, the business owner, but the ongoing training needs to be accounted for.
Common Pitfalls to Avoid
Understanding and executing the formula to start a relationship is great. Still, some areas can, and will, pop up if you aren’t diligent or don’t have transparent practices to gather what is needed accurately.
- Overestimating or miscalculating your revenue.
- Before starting the process, you don’t fully understand the time needed to get up to speed.
- Misunderstanding the operational or indirect costs will affect the ROI.
- There is no clear ongoing measurement plan: costs and margins change so that the ROI will fluctuate.
According to Hubspot, on average, a new sales rep will take 3.2 months to ramp up to total productivity. Work with your outsourcing partner to help avoid these pitfalls and address any questions.
Understand the ROI for Outsourced Sales Teams
You’re embarking on a significant business investment by outsourcing your sales team. You aren’t taking it lightly, and neither should your outsourcing partner. Use the ROI formula for sales to determine a minimum viable return needed to ensure success and be transparent with every member of the decision-making and partner levels. The more awareness there is of the goals, the better off you will be.
OSI is a premier outsourcing partner with many years of experience across multiple verticals, including sales, accounting, IT support, customer service, operations, and more! Contact us todayto see how we can make your move into outsourcing as smooth as it can be.
