Why Your Sales Team Needs Territories⎪Predictable Revenue

Even if you have one salesperson, you should be using some kind of sales territory system as a way to focus them and help them prioritize. Here’s why and how…

Are you getting ready to grow your prospecting or sales team fast? Do you have a lot of unhealthy competition among your people? Is it hard for salespeople to hit their goals? Are sales reps stepping on each other’s toes? Or “claiming” leads they aren’t even working? If you don’t have territories, now’s the time to implement them.

Frequently I run across companies that don’t have a territory system with their sales teams. They say things like: “why limit our people?”, “we can’t make them fair to everyone”, “we’re too small to need territories”, and “we don’t know where to begin or how they should work.”

First, what are “territories”? The word comes from literally dividing up geographic areas of the country into physical territories, each owned by a single sales rep or team. That’s still a great and simple way to do it, though now it’s easier than ever to create virtual territories: by industry, size of company, or market segment.

Really, territories are another example of Specialization, which works by helping people focus, collaborate, and learn to become experts. That’s the main reason to use territories, in whatever form you go with, and whether you’re applying it to prospectors, market response reps or closers.

I want you to think of Territories = Focus, because focus is the main benefit. In fact, I’d like to come up with a more meaningful word for Territories, but “Focusies” just doesn’t roll off the tongue the same way 🙂

First – What Sucks About Territories

Look, there’s a lot of unpleasantness with territories:

They will never be perfectly fair. (Well, life won’t either.)
Territories can be a huge pain to design fairly and can be contentious.
Once they’re up, they can be a LOT of work (with more contention) to manage and change, and it gets exponentially harder as you get bigger.
It’s harder for sales reps to benefit from any close relationships outside their territory.
Territories give pessimistic salespeople an excuse to complain about.
When you get into enterprise companies that are spread out all over the map and across multiple territories, the “sales territory rules of engagement” on who owns what can get very confusing, and require lots of one-off exception handling by managers.
There can be some awkward client handoffs, such as when a salesperson – after talking with a prospect for a half-hour – finds out the location of the decision-making office is outside their territory, and they need to transition the prospect to someone else.

I’m sure there are more factors than, this, which is just a sample!

The Only Thing Worse Than Territories

Let me tell you the thing that’s way worse than setting up and managing territories: not having them, some clearcut way for your sales teams to divide and conquer your markets.

Why You Should Implement Territories

But by not having territories, things run amuck: sales reps have less focus, less emotional ownership and more infighting. By giving your people “a patch”, you get the benefits of:

More emotional ownership over “their part” of the business.
Divide and conquer, rather than running over each others’ toes.
Get back most of the enormous amount of energy sales reps spend solely to claim and hold ownership over inactive leads and accounts (which can be 20-30% of their time).
Easier to set up and run “territory teams”, such as a prospector with specific Account Executives attacking a specific market segment.
More clarity & productivity. Less choice = easier decisions & action. Example: I remember managing a prospector who was struggling; just barely meeting quota of generating eight qualified opportunities a month. When the team grew and we halved her territory, she jumped up to doing 15 opportunities the next month!
Sales reps have to focus on growing the whole pie; more scalable team growth. Why: while it is ‘simpler’ to avoid having territories and just add new salespeople to your one lump database/system like everyone else, by doing that you’re really – to them – dividing up a fixed pie into smaller pieces… this means more “I win, you lose” competition. When you have pre-defined territories, each rep has to focus on growing their piece of the pie rather than spending so much energy defending their pie or eating others’.
Less head-to-head conflict & a lot more cooperation. For example, sales reps will actively refer each other business, trusting others will do the same.
More expertise in their area of focus, whether it’s in an industry, geography or other kind of market segment.

Where To Begin – Designing Sales Territory

The best ways for most companies is to focus sales reps by some combination of 1) geography, 2) industry and 3) size. “Named” accounts is another common approach, especially if your sales are very relationship-based, are randomly placed or sized, or if you’re targeting a very small number of prospects.

How you divide things up depends on where your revenue comes from and goals…

1) First, Revenue Sources: Spend some time defining where revenue comes from, where your customers are, and how much comes (or will come) from inbound leads versus outbound prospecting…

Current customers: Where your best customers and prospects concentrated? You’ll see geographic or industry-based concentrations, signaling an easier path to closing more customers in those same areas. Historical sales data is the best predictor of near-term future success.

Inbound leads: For the leads that turn into customers, what kinds of concentrations (geography, industry, size) do they exhibit? How can you divide them as fairly as you can across your salespeople – based onrevenue generated from inbound leads rather than volumes of leads?

Outbound Prospecting: First set up your sales territories, then overlay prospecting territories on them according to how you’re allocating prospectors. For example, say first you decide two salespeople need to focus on California, and you’re hiring one prospector for every two sales reps, so California would have two sales territories and would be one big prospecting territory.

2) Second, Goals: What do you want to accomplish, what are your goals?

Most Profitable (Least Risky): Double down on currently successful territories / industries and do more of what’s already working.

Most Growth: Do you want to open new markets and establish longer term growth? Focus on untapped territories, which may or may not be profitable at first, but will create more growth over time.

Learning / New Markets: Perhaps you’re trying to learn whether a market segment’s viable or not. You might set a prospector and salesperson up to target a new industry of Health Insurance, or an international country like England, for example, just to see what it’d take to grow in that market.

Your goals help you decide the best way you want to focus your people, time & money.

3) Third: Involve Your People: Well, technically this could be the first step, but along the way I’d suggest bringing your salespeople into the conversation to help you figure out your territory system. It will take longer to make a plan, but they will bring you new ideas and it’ll eliminate most of the usual frustration of unilaterally rolling out new sales initiative. People support what they help create! (Read the section on page184 in Predictable Revenue, “Engage the Whole Team in Designing Their Compensation” and apply the same approach here.)

For example, by involving their salespeople, one client with a half-dozen salespeople created territories that spread across the country, so their salespeople could call people in different time zones through the day.

Some Examples

a) You’re a startup with one salesperson, and you’re based in the Bay Area. Make up a “Top 10” targets list. Or focus them on the Bay Area. Or on asking for referrals from current customers. Have them work through these mini-campaigns, testing and seeing what works.

b) You’re a company based in Chicago, with 10 salespeople. Because you sell to ad agencies, your customers are concentrated in New York, San Francisco and Chicago. Your 10 sales people (inside or outside – doesn’t matter), should be focused on those three cities, ignoring the rest of the country.

c) You’re a newish company still figuring out what market segments are your most profitable; you divide four prospectors across four segments – one targeting new businesses; one small businesses; one enterprises and another channel partners. Each prospector might be focused on just 1-2 geographic cities or states, a specific industry/vertical, or some other way to narrow their target list.

d) Imagine you’re a company with best prospects are businesses 100-500 employees in size, in a specific industry. You might divide five prospectors up across the country: Northeast, Northwest, Southeast, Southwest, Central.

Remember The Point Is Focus!

Territories can be a complex topic, without a “right” answer. I have no doubt I could add a hundred examples, and still not give you the perfect one for your business.

Remember the whole point is to give your people (prospectors and sales reps and sometimes inbound lead qualifiers) a way to divide and conquer, to focus. How you best adapt that goal to your specific situation is your challenge, and again why I recommend bringing your people into the conversation earlier rather than later.

What If Your People Don’t Want Territories?

Rajesh Setty asked me a great question: What can a sales manager do to move salespeople from a “scarcity mindset” (territories put limits) to an “abundance mindset” (territories bring focus and discipline).

Involve your people in the process of an honest look at the challenges they and the team are currently facing, and the role of either no territories or poorly designed ones. People prefer the devil they know; help them take an honest look at that devil.
Involve your people in deciding how to improve the situation, whether or not you need territories, what kind, and what they’d look like.
Prove that it works by holding up examples of people who excel once the territory change happens.
Really listen to reps when they complain about their territories. Sometimes they have a real point, sometimes they don’t – your job is to get to the truth. I recently spoke with a very experienced sales rep at a $100 million company. He owned Oklahoma and was supposed to focus on the oil industry there, yet was having anemic success in building a sales pipeline after nine months selling a software-as-a-subscription product. Yet the sales rep who owned the Bay Area was rocking his numbers (go figure). I’ll tell you right now, the problem wasn’t the sales rep who owned Oklahoma – it was sales management who put him there without enough support or understanding of the market. Better to double down and give him part of the Bay Area!
Realize that you can’t make everyone happy all the time, so some dissent is ok, although ongoing complaining or resistance – after a plan is made and executed – is not. If you have anyone who’s consistently negative, you and they need to have a brutally honest conversation about whether your company’s the best place for them, or practically what needs to happen to improve their situation.

You Don’t Need To Cover The Whole Country

Don’t worry about what areas of the country or market you’re not covering – just focus on the best ways to focus. Don’t have them scatter there energy all over the country messing around.

For example, say you’re a company based in Los Angeles, with plenty of prospective clients there. Because you sell to ad agencies, you also have concentrations of customers in New York, San Francisco and Chicago. If you hired 10 salespeople (inside or outside – doesn’t matter), you would distribute them across those three cities, and ignore the rest of the country.

If you were a software company based in San Francisco, you might start by focusing your people on say, the Bay Area and New York. As you grew, you might double down on those areas – as long as it was productive – or you might expand your coverage to be statewide (California and New York states)…then region-wide (Southwest and Northeast), and finally someday the whole USA.

A lot of how you grow depends on your resources. If you have a lot of money to burn and a product that sells well across the country, you might quickly expand to cover the whole USA fast.

Usually it’s better to go a little slower, beta-testing how you make a new territory successful before expanding too fast and having a high failure rate with new salespeople and territories.

You can use this same approach by industry: focus first on fashion retail, then expand into general retail, and so on. Build & expand from your areas of strength, learning as you go.