How much does field force cost? Can route-planning reduce it?

Employees in the field are important for companies – and expensive. Field sales can account for costs of up to 30 percent of a company’s total sales, according to a study by Homburg & Partner.

It is admittedly difficult to calculate all accrued expenses for the sales force – indirect costs especially are often forgotten or underestimated. We have compiled a list of typical cost factors in the field. Wherever high costs are incurred, it makes sense to think about optimization. Just with good route-planning alone, you can increase your profit margin by 54% or more, according to a study bythe VTH.

We have created a cost calculator for field forces, with which you can calculate the direct costs of your sales team and the possible potential savings with optimized route planning.

Taking into account all cost factors, expenditure for the field force is about 120,000 € per employee per year. Given 8 customer visits per day and 200 days a year with visits, a single visit generates costs of 75 €. Depending on the industry, this amount goes up to 200 € per visit. Where does this number come from?

In addition to the salary costs and vehicle costs, more is needed to build a field force for sales, consulting, or service, and to maintain it. Here is an overview of all costs and time-wasters that affect the contribution margin in the field. You will certainly discover one item or another that has been attributed to the expenses of another department, but is actually related to the effort to sustain the field force:

Vehicle Decision-processes during car-purchase Logistics during car-purchase Financing/depreciation Interest Insurance Taxes Fuel Maintenance Repairs Replacement vehicle Tires Minor expenses (washing, parking, …) Account for expenses Employment Salaries Commissions/bonuses FICA/FUTA, tax, insurance & 401k benefits, medicare, benefit maintenance, … Travel expenses (accommodation, …) Internal services (payroll, accounting, expense reports, …) Severance payments Legal expenses Recruitment and selection in HR (ads, interviewing, testing, …) Facilities Notebook Mobile phone Telephone bill Data plan ICT support & maintenance Consumables Insurance

Account & Sales investments Effort for supervisors (sales planning, management, controlling) Buying leads and analysing territories Training costs (internal/external trainers) Ongoing product and sales training Free samples and demos for customers Marketing material Office space/meeting rooms when in-house, including furniture and facility management Working days without customer calls Onboarding Ongoing product and sales training Regular sales meetings In-house days for reporting, planning, IT, … Events (trade shows, fairs, demos, …) Vehicle maintenance Holiday Unplanned time wasters Traffic (jam, snow, …) Vehicle defects/repairs Cancelled appointments with customers Illness

Given these costs, any optimization made in the field force pays off. Even if only 1% can be saved, an additional 1,200 € profit shows up at the end of the year. A benchmark study by the VTH of 109 companies showed that the average profit margin of a salesperson can be raised from 532,000 € to 819,000 € just by using route-planning-software. That’s an increase of 54%! In addition, the time required for planning the routes can be greatly reduced when using the automatic portatour® personal route-planner.

Calculate your own costs of your field force and savings of using automated route planning using our rentability-calculator for field forces.

The simple conclusion is:

• The fewer vehicles you need, the fewer miles you drive, the better!
• The more visits your employees achieve, the better!
• Invest in route planning: The benefits are already evident with 1% increase in efficiency – the practice shows a potential upside of 54% on average.

We welcome your feedback and questions at info@portatour.com.

Sources

1. Den Außendienst auf Kurs bringen, Homburg&Partner, pharma marketing journal 6-2007
2. VTH Benchmarking-Studie-Vertrieb, Verband Technischer Handel und Fraunhofer SCS, 2008