Question

In: Economics

As vice president of sales for a rapidly growing company, you are grappling with the question...

As vice president of sales for a rapidly growing company, you are grappling with the question of expanding the size of your direct sales force (from its current level of 60 national salespeople). You are considering hiring from 5 to 10 additional personnel.

sing hypotherical numbers, please explain (show work on excel):

a)How would you estimate the additional dollar cost of each additional salesperson?

b) Based on your company’s past sales experience, how would you estimate the expected net revenue generated by an additional salesperson? (Be specific about the information you might use to derive this estimate.)

c) How would you use these cost and revenue estimates to determine whether a sales force increase (or possibly a decrease) is warranted?

  

Solutions

Expert Solution


How would you estimate the additional dollar cost of each additional salesperson?

Answer: The change in dollar cost of direct sales force dividend by the change in the number of salespersons will give the additional dollar cost of each additional sales person. The change in Dollar cost is the difference between the cost of direct sales force after additional salespersons and before addition. Then divide by the number of salespersons added.

Based on your company’s past sales experience, how would you estimate the expected net revenue generated by an additional salesperson? (Be specific about the information you might use to derive this estimate.)

Answer: The net revenue is calculated by subtracting expenses from the total revenue. To get the net revenue that is generated by an additional sales person will be change in net revenue as a result of change in additional sales persons dividend by additional sales person. The difference between the net revenue before additional sales persons and after gives change in net revenue.

How would you use these cost and revenue estimates to determine whether a sales force increase (or possibly a decrease) is warranted?

Answer: The additional net revenue should be higher than the additional cost both for individual salesperson and for the whole of additional sales force. The different between net revenue and additional cost for each additional salesperson must be positive to warrant sales force increase.

Rahul Sunny answered 1 year ago
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