Whitepaper ROI Worksheet Galt Society

Everyone Sells – But At What Cost?
A SALES RECRUITING ROI WORKBOOK
INTRODUCTION
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Some organizations are strategic in nature. Most, unfortunately, are tacit, practical, or even apathetic when it comes to
their sales force. However, all will find themselves in need of recruiting sales people at some point or another. There are
a myriad of recruiting strategies, including: job boards, in-house resources, referral fees, 3rd party recruiters, and so on.
The various investments in recruiting have been, and will continue to be, volatile. The emphasis of concern typically
rotates through the seasons of the economy and the perception of such by the organization itself. Talent acquisition is a
‘cost’ when it is tacit, practical, or apathetic, yet it is an ‘investment’ when the initiative is strategic.
Expenses may be categorized into three areas: Explicit, Latent, and Germane. This workbook is designed to expose and
stratify these expenses to better shed light on the consequences of recruiting, or not recruiting, and how it impacts the
bottom line as it pertains to the sales force.
Explicit expenses are those costs that are fundamentally associated with a recruiting process, e.g. job-board postings,
background checks, plane tickets, et al. Regardless of circumstance – when broken down to money: It is what it is!
Latent expenses are not so obvious and often overlooked, yet they are real costs that do incur in varying degrees
regardless of the recruiting methodology. Prime examples of latent expenses are:
A. Indirect Investment: A very common mistake that organizations make is not to include the investment of time
that their own employees make during both the interview process and the training process. On average there are
about 255 business days in a fiscal year and, for the sake of calculation, there are 8 business hours per day, or
2,040 business hours per year.
B. Employment Cost: Another common error organizations overlook is the hard costs spent by an organization on
Federal, State and Local taxes, Insurance, Paid Time Off, and other often ‘hidden’ costs. According to the
Bureau of Labor Statistics, the national average is around 30% of the total compensation. These calculations
should be considered not only for the new hire, but other human capital assets involved in the recruiting,
interviewing, and on-boarding process.
C. Ancillary Recruiting Investment: Yet, another common mistake is to calculate only costs expensed for the
candidate hired and not the expenses incurred on all candidates that were considered.
Germane expenses may be the most crucial of all. Even the most adept observer of sales recruiting seldom associates lost
opportunities and operating revenues to the overall impact a successful recruiting process. Additionally, one should
consider velocity to production, valuation, turnover, and morale that all significantly impact the sales department and the
ultimate health and future success of an organization.
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Illustration: If one share of a $5 stock is purchased, and over the course of one year, that share increases in
value to $10. The obvious perception is that the initial investment experienced a 100% return. However, if one
is to consider the cost of the initial investment over the course of that year (e.g. interest realized if the money
were safely left in the bank), the valuation of the $10 return vs. that of a year ago (e.g. inflation), and taxes due
on the return - the reality is that the actual ROI is actually less than perceived.
The ensuing guidelines will vary from company to company. We have tried to be as granular as possible so that
organizations can be as quantifying as they feel comfortable with in identifying the true importance in the strategic nature
of sales recruiting as it pertains to them. Additionally, since we have gone to pains not to fabricate expenses or take undo
liberties, an organization could reasonably have additional investments that we have elected or failed to include due to a
lack of universal usage.
EXPLICIT EXPENSES
Let’s begin with a common example: A sales person resigns or is terminated – a position now needs to be filled!
Day Day Day Day Day Day

Task 0 2-21 15-30 39 41 55
Position becomes
available and posted on
job board
HR screens more than 50
applicants, interviewing
10, and identifying 5
contenders
RVP & SVP spend 1 hour
with each of the 5
contenders and identifies
2 semi-finalists
Semi-finalists are brought
into to corporate for
round-robin with HR,
SVP, RVP & Peer
Offer letter extended,
references & background
check performed
Candidate begins
When the Explicit and Latent expenses are calculated in this scenario, the costs incurred totaled nearly $2,600 -
minimum – ONLY THROUGH THEIR START DATE! Assumptions and considerations beyond those listed are: 1)
all applicants came from a single listing on a single job-board, 2) HR pre-determined the decision of the RVP who pre-

determined the decision of the SVP, and 3) the costs of amortized assets and expenses are not calculated, e.g. phone
expense, square footage, and equipment.
Below is a worksheet to help organizations calculate these expenses. REMEMBER: Make sure, when calculating HR
and interviewer time, to include true ‘employment cost’.
$__________ Recruiting Fees: Calculate all fees paid to any third party such as recruiters, employee referrals,
job-board postings, or newspaper advertisements.
$__________ Assessment / Background Fees: Calculate local/national background checks and competency
assessments. E.g. DDI or Myers Briggs. EXAMPLE: A typical background check for felonies,
assuming only one state is searched and no ‘hits’ that require further investigation costs around
$38 per search.
$__________ Human Resources Time and Expenses: Calculate the average hourly rate of Human Resources
and multiply the total time spent reviewing and interviewing ALL candidates considered for the
position. A critical mistake of some companies, assuming they even incorporate this metric, is
that they only consider the employee actually hired and not the entire investment for the position,
including candidates considered but not chosen. EXAMPLE: Human Resource base pay of
$70,000 equals $45 per hour. If HR spent 5 hours reviewing 50 resumes and another 5 hours
conducting telephone interviews then 10 hours multiplied by $34 equals $450.
$__________ Management / Interviewers Time and Expenses: Calculate these expenses as one would Human
Resources above. Be sure to include the time and expenses of ALL candidates considered and
interviewed for the position, not only those for the candidate actually hired. EXAMPLE: Vice
President of Sales base pay of $150,000 equals $96 per hour. If he/she interviewed 5 candidates
for an hour each, then $96 multiplied by 5 hours equals $480. NOTE: It’s important to
calculate the investment of ALL employees involved in the interviewing process.
$__________ Travel Expenses: Calculate the costs of flights, hotels, car rentals, per diem, meals and
entertainment of ALL candidates considered for the position.
1. $ TOTAL HIRING COST
LATENT EXPENSES
The recruiting process, and inherent expenses, does not cease at the signing of an offer letter, or even the new hire
actually starting. To accurately assess an actual Return Of Investment, expenses continue to accrue beyond the start date
to the competency of productivity of that sales person. Most companies operate in a ‘Silo’ fashion, in that once Human
Resource has perceivably completed the hiring process, then a new budget begins with the training department and yet
again with the sales manager. Each of these processes is viewed independently of one another, when in fact they are
continuations of each other until an actual return has been realized.

Illustration: Assume that $100 is invested for 10 shares of a mutual fund with a NAV of $10 per share. At the
beginning of the second month, the NAV has dropped to $5, however another $100 is invested. At the beginning
of month three, the NAV has risen slightly to $7.50, and yet another $100 is invested. Lastly, another $100 is
invested in the fourth month as the NAV has risen back to $10. This is called Dollar Cost Averaging. At a
glance, it may be intuitive to think that $400 dollars was invested and the value of that investment is $400,
however, the actual value has grown to $530!
Day Day Day Day Day Day Day

Task 0 2-21 15-30 39 41 55 55-60
Candidate begins
Candidate completes on-

boarding and training
$__________ Travel Expenses: Calculate the costs of flights, hotels, car rentals, per diem, meals and
entertainment expensed during a new hires on-boarding and training period.
$__________ Human Capital Expenses: Calculate the total time expenses of Human Resources, Corporate
Trainer, and other Employee Time (e.g. time spent with the new hire with his or her direct
supervisor and peers as calculated by the same method as interviewing) and Expenses (e.g.
taking a new hire out to lunch) invested during the on-boarding and training period. EXAMPLE:
Corporate Trainer base pay of $75,000 equals $48 per hour. If he/she spent 6 hours per day with
a new hire over a 5-day training period, then $48 multiplied by 30 hours equals $1,440. NOTE:
It’s important to calculate the investment of ALL employees involved in the training
process.
$__________ Salary: Calculate the time invested by the employee during the training period. EXAMPLE: A
Senior Account Manager with a base pay of $75,000 equals $48 per hour. If the new hire spent
one week in training, then $48 multiplied by 40 hours equals $1,920.
2. $ TOTAL ORIENTATION & ON-BOARDING COST
GERMANE EXPENSES
Germane expenses are the least recognized measurable of the recruitment process, yet they are the most valuable
consideration that every sales organization should be acutely cognizant. These are the true measures of leadership at any
level, and most importantly as to whether an organization is ‘Evolving’ or ‘Revolving’.

All organizations are measured on revenue and profitability – measured in income and expense, respectively. While each
may teeter one way or other, an organization certainly cannot sustain with expenses exhausting more than provided by
income for an elongated period of time.
Illustration: Consider a hotel owner with 100 rooms and a 50% occupancy rate. Although there is revenue
recognition for 50 rooms, the owner still pays for the entire hotel. If the 50 occupied rooms retail at $79, but the
TCO of the hotel averages $40 per room, then: TCO equates to $4,000 and receivables are $3,950 for a net-loss
of $50.
Day Day Day Day Day Day Day Day Day Day
Task 0 2-21 15-30 39 41 55 55-60 61-90 91-120 120-150
Candidate completes on-
boarding and training
Ramp Time
The inherent risk to on-boarding a new sales hire is their velocity to competency and production. 70% of organizations
report a ‘ramp time’ of 6 months or more, suggesting that during those first six months of employment, a sales person
contributes little – if anything – in terms of revenue generation. This is Latent Time where loss revenue, burned
opportunities, and hard costs continue to deplete the company’s run-rate.
$__________ Support Cost: Calculate the cost of office space (square foot per FTE), hardware (amortized),
software (per seat) and network costs (total cost divided by FTE). EXAMPLE: EBITDA minus
Net Earnings equals infrastructure expenses that an organization incurs. Divide this by FTE and
multiply by the total latent time of position.
$__________ Opportunity Cost: Calculate the lost Operating Expenses from the quota expectation from the
position for the TOTAL length of time the position remained unfilled AND
UNPRODUCTIVE. EXAMPLE: If quota expectation is $1M and an organization has a 70%
margin, then total operating losses for the position remaining unfilled are $1M multiplied by
30% equals $1,176 PER DAY that a position remains latent. Simply assuming that the position
went unfilled during a 3-week recruitment process equates to $17,640 in Lost Operating
Revenue! Additionally, the period of ramp-time should be calculated until a period in which the
sales person begins to make net-positive contributions.
$__________ Valuation Cost: Sales-Per-Employee vary dramatically from industry to industry (e.g. retail vs.
technology) and, less dramatically, from company to company. As implied by its nomenclature,
Sales-Per-Employee is simply calculated by dividing a company’s annual sales by the total
employees. EXAMPLE: A $50M company with 250 FTE’s equates to $200,000 sales per
employee, or $550 per day that the position remains unfilled. This number is particularly

important an organization manages their valuation for venture capital or Wall Street, and then the
cost would be, obviously, $200,000. If you have ever wondered why when a Publicly Traded
company announces a reduction in force that their stock price actually goes UP – this is a
simplified answer!
3. $ TOTAL GERMANE COST
SOLUTION
An employee perpetually absorbs organizational resource, or Investment. Presumably, that employee will begin to
contribute to the organization, thus beginning to pay back towards the investment. However, even though there is a
contribution from the employee, the
organization still continues to invest in
that employee. It’s the net plus of the
contribution, or Rate Of Return, that
is relevant. When there is parity of net
sum investment and net sum return,
the organization then realizes a
Return of Investment. It is only
beyond that point may the organization
experience a Return On Investment.
While using the graph as only an

example, it is important to understand
that, in most cases, the timeline to
‘Break Even’ is typically longer depending certain variables. Most importantly, however, is to recognize what a sales
leader can manage for better assurance of success: Time.
The most obvious part of time management is to shorten the Recruiting Cycle to as close to Zero Day as possible. It’s
most common for a company to contact a recruiter if time is of the essence; and yesterday is not soon enough. However,
unless a recruiter can provide suitable candidates in extremely minimal time, their value appears to only add cost to the
process. In the above graph, the Recruiting Cycle, without a recruiter, requires an investment of $72,200 (or $30,000 for
every month).
A natural reaction might be to mitigate the cost of a recruiter by conducting the search internally. The net effect is that
this only elongates the time to hire and, thus, expensing more time since there is typically little, if any, position expertise.
After all, there is not a ‘Time’ column on a P&L statement, so it appears to be the least painful on its cover.

Example: At what expense does a retail shop owner do his or her own taxes? If it takes two hours, how much
revenue was recognized in loss sales during that period?
Another manageable is what we call Velocity, or time to competency. This is the moment at which a sales person begins
to produce revenue - in short, sell! Our vanilla benchmark is the Sales Cycle + 1 (e.g. 3 months + 1 month). There are
two ways to manage this in a company’s favor: 1) hire a ‘proven’ [for their organization] sales person, or 2) have a
lead-generating machine to support the sales team. The latter, obviously, only adds to the ‘Total Cost of Ownership’, thus
the former is preferred. Again, referring to the example above, shortening the Velocity of a new hire by one month would
save more than $13,000.
The third metric that should measured is the Rate of Return. Anyone can sell – But at what cost? Organizations should
measure the Rate Of Return of a sales hire. A mere 10% discount of a $100,000 deal results in an added expense of
$6,700. Thus a sales person with a $1M quota needs to achieve 106% to meet the financial objectives of the company.
Example: One could easily become the #1 luxury car salesperson in the world if they sold them below cost. Not
all money is good money!
The sum total of simply managing these three areas [e.g. reducing the recruiting cycle by 15 days, reducing time to
competency by 15 days, and allowing no more than a 5% discount) would actually save, or make, an organization
$30,850!
About Galt Society
Galt Society specializes in working with organizations that understand that they cannot expect to beat their
competition unless they have the very best sales team; and with salespeople wanting to navigate their careers.
To do this, Galt Society utilizes a proprietary taxonomy that distills and stratifies ERA - Effort, Results, and
Attitude - that are unique from person to person, company to company, and solution to solution.
Galt Society's corporate partners apply this process to help identify talent predictively and proactively that will
assimilate into their organization at lightning speed. Zero-Day Recruiting eliminates the valleys of revenue
recognition when managing change in your sales force and your future.
Others use this process as an internal dashboard of their sales force to precisely understand processes that may be
slowing down at such a nominal level that they would not noticed it otherwise. Still, others use it for change
management when shifting or creating new sales channels that require different metrics.
Smart sales professionals are always open to opportunity and know that time stands still for no one. Galt Society
is about being prepared to make Zero-Day decisions for immediate impact!
Complacency is not competitive!
Visit us at galtsociety.com – email us – or call us at (805) 876-4389 for more information

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Everyone Sells – But At What Cost?

A SALES RECRUITING ROI WORKBOOK

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Day Day Day Day Day Day

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Day Day Day Day Day Day Day

Candidate completes on-

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While using the graph as only an

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About Galt Society

Complacency is not competitive!

Visit us at galtsociety.com – email us – or call us at (805) 876-4389 for more information

Property of Galt Society Page 7 of 7

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