Territory planning is easy with a well-defined target account population and stable market conditions.
If you’re in a startup, you’re probably dealing with fluid use cases and target audiences. Some products go to market with niche use cases only to expand to have more global applications. At other times, it’s hard to find product-market fit.
Much like compensation planning, territory planning must align with strategic objectives above all else. This article will cover why companies split territories by different attributes and how to design territories.
Introducing territories to an organization is tricky. If not adequately thought through, people may be unable to make a patch productive through no fault of their own, and your company risks losing talented employees.
What is the goal of territory coverage?
The goals we’re striving for with territory coverage during design are:
Well-designed territories can help salespeople focus on the highest-value prospects, introduce fair account distribution, and encourage specialization when appropriate.
In smaller companies with low brand recognition, selling is often difficult in territories without prior coverage. We expect a struggle when we begin selling in a new geographic region, but sometimes, we forget to analyze lead volume and engagement by territory when dividing them up.
What do you need to know before designing territories?
There are many considerations to weigh before dividing up accounts.
Once you identify a strategy, it’s critical to verify your assumption with data before implementing any changes.
There is no perfect balance of accounts across territories (that we’ve seen to date). However, in revenue operations, we can help other departments understand where the inequities lie and how to potentially balance them out through additional marketing activity and outreach.
Dividing accounts by geography is the most classic approach to territory divisions, and for a good reason! Before technology made it possible to meet with people via video conference around the globe without leaving your house (or changing out of PJs), it was convenient to limit territories to an area within driving distance of the salesperson’s house.
Believe it or not, there are still practical reasons to consider geographic segmentation for territories. Time zones, languages, and cultural differences are all part of the puzzle. For example, we divided our inside sales team by region because some people embraced getting in and out of the office early, and others based in Seattle couldn’t drag themselves out of bed before 7 AM–which is a problem when you’re assigned to the East Coast.
We’ve even put certain personality types in certain regions. Apologetic and polite work well in the Midwest, and direct and snappy work best on the East Coast. Swap the two, and prospects get annoyed.
Pros
Cons
Early-stage startups that go live with a minimum viable product may only provide a lot of value in two to four use cases or three industries (as an example). Industries aren’t evenly distributed geographically, making designing territories based on major markets impractical.
Uneven geographic distribution doesn’t mean you shouldn’t design territories around a vertical, but it does mean you have to pay very close attention to how you divide the accounts across salespeople.
When you think about territory division, research your historical sales and the associated company profiles. Also, research how decision-makers operate across accounts. For example, some medical networks have centralized decision-makers while others appoint Chief Operating Officers at regional offices. The territory design will depend on how your product is bundled and purchased in each scenario.
If your product is still in active development and use cases are expanding, make sure your vertical patterns aren't holding or changing because a seller has a background in the industry or because of a product limitation.
Pros
Cons
There are a few reasons people may consider aligning territories by company size:
A named account strategy may make sense if you're considering territories segmented by company size because a few large accounts have been highly profitable for your company. But always double-check to ensure that your lifetime value (LTV) from that company outweighs the extra expenses associated with supporting a demanding customer.
It's also crucial to look at the balance of accounts assigned to a single salesperson. If they've put all of their proverbial eggs into one basket by focusing on a single, profitable account; they may not be able to sustain themselves on the rest of their territory if they neglect to pursue enough accounts simultaneously.
Pros
Cons
Territories should be structured in a way that compliments your product and go-to-market strategy. When a product is young (and has issues that the development team hasn’t ironed out), your salespeople will need larger territories with more accounts to make a living. The easier it is to sell your product and the wider the appeal, the easier it is to segment territories without worrying that you’ve designed a patch that will doom a salesperson to fail.
A great deal of the strategy behind territory structure is based on product knowledge. But, too often, that “knowledge” is a biased, human observation.
You must dig into the data to verify or disprove any assumptions.
Salespeople aren’t great about logging meetings or calls. However, they are incentivized to use opportunities.
Look at the number of opportunities your sales team started throughout a year and how many they closed-won. It’s also worth looking at how many accounts have activity logged against them (it’s an estimate not a science), what translated to opportunities, and what translated to sales. These conversion rates and volumes will give you a ballpark idea of how many accounts a salesperson will need today to meet their quota.
As your product evolves and is proven out in more markets, you can reevaluate your conversion rates and potentially shrink your territories.
Hopefully, your customer account data is good. If it's not, invest in an enrichment tool to help you populate key fields such as industry, employee size, Fortune 500 ranking, and annual revenue.
Look at your customer distribution across industries and markets. If you have a wide industry pool, but your markets are limited it may be an issue of a salesperson only having the bandwidth to cover limited geography. It could also mean that your marketing team is pooling their budget into territories with active coverage.
If you have shallow industry diversity, organizing territories by layering on geography or company size may be tricky depending on the number of salespeople you want to hire and the number of eligible accounts needed to sustain a salesperson.
In order to split your target accounts equitably across territories, you have to know how many accounts you can target!
Try to acquire all accounts that fit your Ideal Customer Profile (ICP) from an enrichment source. A known population is much easier to evaluate and divide and evaluate again. If that isn’t feasible, you can still use information below as a starting point.
Using a country’s GDP data and then layering on industry or metropolitan area data is a great way to figure out population density and market potential. It’s a great way to stack rank your markets and identify areas or verticals that will be the first to support multiple salespeople.
Population density correlates to employment opportunities, which correlate to business density.
If you’re at the point where you need to split territories and divide states or even cities, I would recommend using zip code over area code. Many enrichment tools list 800 numbers for accounts, which is useless when it comes to territory zonings. They’re much more likely to populate address information than other contact details. Area codes are also odd in that geography is often secondary to coverage.
I’d also like to point out that routing contacts by area code is very problematic. Most of us keep our cell phone numbers even if we’re moving across state lines.
There are paid and free tools available online to draw maps and export zip codes like this one here.
If your product is immature or intended for a niche, you’ll only be able to sell to a subset of accounts. This will limit what you can do with territories.
You can gather this data by anonymously collecting data from the sales team or, if you can get approval, analyzing closed lost data and calling those contacts to ask impartial questions. If you're gathering sales feedback, start with the salespeople who are successful and apply a grain of salt to the feedback in struggling territories. It could be that their territories were poorly designed, or it could be that they haven't figured out the right approach with their target audience.
Designing the perfect balance of accounts isn’t possible, but it is the goal during territory design. Analyzing how many accounts are necessary to sustain a salesperson and honestly evaluating what works (and what doesn’t) will help ensure your management team and your sellers are confident that you’ve done your best to set them up for success.
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