Newsletter, Volume 6

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Newsletter
                                                 News by SEs for SEs

In This Issue
What Is A Sales Engineer Worth?
Results and Analysis
Your Mileage May Vary
What is Your SE Worth?
Quick Links
Dear Pre-Sales Colleague:


The average fully burdened SE salary and benefits is about $150,000 annually.  Ever wonder what you get
back for that investment?  With a focused pre-sales performance initiative, the answer may astonish you.

What Is A Sales Engineer Worth?
 

What is the business impact of SEs?  Let's look at an actual case study.

A multi-billion dollar hardware/software solutions company had a serious problem.  So many pilots had been started, that the sales team ran out of pilot equipment to loan.  Pilots were deployed based on the "use it and they will buy it" theory of sales.  Qualification of pilots was inconsistent or even nonexistent.  Measurement of sales indicators was lacking across the organization.  Business problems included:

Sales districts were being charged for millions of dollars of loaner equipment
Much of the existing pilot equipment would never generate the millions of dollars
  of revenue it was worth

Because sales were lagging, the corporation would not replenish the pilot pool
Pilots could not be provided to customers who would likely buy multi-million dollar   solutions - money was being left on the table

 A pre-sales performance initiative was begun to resolve these issues.  Going against the corporate culture, one pre-sales manager measured the results for his district of 6 SEs.  At the start of the initiative, they had:

33 pilots, many of which were stalled
The average deal size was $40k
The technical win rate was 18%
The average time to the technical decision was 180 days.

The Results and Analysis
 

After 6 months:

There were 44 well qualified pilots -- A 33% improvement
The average deal size was $70k -- A 75% improvement
The technical win rate was 40% -- A 122% improvement
The average time to the technical decision was 120 days -- A 33% improvement
In 6 months, annualized district revenue grew from $482,000 to $3,750,000 -- 678%   growth

Let's factor in a reasonable cost of pre-sales.  Say each deal requires 5 work-days of pre-sales effort, and an average fully burdened SE costs $180,000 per year, or $500 per day.  For every fifth deal, let's also factor in one 2 day on-site visit including $1200 in T&E.

The cost of pre-sales for 33 deals in 180 days is $95,700, or $191,400 annually. The   cost for 44 deals in 120 days is $127,600, or $382,800 annually.
In 6 months, annualized district profit grew from $290,600 to $3,367,200 -- 1059%
  growth
The annualized profit return on the program investment was 123-fold
Each SE would contribute $512,766 per year in profit.  Conversely, had the   organization done nothing, this represents the annual lost opportunity cost per SE per   year
: 

For a team of 10 SEs, this represents $5,127,666 per year>
For 50 SEs, this represents $25.6M per year
For 500 SEs, this represents $256M per year

Your Mileage May Vary, But You Should Still Fasten Your Seatbelts


Now we would not ordinarily expect 1059% annual profit growth - but it did happen.  Conservatively, what if you could improve each metric just 10% in one quarter?  This really is not a difficult goal to manage to.  Your incremental revenue will grow 48% in one quarter. 

Now improve each metric another 10% for each of the next three consecutive quarters, and annual incremental revenue grows a whopping 378%.  In the case above, 10% quarterly improvements for one year results in each of the 6 SEs contributing $303,800 per year in incremental revenue -- they would pay for themselves twice over.

So What Is Your SE Worth?


Consider your business relative to the case above.  Approximately what is your average deal size?  How many deals do you have per quarter?  What is your technical win rate?  What is your average time to a technical decision?  How much quarterly improvement do you want?  5%?  10%?  20%?  You can start to get an idea of the relative value of one of your SEs. 

If you would like to contact us, we have a financial model that we can plug your numbers into to give you a more accurate view of the value of your SEs.

To our colleagues - Feel free to forward this newsletter along to your CFO or COOs.  Perhaps it will challenge their opinion of the value of pre-sales performance initiatives.


Sincerely,

Philip Janus
Founder & CTO
salesengineering.com