How to Create a Sales Territory Plan: The Ultimate Guide

What is Sales Territory Planning?

Sales territory planning is a critical element of sales management and overall sales success. It involves creating defined and balanced sales territories, customizing sales activities to maximize sales potential within each territory, and managing sales performance on an ongoing basis. Sales territories are typically determined by factors such as geography, industry, company size, or other metrics that matter to your business (e.g., historical performance, ARR potential, etc). By providing balanced sales territories, companies can create specific revenue targets and strategies to increase sales productivity and efficiency in each region with precision.  Good territory planning ensures that all sellers have an equal opportunity to hit their number, which keeps them motivated and on target.

Benefits of Sales Territory Planning

Creating balanced territories can have a huge impact on your team’s ability to achieve its sales goals, yet it is often overlooked. According to the Harvard Business Review, optimizing territory design can increase sales by 2 to 7%, without any change in total resources or sales strategy. In short, well-designed territories ensure that the right resources are focused on the right opportunities. This improves quota attainment and rep retention, making it a key driver of sales productivity and performance.  Good territory design is especially important In difficult economic times. Rather than increasing sales headcount, well-balanced territories can enable companies to achieve more with the same or fewer resources.

How to Create a Sales Territory Plan

The most important first step for sales territory planning is to determine your corporate goals so you can define your ideal customer. For example, one company’s goal may be to increase market share while another’s may be to retain customers. The BCG matrix (figure 1) provides a useful framework for understanding your accounts and dividing opportunities fairly among your team. BCG describes four types of accounts to consider:

BCG Growth Matrix
Figure 1: BCG Growth Matrix (Boston Consulting Group)

  • Cash Cows (high market share, but low growth) – opportunities may be limited
  • Dogs (low market share and low growth) – it will be very tough going
  • Question Marks (low market share and high growth) – these opportunities need serious thought whether they are worth the investment but could have high payoff
  • Stars (high market share and high growth) – fantastic opportunities.

The key is to define each category based on your company’s context and GTM strategy.  For example, a Cash Cow account may look very different from one company to the next, and may even vary by region or product.  A Cash Cow in North America may actually be a Question Mark in the Asia Pacific region where the company has no existing market share.

Some important questions to ask before you dive into territory planning include:

  • Are you trying to expand into a new market?
  • Has your product or SKU mix changed to suit customers in a new industry?
  • Has your total addressable market (TAM) changed or been updated based on new data?
  • Are you targeting a certain company size this year?
  • How important is expansion revenue to your growth strategy and which roles does this impact?

Common Sales Territory Planning Criteria

The next step is to divide accounts into each of the four categories among various roles on your team. There is no one size fits all approach and most organizations will follow a hybrid model. You may decide to simply divide the categories evenly across your team. Or you may target one segment of the matrix, such as Cash Cow accounts, with a new product and assign reps and overlay resources accordingly.

Although every organization will prioritize differently, some common criteria that are used to plan territories include:

Geography – Historically, geography has been one of the most simple and common ways to plan territories and can work well if your sales model requires feet on the street. However, as remote selling becomes commonplace, many companies are moving away from geographic territories because there are better ways to maximize opportunity that more closely align with the corporate strategy.

Historical performance – Which accounts, products, or geographies have historically performed well?  For example, you may balance your high-performing Star accounts or products with a mix of net-new Question Mark accounts or products.

Revenue potential – A common approach, many companies balance territories based on the TAM or revenue potential of accounts.

Size – High ACV accounts may have long sales cycles that require a high- touch or in-person sales process, favoring geographic territories, versus low ACV accounts with short sales cycles that favor other criteria.

Industry – Industry can be useful for balancing especially if you are building a new vertical or have industry-specific products and messaging, such as financial services or government accounts.

Product Type – If you have specialized teams selling certain products, it may be important to balance overlay resources across accounts.

Propensity to Buy – Many companies group their accounts into categories based on propensity to buy and balance these across their resources (e.g., evenly divide Tier 1, 2 or 3 accounts across their team)

Account Score – An account score aggregates many of the above criteria into one simple number which makes it easy to balance.

Quota – Because it is almost impossible to get to 100% balance, you may consider factoring in quota to make things fair.  For example, you may assign a New York City rep a higher quota than a Midwestern rep; or a rep taking on a new, untested market a lower quota than a rep in an established territory.  As long as these calculations are transparent, this can be a useful final arbiter to equalize your territories.

Sales Territory Planning Examples

Most companies start their territory carving process by dividing into the major world regions. This first cut serves to align resources with time zone, culture/language, and internal organizational structures. From there, Ops and Strategy teams use a combination of criteria to balance territories to align with their corporate strategy. The following example demonstrates how single segments can be balanced. For additional examples, please visit, The Ultimate Guide to Territory Balancing.

The Company:

  • $50 million in annual revenue, reps have annual sales quotas of $1M each
  • 50 Global Sales Territories

The GTM Resources

  • EMEA – 10 reps
  • LATAM – 2 reps
  • APAC – 2 reps
  • AMER – 36 reps

Planning Scenario:

The SMB sales in AMER tend to be high velocity. The team of 5 SMB reps need to move through accounts quickly to either disqualify or pursue. Rather than using a region-based design, the SMB territories are constructed according to the following criteria:

  • Historical data indicates that financial firms are typically high-value and quick deals, so all accounts in the finance industry are distributed evenly across the territories.
  • Additionally, ICP accounts located in dense urban locations, such as Manhattan and San Francisco, are distributed evenly across the territories.
  • Each Territory has a maximum of 250 accounts at a given time. Reps can disqualify accounts throughout the quarter, then at the start of each quarter, the territories are topped up with fresh accounts.

Challenges of Sales Territory Planning

Even the best laid territory plans often go awry.  Here are some of the common challenges faced in sales territory planning.

Seller turnover

What happens when your best sales rep leaves in the middle of a quarter? Do you reassign that patch permanently, or temporarily while you backfill the role? What happens when hiring takes longer than anticipated? Are you certain that new reps will ramp quickly?  These are all examples of everyday occurrences that can throw the best laid plans into chaos.

Markets are constantly changing

Change is a constant when it comes to territory planning.  New competition enters your market, companies are acquired, recessions occur, pandemics hit.  These unanticipated changes can have a dramatic and sudden impact on your go-to-market (GTM) plans.  When a company sets an annual ‘one and done’ territory plan it is extremely difficult to respond with agility.

Spreadsheets and manual processes hinder agility

When your team has fewer than 50 reps, it is possible to manage territories with a manual spreadsheet-driven process  However, as you grow, it can be impossible to scale relying on spreadsheets alone. This method is fraught with errors, version control, and collaboration issues.  Other organizations may rely on corporate planning software, yet these tools lack out-of-the-box functionality like integrated planning and agile deployment, so still end up bogged down in custom coding projects.

Data quality issues

Garbage in means garbage out.  The data in your CRM is constantly changing and if you rely on it to plan, you may end up with a point-in-time plan that does not reflect the current reality.  For example, if you pull data about your accounts from your CRM in September for a plan that launches in December, the data may already be several months out of date by the time you are ready to go to market.

Too many tools

Some organizations use multiple point tools for territory planning that quickly become difficult to manage. Your territory assignments are integrally tied to other aspects of your GTM plan like capacity, quotas, and routing.  When a change to territories occurs, it can be nearly impossible to make changes in real-time and keep your entire GTM system in sync.

Benefits of Sales Territory Planning Software

To overcome these challenges and maximize sales territory planning efficiency, many organizations are turning to Territory Planning or Territory Management software. This enables them to shift from static sales territory planning to dynamic territory management process. Territory management recognizes that change never ends, and organizations must reduce the cycle time to respond to change. Automation enables RevOps teams to quickly adapt to change with agility so that revenue teams execute with clarity and efficiency. With Territory Management software, data can be refreshed and re-factored into the plan at any point during the year, which reduces the annual territory planning burden. Those that adopt a “continuous GTM planning” approach will be the ones that win the next business cycle.

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