As a Learning and Development leader, you’re expected to assess projected return on sales training before you invest in program. Are you struggling to build your case?
Let’s start with the basics: A $1,200 training program costs 50% more than an $800 program, right?
You may be surprised how rarely this is the case. Don’t worry we will explain why.
This post shares a model for measuring your return on sales training. Organizations compute ROI many ways, however most analyses share the common formula: ROI = Cumulative Returns ÷ Cost to Implement
The Value Equation
When recently presenting an Eye for Impact report, this is Executive Conversation’s training ROI measure that is provided to clients, it triggered an eye opening conversation relevant to anyone involved with training, sales, and L&D.
Let’s paraphrase a client. This client is responsible for the Learning and Development in a successful software company. She organizes dozens of programs for multiple teams. Their goal is to build longer term relationships with their customers and to close deals more quickly. This person needs training for their direct sales team and has a strict budget to manage. In L&D you must be able to articulate and measure the Return on training before you can make the investment…
- The client agreed that training investments are undertaken to deliver financial impact.
- The client was surprised to see that the results delivered by a training program are the single largest determinant of its ROI.
- The client shared that their training decisions pivot primarily on cost per person without considering potential returns.
This last bullet point really stands out on why you can make better choices in your L&D investments by properly measuring your return on training. Let’s continue to use sales training as an example to illustrate how the returns generated from training play such a dominant role to measure ROI. Return from sales training can occur five ways:
- Making a sale that would not have been realized without the training
- Closing a sale more quickly, thereby decreasing cost of sales
- Increasing the size of a sale, thereby increasing revenues
- Increasing margin on a sale, thereby increasing profitability
- Deciding a better business decision is to walk away from a sale
Of course, some of the foregoing are easily quantified (improving margins), while others are almost impossible (walking away from a sale). Our L&D client from the software company can map out that training will indeed help her team to build longer term relationships and close sales more quickly with their customers, all while making better business decisions to increase revenue.
The key takeaways to remember are to:
- identify what returns are relevant to your learning initiative
- implement a means to track those returns before training begins
Cost to Implement
As you may suspect, measuring costs is more straightforward than returns.
What may be surprising, however, is that the cost per participant not only makes up a minor part of the total training cost; it also represents an insignificant part of the total return on training equation.
This is best explained with a scenario:
People Cost Assumptions
- Annual cost of a sales professional: $250,000
(Fully loaded, includes compensation, benefits & support)
- Number of work days in a year: 225
(Approximately $1,100 per day)
- Daily instructor cost (day rate + T&E): $3,500
- Number of participants in workshop: 20
Applying these assumptions results in over $5,000 of costs per person before the actual cost per participant:
- 2-days spent in training 2,200
- 1 day of travel time 1,100
- Est. travel and lodging 1,600
- Pro-rata instructor cost 350
* It’s easy to identify the costs shown, should this number appear high, calculate reasonable numbers for your organization.
- When the full cost of training is recognized, this example $1,200 workshop’s total cost is $6,450 (5,250+1,200), and the $800 workshop ends up costing $6,050 (5,250+800).
- The real cost difference between these $1,200 and $800 workshops turns out to be 6.6%, not 50%.
- The returns generated from training greatly outweigh the cost per participant in capturing return on training.
- Learning and Development professionals, as well as Sales Leaders, should expect vendor value propositions that enable them to make training decisions incorporating anticipated returns.
To help you build the case for your next learning initiative, and align it with your leadership’s business priorities, take advantage of our complimentary online Build-it tool.
What’s been your experience measuring return on training?
If you would like to receive ideas, selling strategies and special event invitations right in your inbox. Gain an edge on your competition, join the conversation now!