ROI on Training Investment

“What return can I expect on this investment?” is a natural client question.

The best guide to a specific answer is the client’s business plan. If we understand the market situation, recent trends, planned change initiatives and sales & profit KPIs, we are happy to quantify the probable impact of any learning investment.

Simplistically, if the client is “stable” (growing at the natural market growth rate, no other significant change initiatives) we will project a Year 1 outcome based on:

We have achieved Year 1 outcomes in excess of 1000% in growth markets, where there are more opportunities to outmanoeuvre competitors. A more realistic number for slow growth markets will be in the 4-500% range: a $450,000 incremental gross profit return for a $100,000 training investment.

ROI Case Study:

How one client achieved an 816% ROI on a consulting/ training investment.

Our client’s business unit sales were $85 million, in a market which was growing at 8% per year. They were not quite keeping pace with the market (6-7% growth): a slight market share decline. The project was a mix of consulting and training:

Consulting on sales strategy, organisation, account management, new business development, productivity and skills, followed by….

Training for 70 sales people: Sales Managers, Account Managers, new business sales team, telesales.

Client direct investment was $250,000 (consulting fees and expenses).

Basic ROI Calculation

(a) Growth Projections

	Sales	Gross Profit (40%)
Base	$85,000,000	$34,000,000
Plan ( 14%)	$96,900,000	$38,760,000
Incremental	$11,900,000	$4,760,000
Less natural market growth (8%)	($6,800,000)	($2,720,000)
Plan Growth attributable to the project	$5,100,000	$2,040,000

(b) ROI

The ROI multiplier was 8.16 x investment, or 816%.

Note: The real result was slightly better since the client had not been achieving “natural market growth” in prior years.

Other Key Performance Indicators

The basic ROI equation will always be senior management’s focus, when making investment decisions or judging project performance

• Incremental sales
• Incremental gross profit
• ROI

We also agreed a range of KPIs with this client. These enabled monthly or quarterly progress tracking. The focus was threefold:

• Large customers/ prospects
• Improvements in sales force productivity (activity levels)
• Competency improvements

Large Customer Sales

• Win 3 competitor accounts in the $500,000 range
• Zero loss of existing accounts in the $500K to $3 million range
• 80% of Account Managers to achieve existing customer growth targets

Activity Levels (Productivity)

The base for individuals’ activity measures included:

• # of “work with” days (SM accompanies Account manager on calls)
• # of management face-to-face contacts with top 30 clients per quarter
• # of top 30 clients receiving business reviews on their desired frequency (quarterly, ½ yearly, annual)
• # of face-to-face contacts with existing clients per month/ period
• # of new prospect meetings/ period
• # of qualified proposals presented

Competencies

We introduced a “competency tracker”: 10 core sales competencies adapted to each role (see a download on this methodology in “Free Articles”).

Outcome

The client achieved a perfect score on sales performance: 14% sales growth, some significant contract wins (largest $2.5 million), zero loss of key accounts.

The gain at the top end (large new business) was offset by slower productivity improvements, as I.T. failed to deliver system improvements on time (as usual!). But, we had factored that in; our unstated aspiration was a 20% sales growth and ROI in excess of 1000%.

Management was ecstatic to achieve double the market growth rate and begin to increase market share again.