The Only Guide You Need for Sales Territory Planning (Step-by-Step Template)

Nov 9, 2020

As a territory manager, you set a unique strategic sales territory that cannot fit into a cookie-cutter strategy. It is a distinct reflection of your company, customers, goals, and sales team.

Your sales territory should be a physical or spatial representation of a customer base that matches your sales team’s expertise. It requires a deep insight into both your customer and sales team.

It requires getting out of the weeds and getting comfortable with trends, sales enablement tool development, and generally supporting your team as they relate to their territory.

Territory planning also means advocating for those you manage while staying clued into any indication that customers are not being served. It’s a delicate balance that requires a lot of active listening.

Your ultimate goal is to encourage healthy growth for your company’s sales. And the good news is many of your responsibilities can be made easier with the right definitions and sales strategies in place.

That’s why we’ve created this ultimate guide to sales territory planning. It will give you all the information you need to know how to divide sales territories to maximize your team’s efficiency, lower overhead, and boost profits. We included a territory sales plan template so you can create a territory plan that is unique to your company.

So, let’s dive right in:

What Is Sales Territory Planning?

A sales territory allocates business amongst your sales reps. Sales territory planning is the process of dividing your territories to disperse regions to each member of your sales team to make sure your customers are served equally.

Geography is a common way to divide up sales territory, but how you define your regions depends heavily on your business. It may not make sense for you to divide up your regions geographically. Some other ways to assign territories include:

  • Account types
  • Audience segments
  • Referral source
  • Products purchased
  • Industry

For example, if your salespeople spend almost no time in physical meetings but more through phone and email, you probably don’t need to work geographically. An exception to this will be if you need to work in different time zones that require your salespeople to communicate at various times.

The work required to create the right sales territory is well worth the effort. In one survey of 100 organizations, those with an effective territory design had a 14% higher sales objective achievement on average. The same study found that ineffective companies had 15% lower success than the average.

If you already have a sales territory in place and are still not hitting the goals you would like, it’s worth taking a look into redesigning. Research by Harvard Business Review found that businesses showed a sales increase of up to 7% by redesigning their territories.

Don’t be afraid to take a step back and reconsider your territory if it does not measure up to your expectations. It probably means you’re leaving money on the table if you choose to ignore them.

Benefits of Proper Sales Territory Planning

Sales territory planning can be a painstaking process that requires leaders to carefully calculate their metrics, customer personas, deal sizes, costs, and sales reps’ strengths and weaknesses. Before making such a commitment of their time and energy, most management and leadership teams want to make sure it is worth their effort.

However, careful sales territory planning is one of the most effective ways to lead, encourage efficiency, and boost profits.

Specifically, strategizing your sales team’s territories helps to streamline processes and sets your reps up for optimum efficiency and productivity in any situation. Poorly defined regions can mean valuable time, energy, and resources wasted by not having enough sales reps working a territory or having too many in a territory.

Some of the benefits of sales territory planning include:

  • Increase revenue by redistributing sales effort more equally and strategically. Allowing time and resources to zero in on customers and prospects with the highest engagement and greatest revenue potential.
  • Increase profits by using a reduced sales force (costing less money) to target the areas and customers with the greatest potential.
  • Organize the workload evenly across sales territories. This results in equal coverage of existing customers and prospects and maximum sales efficiency.
  • Boost client satisfaction through more responsive and consistent client coverage.
  • Reduce client fatigue. With more organization of the territories, reps can remain focused on effective sales processes, resulting in eliminating outreach redundancies.
  • Balance revenue potential across territories. This will also help keep morale high by allowing for even rewards and incentives to all sales reps.
  • Reduce your sales reps’ travel time and expenses by implementing an efficient outbound sales strategy that appropriately matches the size of the territory.

Leaders who spend time and energy to create well-balanced opportunities will find that they will have happier customers and sales reps, be able to take advantage of opportunities, and minimize any threats to their business.

Your Step-by-Step Guide for Defining a Sales Territory

While you may know that a balanced sales territory means more for you and your business, you may be at a loss as to how to create the right sales territory.

Although it might seem easy to recreate another business’ sales territory, it’s important to remember that what works best for one company might not work for you. Instead, you need to take the time to understand your customer and the sales process.

We included a sales template to help you create sales territories that are most effective for your unique business. Here are five steps that can help you make the most effective sales territory strategy for your company:

Step 1: Get Back to Basics With Customer Data

First and foremost, dividing your sales territories should reflect your customer base. It needs to primarily serve your customers’ needs, which can result in improved efficiency for your sales reps and sales for your business.

To understand how to divide up your sales territory, take some time to get to know your ideal customer and who you want to reach.

Start by looking at the customers, prospects, and leads that you already have. Divide your customers into three groups:

  • Your top-tier customers, who require the least amount of effort to get a sale
  • Your second-tier customers, who need some work but are worth the effort
  • Your third-tier customers, who might need more than they are worth

By laying out these customers into groups, you can make sure that you target more customers like the first-tier customers. Analyze them to find common characteristics between them.

For example, do they typically convert online or in-person? This can let you know exactly how you want your sales reps to be spending their time. How long do they usually take to convert? Understanding your sales cycle will also help direct your sales tactics.

You will want to note more than where they are located to get the right territories. Some additional questions to consider:

  • What are their pain points, and why are they drawn to your product or service?
  • Which of your products and services is doing best?
  • What events lead to a customer purchasing from you?
  • Conversely, what events seem to discourage them from purchasing?
  • What is your conversion rate?

The goal is to find trends in the market and within your customer base. Once you identify underlying themes, you can start to create a better sales territory that can serve their needs.

Step 2: Analyze Your Sales Team

Once you have a good understanding of your customer, it’s time to take an in-depth look at your sales team. This allows you to make sure your reps’ skills are truly matching the needs of your territory and guiding your decisions on education, resources, and future hires.

To do this, consider a SWOT analysis to help you create a strong territory plan. Here’s what that acronym stands for and what it means:

S = Strengths

Assess what areas your sales team does well. For example:

  • Does your team excel in in-person demos or phone and email?
  • How much internal knowledge do they have?
  • Do you have experienced reps who know the product well or create content that provides valuable information to your prospective buyers, etc.?

These are all strengths you need to consider.

You also want to take a broader look into what your company has to offer. What advantage does your team have over your competitors? Why are clients turning to you rather than them? How does each of your reps contribute to that?

Also, take some time to consider your assets. Any capital or intellectual property will help you get ahead. Comparing this kind of wealth to your team members’ skills may reveal some interesting new strategies or pitch ideas.

W = Weaknesses

This step can be a bit painful, but it’s essential to know your weaknesses to help build up your company and identify growth areas. What does your business lack? Where does your competition out-perform you, and why?

Also, take an honest look at your sales process:

  • Is there a particular stage that customers seem to lose interest?
  • Are there any bottlenecks or leaks in your pipeline you need to address?
  • Where are your resources limited?

You need to create a territory that minimizes your weaknesses, but you have to understand them first.

In addition to the weaknesses in your business, each sales rep has their own shortcomings. For example, a new salesperson probably doesn’t have the experience to handle enterprise clients, so territories that include larger clients should be given to a more experienced salesperson. Another rep might struggle with technology, so they may do better with clients that require more in-person meetings.

While every sales rep may have some challenges, it’s vital to understand the difference between a weakness and a weak salesperson. Your goal should be to improve efficiency in your team, not to enable poor performance.

A weak salesperson can be damaging to your whole team and company. Avoid the temptation to tailor their territory around them. The constant change in a region as you try to make it fit the wrong salesperson could upset customers, and potential customers as their point of contact keep changing.

O = Opportunities

While planning for the team and company that you currently have is essential, sales teams that succeed have leadership also keep one eye on the future. Recognizing and strategizing for the future will ensure your sales team continues to hit their quota beyond the current quarter and in the years to come.

Understanding the opportunities helps you plan for the future while defining territories. Some questions to consider include:

  • Are there any untapped or under-serviced markets?
  • Are there areas with fewer competitors or growing demand?
  • Is there an opportunity for you to get positive press or build goodwill amongst your target audience?

These can all encourage growth in your company. Recognize where your business’s future is headed so that you can create territories that facilitate these opportunities.

T = Threats

On the other hand, you also need to look at potential threats to your company. While you can and should be optimistic about your sales team and business, overlooking threats can be dangerous.

Taking the ostrich approach to your sales territories could be detrimental to your entire company. Low sales and poor morale could plague your team if they are forced to handle the threats to your company on their own. Instead, your sales territories should account for and minimize any danger to your company.

Some threats to consider, for example:

  • Is there somewhere where competition is fierce?
  • Is there a new industry or regulatory standards that may require more time and money from you?
  • Is there any negative media or a lack of goodwill?

These are all factors that could be damaging to your territory. When you recognize these threats, though, you can help mitigate some of the damage they would otherwise cost.

Threats are not necessarily a bad thing. In fact, they could be an unrecognized opening for growth. You can use it as a chance to turn threats into opportunities.

If there is an area saturated by competition, for example, you can instead look for potential areas where your competitors have not reached yet. It can provide you with the catalyst you need to make proactive changes.

Step 3: Set Goals for Your Team and Establish Quotas

The purpose of creating specific territories is to meet the goals of your sales team and company. It’s important to identify exactly what these goals are to both build your territory and track how well they are performing.

Any goals set by a sales territory manager should be clear and easy to track. Or, in a word, SMART:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-based

The goals you create should take the general aspirations of your company into concrete, manageable steps. Your goals turn the dreams of leadership into reality, and your territories should also reflect that.

Create goals for both your team and individual reps. These goals will give you an idea of how well things are going and if something needs to be changed. A well-set goal will also motivate your sales reps and enhance productivity.

Break down your overall goal into specifics. This is where your first step is most useful.

  • How many opportunities will your team need to achieve the goal?
  • Which regions are best to focus on?
  • Which products will be the most profitable?

In addition, drill down to identify specific, action-oriented tasks that build up toward larger and larger goals.

Go over your data from previous periods to see what metric-driven goals are realistic for your sales team and assign quotas to support these goals. Your CRM will allow you to do that.

Step 4: Form Strategies to Meet Your Goals

This is where all of the information you acquired becomes practical. Create territories based on your current customers, opportunities, and threats. It’s also in this step you put it all together to match your sales rep to the right territory or figure out the sales enablement they need to be great.

As a territory manager or leader, your job is to enable your sales team to succeed. Your strategies ensure that everyone is on the same page and have the knowledge and tools to meet their quotas.

Assign your sales reps based on your assessment of their skills and match them according to the territory where it would work best. If your sales rep already has established relationships in a territory, for example, it would be wise to assign them there.

SWOT will allow you to assess where your team needs your help. For example, what does your organization need? Perhaps they need more education in the sales process or better content to give potential clients.

Take a look at your current successes. How can you leverage them? Perhaps you can ask for referrals or use them as a case study. How will you generate new leads to meet your goals?

Are there external resources you can use to reach your goal? Which sales reps have the information and experience that you need to achieve your goal?

These questions can shape your specific strategy to meet the goals you set.

Step 5: Review and Track Results

Territory management is never really done. It requires a continual assessment to measure progress. Regular checks will help you gauge how effective your territory planning is and if it is working for your sales team.

In your review of the territory, consider:

  • Is there a significant difference in sales between your territories?
  • Is there one rep that can barely keep up with leads while another struggles to meet quota?
  • Is there an underserved territory?
  • What are the costs of each territory?

As your company changes, grows and offers different products, it might require a re-assessment of the sales territories. Continue to track results to make sure that you are getting everything you can out of your regions.

Luckily, we wrote another article on territory management to stay on top of your territories after defining them.

Check out our Definitive Guide to Sales Territory Management

Do You Need to Restructure Your Territories?

If you’ve already put in the work to create sales territories for your team, you may be wondering if you’re getting the best results.

Maybe at one time, it seemed to work really well for your company, but sales have slowed, and you’re wondering if your territories are out of date. Or, your sales never really took off like you hoped they would after structuring your territories.

Balance is key to creating the right sales territories, and it is delicate. Stray too far one way or the other, and it could spell doom for your sales team.

Sales territories run into most of their troubles when they are either over- or underserved.

Why You Need Balanced Territories

Maintaining this balance in your sales territories requires constant surveillance and an awareness of changes to your company and business environment. Since business is constantly changing, territories can easily tip to being over-or underserved.

An overserved territory dedicates more sales reps to an area than there are real prospects. Your salespeople will have nothing to do and likely won’t be able to meet their quotas. In addition, other territories will probably suffer because of the increased (yet needless) cost to maintain the overserved territories.

Many businesses fall into this trap. According to one recent study, 72% of agencies admitted they commit a disproportionate amount of resources to high-profile clients. This can be a costly mistake for your company, though. HubSpot found that nearly half of the companies that they surveyed reported a loss of at least 11% through client over-servicing.

An underserved territory, on the other hand, will also create problems for your company. You will lose out on potential sales when your sales can’t properly take on their leads in an area. Sales reps will be too tempted to take on too much, which will leave your customers dissatisfied.

A well-balanced territory, though, means that your sales reps can spend more time making sales and less time feeling demoralized by the lack of fairness. They will be motivated to compete with each other instead of comparing their situations. The right sales territory strategy will help you achieve this ideal.

If you’re finding that critical areas are over- or underserved, it is time to take a hard look at your territories.

Critical Times to Restructure Your Territories

There are many reasons why your territories may shift, and there are key times in business when realignment is in order.

Knowing when to make adjustments to your sales territories can be challenging and unpredictable, especially since these adjustments are usually triggered by change. But, during economic downturns and significant changes to your market, as well as internal business changes, not taking a look at your current sales territories and how they may need to be adjusted can become a problem fast. More than likely, you’ll quickly be faced with lower sales productivity and territory imbalance.

That is why strategic sales territory realignment as soon as factors change, such as the number of sales reps, prospects, etc. will keep you ahead of running into any significant problems. In the case of having to downsize the number of sales reps, you don’t want to run into a situation where the remaining sales reps can’t effectively cover the gap left in the territory without being stretched too thin.

In most cases, it is better to do it sooner than later as long as it is done strategically. The goal is to position your sales team and your company as quickly as possible to remain efficient, productive, and cost-effective.

Aside from downsizing your sales team, there are other times you should be aware of where redesigning your sales territory plan would make sense. These include:

  • A change in products or services offered – One territory might have a much higher demand for the new product causing a need for coverage by more sales reps.
  • Expansion of sales team – Just like downsizing the number of sales reps, as you bring more sales reps back onto your team, your sales territory plan should be reevaluated. More salespeople mean more coverage.

No matter the current situation, over time, the structure and balance of your sales territories naturally decline. Making sales territory analysis and management a regular part of your routine will help you remain proactive and ensure your sales territory plan is always as effective and profitable as possible.

Even when sales are going well, keep a periodic check on the performance of each territory and your sales reps within the regions. Don’t wait until lackluster sales and unhappy customers force you to do so.

Tips to Successfully Readjust Your Sales Territories

Once you have decided that it is time to readjust your territories, you can follow many of the tips in our template above to come up with new territories. However, there are additional points that you may want to keep in mind as you decide how best to re-divide your regions.

Taking the time to readjust and deciding how to divide sales territories requires more than looking at sales volume across territories. Instead, it entails a careful analysis of your current customer base, data, and goals to ensure your sales team is successful.

Some sales territory management best practices should be followed to help you strategically readjust territories properly:

Reassess Your Capacity and Resources

Your current number of sales reps and the available resources might not be the same as when you last created your sales territory plan. This is especially true in situations where you have had to downsize your current sales force or during periods of rapid growth.

When readjusting your territories to move forward, it is especially important to realistically look at how many reps you have available to cover areas and what resources you have to help them reach their sales goals.

Based on your capacity and resources, some territories may need to be reduced and/or shifted geographically to allow your reps to focus on the areas with the highest opportunities.

Utilize Data Insights

Some of the best information to guide your readjustment is probably already at your fingertips. Your sales data can provide valuable insights to ensure to help you as you decide where your territories need to be changed.

Gathering and utilizing certain sales data and third-party data is an essential step in strategically realigning sales territories. This will help you best align sales reps to territories. You want to look at metrics such as:

  • Number of accounts per rep currently
  • Lead distribution
  • Geographical location of customers and prospects
  • Current revenue per territory
  • Revenue potential
  • Location of sales reps
  • Market data on industry changes, prospects’ current technology usages/needs, etc.

Diving into this data and using data visualization will help you pinpoint instances of unbalanced territories currently and what course corrections may need to be made.

Keep Your Ideal Customer Profile in Mind

Your sales reps need to know what type of customers are best to approach. It helps make them more efficient in spending their time and energy on prospects that are valuable to your company. It also ensures that your customers are as profitable as possible, as opposed to wasting your time and resources in the long run.

When you are readjusting your sales territories, keep your ideal customer profiles in mind. Some geographic areas may now have a greater (or lesser) concentration of target prospects, which should impact how you divide sales territories.

Take into account your customer profiles to help your sales team pinpoint upsell and cross-sell opportunities within existing customers that they could focus on utilizing. Often, especially during economic downturns, these opportunities are the easiest and most profitable to capitalize on with a reduced sales force.

Set New Goals and Benchmarks for Your New Territories

Consider the problems you want to solve and the opportunities that may have changed from the last time territories were established. It can help guide your territory restructuring and enable you to set new goals and benchmarks. These new goals and benchmarks will then allow you to assess the success of your new territory structure moving forward.

For territory restructuring to be successful, you have to be able to determine sooner than later if the changes are helping to meet business goals and objectives. Make analyzing your sales territory plan something you do regularly moving forward. This allows for a more in-depth insight into territory performance and the ability to be proactive in making changes before problems derail sales performance.

Automate Your Territory Mapping

If you don’t know how to use it, even the best data is worthless. The right tools can help you convert your information into something meaningful and practical as you restructure your territories.

Utilizing a robust territory mapping software can speed up the process of readjusting your sales territory plan and make it more successful through the use of data-driven insights. Automated mapping tools allow you to:

  • Perform sales territory analysis on existing territories to pinpoint ways to improve
  • Look at potential territory maps as you are redrawing your territories
  • Compare different territory models
  • Share the new sales territory plan with your sales reps and make sure everyone stays on the same page

Territory mapping software provides an optimized sales territory map based on all the available information to help your company remain competitive and profitable. It will also help you make your territories balanced and fair for your sales reps, which will motivate them to stay productive and perform at their best level.

It’s also important to utilize other automated tools, like your CRM and industry/market tools, to pull in internal and third-party data. This will help ensure that each territory provides equal opportunities for your reps to hit their numbers.

Effectively Communicate New Territory Changes

Your work to readjust your sales territories strategically will become lost if you don’t ensure that everyone is on the same page with the new changes. Your team’s buy-in is incredibly important to the changes you make.

Your company culture is vital to your overall success. How your sales team feels about your brand, whether they feel supported, and how excited they are to sell your product or service will all have an incredible impact on your quota and reaching your sales goals.

If big changes to the company, such as lay-offs or economic downturn, are what is prompting your restructuring, your sales team might be suffering from low morale already. How you communicate and frame these changes can either instill hope and new enthusiasm or cause resistance and worry.

It is critical to make sure that the new territories, what has changed, any new sales goals, and any new roles are clearly communicated to the entire sales team. Instituting changes without any real communication can cause confusion and more resistance.

It’s also important to be transparent and communicate why the territories were restructured and the steps you took to do so. Explain how these changes will help your sales team specifically. They need to know that you are working to help them reach more prospects, sell more products, and manage a more reasonable workload. This will all help increase their buy-in.

Effective communication and transparency will help maintain trust from your sales force and prevent confusion and eliminate any surprises, both of which can cause decreases in cooperation and productivity from your reps.

Create the Right Sales Territory Plan for Your Business

Your sales territory plan will be as unique as your company. However, the right steps can help you identify how to best strategize and create territories that can serve your sales team and company most efficiently and effectively.

Companies that take the time to analyze their data, get to know their customer bases and create effective sales territory plans are rewarded with lower overhead, better productivity, and happier customers. Businesses that do not face waste, disgruntled sales teams, and higher customer abandonment.

There are also times where restructuring is necessary. As you scale your sales team (down or up) or your company faces market changes, readjusting your sales territories is necessary to remain profitable and continue growth.

Territory readjustment helps ensure that your sales team will be as efficient and productive as possible and align with your sales goals no matter what capacity and resources you currently have available.

By following the best practices outlined above, utilizing automation tools, and communicating with your team, you can save time in your readjustment efforts and ensure everyone is on the same page. This will all result in a sales team that remains competitive, effective, and profitable under any circumstances.