Sales territory planning & management: maximizing your potential

As a revenue or sales operations leader, sales territories can be a bit of a thorn in your side.

Territories that are imbalanced (i.e. a discrepancy between sales opportunity and sales rep capacity to serve) risk losing revenue as you’re not serving customers efficiently and not distributing opportunity evenly across the sales team. High-density customer markets might not get the resources they need, all while seemingly less profitable segments have too many salespeople bringing in small deals that barely cover operating expenses to target the territory.

With balanced and equitable territories, you motivate and retain sales team members; reps don’t feel like they’re competing on an uneven playing field. Further, commissions and bonuses are more fairly awarded based on the territory, potential, and opportunity each rep is targeting.

A big—but less discussed advantage—on offer with balanced sales territory plans, however, is the degree of revenue predictability you can attain. When you're disciplined to take a scientific approach to territory and quota planning by outlining which businesses, regions, or segments are the most profitable, this ultimately means less variability in results and more efficiently divided resources, helping you grow business more predictively.

It's entirely possible to design sales territory plans based on historical data and provide equitable opportunities to all reps. It just takes a bit of planning.  

In this guide we'll share considerations on how to best approach it.

To start...

What is sales territory planning and management?

Sales territory planning is the method by which you plan out the allocation of your sales resources to focus their efforts on the highest-ROI prospects and serve prospective customers most effectively.  

In short, it's the way you divide up your salespeople to address various segments or regions of accounts.  

Strategic or data-driven territory planning in sales is particularly important because it allows reps to play on an even playing field. The last thing you need is demotivated reps looking at their peers easily pulling in thousands in commissions when they’re targeting a smaller and less profitable reason with a similar skillset.

Sales team retention can be affected by territory imbalances and subsequent incentive potential. In fact, 43% of salespeople who want to leave their current job say a lack of benefits was the driving force behind their decision. Almost a third blame a lack of bonuses.

Historically, sales territories were typically divided by geographic location. You might have a team of agents targeting leads in midwestern US-states, and another focused on southern US-states. Today, however, sales territory planning includes more segmentation methods, such as divisions by:

• Industry

• Customer size  

• Sales channel  

• Agent expertise  

• Market potential  

For example: you might have one team with a “territory” of managers; another that focuses on C-level executives. Account type constitutes the segmentation method for territory mapping in this instance, not necessarily location.  

When it comes to ongoing allocation, sales territory management, refers to how you’re managing your territories in the long term. Beyond mapping the original territories, it’s how you evaluate the effectiveness of these territories, rebalancing or reshuffling them when required. An example of this might be how you adapt when certain team members go on family leave, or take extended time off, for instance. Or when you notice net new opportunities you want to take advantage of and shuffle territories mid-year or mid-quarter to take advantage.

The most common challenges surrounding sales territory planning and management

The biggest challenge in territory planning today is that the data and tools revenue ops and sales teams use to plan territories are typically very disconnected from the holistic SPM process.

Often, as a fix, teams are burdened with stitching together datasets manually. This work is very time consuming, so analytical rigor gets sacrificed to get basic territories carved and out the door on time for sales planning.  

Unfortunately, this becomes an exercise in keeping the business moving on a painful annual and bi-annual process instead of being intentional and optimized.

Largely because of the disconnect of the data and tools, many organizations can't realistically take a data driven approach to the design of territories at all. This ends up resulting in increased turnover and lost revenue as reps can't hit the targets within their unbalanced territories.  

Conversely, when salespeople easily meet too-low targets due to ill-informed territory planning, the resulting payouts decrease margins without upside to the business.

Ultimately the sales pipeline data is siloed, meaning it's difficult to gauge quickly what's going on in your organization (are your territories optimized?). What's more, the data and software surrounding territories is siloed from downstream functions like incentive compensation management, meaning that the process to deploy any territory changes is also greatly hindered.

Because of the above, the following are also significant pains:

Identifying and overcoming territory imbalances

Territory planning isn’t about outlining segments and assigning resources based on a hunch. But without solid data inputs, it's difficult to perform analysis to identify the best territory plan. As a result, you end up with imbalanced territories—perhaps with your most talented or experienced team members serving smaller segments, putting retention of your A-players at risk.  

It's a common challenge to overcome. Tasks like territory splits, reassigning reps, and segmenting resources all need to be tracked. The data gets manually passed into downstream systems, leaving it prone to human error—especially without adequate validation and quality control checks. The result is making changes to your territory plan on inaccurate or incomplete data, which costs more to rectify in the long run.

Addressing market changes and competitor actions

Territory planning is an ongoing process; demand, customer preferences, or competitor actions are constantly evolving. You need the agility to keep up with any of the changes you want to enact.  

A sales territory plan that remains stagnant, uses inaccurate data (or worse: a lack of data entirely) won’t be best positioned to pivot and take advantage of new opportunities. You’ll fall short meeting customers and positioning yourself better than competitors since you didn’t have enough time to readjust resources where required.

Ultimately, if you notice something’s fundamentally changed with your business (maybe you’re getting disproportionate traction in a particular vertical), you want to be able to change territories aligned to your convictions, not based on arbitrary times of year.

Ensuring consistent sales coverage

Without data to inform your approach, it can be tempting to assign additional sales resources to an already over-resourced territory. This common challenge ties back to incomplete data with which to make your decisions and leads to gaps in sales coverage and inefficiencies.  

While smaller regions might not look exciting, they could prove to be lucrative opportunities for exploring sales potential—deals you could miss out on in pursuit of the shiny new territory.

Ultimately, poor territory balancing results in underserved potential customers and overlooking that revenue opportunity.

The benefits of data-driven sales territory planning and management

Conversely, by having your sales territories planned correctly, you can boost sales productivity, increase predictable growth, and ensure a more balanced workload for reps.  

Here's what this looks like in practice.

Increased sales efficiency and agility

With appropriately designed, balanced territories for each team (wherein the administration of these territories is also well managed), you’re able to respond to changes in the market fast (and this agility drives revenue).  

• Say you acquire a new business and need to assimilate 20-30 new reps into your existing structure. You need to achieve this quickly to make the most of the acquisition, plus ensure fairness for net new reps and existing sales team; it's a sensitive and delicate strategic decision that's best managed when you have the data that can highlight where and how reps will be impacted by certain strategies (and balance the territories accordingly).  

When you have an SPM solution that allows you to rollout these changes quickly and effectively with the right reporting and tracking the entire territory balancing process becomes much easier to accomplish.

If we think about sales productivity as the capacity a rep has to sell matched with the opportunity to sell, then having the right data or territory management process ensures you optimize these two variables best as possible.

Balanced workload distribution

Employees become disengaged when there is a lack of meaningful recognition. Salespeople on variable compensation or pay-for-performance models, in particular, become easily demoralized if quotas are too ambitious or arbitrary.

Balanced sales territories derived from data, along with personalized quotas ensures all reps remain satisfied, productive, and motivated. When territories are balanced by revenue potential, you won’t have some agents feeling they can’t rake in big deals (and even bigger commissions).

Enhanced customer coverage

As we covered prior, balanced sales territory plan design means you can adequately serve the customer base with resources available. With well-defined, manageable territories, sales reps can even work to build deeper customer relationships (understanding the nuances of certain regions) and identify untapped market opportunities, leading to better customer service.  

Overall, as you improve your territory mapping and management iteratively, this enables more accurate performance tracking thanks to the available data for analysis. Good territory design perpetuates even more informed decision-making over time.

Actionable steps for how to create a balanced sales territory plan  

When building your sales territory design, you'll want to outline the following from the very start...

1. Align with stakeholders on meaningful business performance objectives

Consider objectives you have that directly support revenue generation (and tertiary goals that may be unrelated, too). If you’re launching a new product, for example, your objective around territory planning might be to increase market share with a given product.  

Similarly, if you’re aiming to reduce churn and increase retention, the goal might be to increase multi-year contracts in each territory.

In the market share example, a goal expressed in the SMART framework would look like:  

“Increase market share by 2% in the north-eastern U.S. states: including New York, Pennsylvania, and New England over the next six months.”  

You could then adjust territories and allocate more experienced reps and more generous incentives to territories with the lowest market share currently. The opportunity here is bigger.  

2. Deeply understand customer needs and market dynamics  

Before territory mapping, pull data from your CRM and point of sale channels to evaluate how customers are currently interacting with your business.  

• How many interactions do they typically require before converting?  

• What’s their biggest pain point or challenge?  

• In win/loss analysis, what’s the reasoning behind selecting a competitor?

Consider market dynamics in each of your potential regions, too. If there’s huge potential in a particular territory, you might require expert reps to build business cases for these areas. If there’s little competition, however, you might need to allocate reps on more generous compensation plans to incentivize them to be more aggressive with outreach.

3. Conduct a SWOT analysis  

For more accurate territory design than is possible based on guesswork, pull historical data from your SPM software, CRM, or incentive management platform to uncover strengths and weaknesses, as well as highlight potential opportunities and threats you’ll need to address.:  

• Strengths: What is your sales team currently doing well? Look for high-performing geographic areas or customer profiles, and consider outlining these as individual territories in your plan.

• Weaknesses: Which regions or customer profiles do your reps struggle to close? Break these out into their own territories. You could either assign them to reps with more experience or offer more generous incentives for reps in the territory.

• Opportunities: What opportunities are you not yet capitalizing on? Take inspiration from competitors’ sales strategies here.  

• Threats: What challenges do you expect to encounter in each territory? Changes in consumer demand, regulations, or an influx of new competitors are all things you need to account for. Create a plan of how you’ll overcome these threats to prevent them from throwing your reps off course.

Supplement the above with qualitative data from your reps directly. Your salespeople can provide insights you’d previously overlooked.

Either way, treat your SWOT analysis as an opportunity to look at the bigger picture for your sales strategy. It can highlight the need for sales team training, updates to compensation plans, or requirements for new SPM software that help you manage sales performance more effectively.

4. Design a territory structure

To systematically target the territories that make most sense for your business, you can break things down. Popular types of territory models include:

• Geographic

• Account-based

• Industry

• Customer size

• Product line

• Channel

• Named accounts
  

For simplicity’s sake, we'll look at two of the most popular below—geographic territories and account-based segmentation—and the pros and cons of either.  

Geographic territories

These territories are divided based on geographic factors like country, state, city, town, or ZIP code.  

Advantages:

• This is a more traditional structure because it’s relatively easy to segment areas.  

• Geographical boundaries lessen the chance multiple agents target the same customer since you can balance how many reps are assigned to the territory based on saturation and market potential.

Disadvantages:  

• Some territory sales managers are pivoting away from geographic structures because opportunities can vary dramatically. A New York territory is likely to have more opportunities, bigger deal sizes, and therefore more commission on offer than one targeting Colorado, for example. This can lead to tension between teams who see the split as unfair.  

Account-based territories

With this structure, territories are split based on account characteristics, like industry, company size, or revenue potential.  

Advantages:  

• Account-based territories are a great option if you have sales reps with deep experience in a particular industry or account type.  

• It can also result in more balanced territories since agents don’t have to compete for geographical regions that are perceived as more lucrative.  

Disadvantages:

• Unclear geographical limits with an account-based approach can cause confusion among customers who interact with different agents. You’ll need rigid documentation practices, like regular updates in your CRM and pipeline management tool, to prevent overlap with this territory structure.

5. Ensure you've got the right SPM software or ecosystem of territory planning tools

Data-driven sales territory planning requires the right territory planning software—not just when outlining each territory off the back of historical data, but also when evaluating whether the territories are well optimized as you gather more data.

Ideally you don't default to the spreadsheet—they’re error prone and require lots of internal expertise to use sufficiently. Unlike sales territory management software, spreadsheets also don’t offer accurate forecasting abilities based on sales quotas, making it almost impossible to know whether you’re on the right track.

Sales territory planning tools, however, can help you automate the process, including tasks like data collection and customer profiling. Collect data on things like your customer profiles, sales pipeline, competitor benchmarks, and product-specific sales data to paint the bigger picture and see which territories become obvious.  

Common tools you’d find in a territory management tool stack include:

• Territory mapping tools

• An incentive management platform—ideally one that integrates with your territory mapping software for east quota setting and commission tracking

• A customer relationship management system (CRM)

• An HRIS housing your rep data/sales/roles and responsibilities

Forma.ai, for example, is a full-stack SPM platform that can help you manage territories and set attainable quotas within a holistic environment. It has 200+ integrations with CRMs, ERPs, and business intelligence tools like Salesforce, Workday, and Oracle NetSuite, so you can ingest and manage data from your entire sales pipeline—all from a single location.

Implementing and managing your sales territory plans

Lastly, as you drive better sales performance and business growth, you need to ensure sales reps are well-prepared to understand the plan, get assigned to their respective areas, and capitalize on market opportunities via maximum coverage. Below are some considerations for this.

Assigning sales reps to territories

Once you’ve outlined sales territories, you’ll need to assign reps to each. This isn't always as simple as assigning more agents to a saturated region.  

Take other factors into account when assigning territories, such as each rep’s:

• Skill and experience  

• Incentive program or commission level    

• Sales performance history, like a proven track record of closing high-value accounts that are most similar to your account-based territory  

• Pre-existing relationships with leads or customers in that territory

• Ties to that region, such as experience living in that territory or closing deals with companies that fit the segmentation criteria

• Personality type (e.g. curious and analytical agents might be better suited to saturated territories where they have to problem-solve how to stand out)

• Upcoming leave of absence (e.g. parental leave)  

SPM solutions like Forma.ai have sophisticated ways of consolidating these data points into index scores that allow you to balance territories based on the factors that are most relevant to a sales reps performance at your business easily.

Training and support for sales teams

Considering that each territory will have its own unique set of challenges – be it regulatory differences, cultural nuances, or market conditions specific to that particular region – ensure you plan for training when administering new territory assignments.

On objection handling, for example, Founders (as a persona in an account-based territory approach) will have vastly different pain points and purchase motivations than CPAs, so the teams targeting each will need to navigate different objections.

As part of your training and development programs, incentivize reps to meet quota (both individually and as part of their territory team) with transparency and visibility, offering leaderboards to meaningfully track progress to goals.  

Adjusting sales territory plans: an evolving, constant process

Setting KPIs and performance metrics

Key performance indicators get your sales team on the same page by detailing what “success” looks like. Reps know exactly what’s expected of them when they’re assigned to a territory, and you’ll create a culture of continuous learning that drives agents towards meeting larger business objectives.

Performance metrics also provide the data you’ll need to make further informed decisions about territories. It’s easier to spot territories you’re not taking advantage of when you can benchmark performance against others.

Examples of KPIs you might use to monitor territory performance include:

• Revenue generated

• Quota attainment  

• Average deal size

• Sales cycle length

• Commission paid to reps

• Sales pipeline health

• Market penetration

• Customer acquisition cost

• Net Promoter Score

Regular review and adjustment processes Once you’ve put your territory map into action, set regular reminders to monitor performance across each one. Your analysis might uncover under-served markets where you don’t have enough reps, for example, or oversaturated territories that have too many resources that are being underutilized. Both are obstacles that could hurt revenue if sustained. It’s also worth comparing the revenue generated against how much it’s costing you to operate in that industry. What are you left with after paying for salaries, technology, compliance, taxes, and incentives for reps in that territory? If the answer is “not much”, the territory might not be as lucrative as it initially looks.

Keep in mind factors like reps on performance plans, on parental leave, or prorated quotas influence your performance data. Each time one of these scenarios happen, use data to find the optimal way to rebalance territories (and the subsequent financial impact) with scenario modeling.  Territory planning and management features, like those offered in Forma.ai, can show you whether the potential outweighs the operational cost of reshuffling territories and quotas.