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The tech sector saw a sharp decline in sales due to the fastest interest rate hikes in US history. Only 23% of sales reps hit quota in Q4 2022, compared to 53% in Q4 2021. Despite the challenges, sales in tech remains a lucrative and exciting industry with a renewed focus on profitability, value to customers and optimism for economic recovery. 2023 is the time for sales professionals to step up and deliver.
The game is set to Hard mode, are you ready?
For all sales teams, headwinds were felt across the buyer journey. Both new and experienced sales professionals had to adapt their selling practices to counter emerging challenges brought about by the pandemic and the new economic climate.
Facing the economic downturn at the end of 2022, approximately 30% of sales teams lowered their quotas as a precautionary measure. With companies missing their current targets, most have responded by adjusting down future guidance.
To keep in line with the decline in revenue, companies reduced their revenue guidance by 20% to meet targets in 2022.
However, given the current worsening economic climate, expect companies to continue looking for ways to reduce burn to meet future revenue goals.
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As tech companies only hit 75% of their revenue targets, they had to make up for the 25% shortfall in their budget. Hence, tech companies responded by reducing their sales team by an average of 25% to balance their budget.
Non-tech companies performed better than tech companies, who often achieved over 90% of their revenue targets.
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2023 will see companies adopt cost-cutting strategies such as conducting more layoffs, slowing down hiring processes, and substituting costly labor with automation tools such as ChatGPT.
Sales teams are lowering guidance for 2023 revenue targets by 25%+
In 2022, approximately 40% of teams experienced layoffs, with a higher proportion of tech companies affected compared to non-tech companies. In comparison, the rate of layoffs among non-tech firms was less than 30%.
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The most common severance package was 4 weeks. Some sales professionals laid off from large companies received 11 weeks of severance, almost 3x as much as the average while others at smaller companies received just 2 weeks.
If you're a sales leader:
Be extremely conservative with revenue projections to avoid setting unrealistic goals that lead to low morale and high turnover.
If you're a founder:
Companies who did <10% RIFs often ended up doing multiple rounds of layoffs. This creates extreme uncertainty at the organization.
New Bravado members reported salaries have increased in 2022. However, compared to 2021, where salaries increased by 40%, this year salaries barely increased.
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Surprisingly, 2022 now holds the highest record year for the lowest average wage Americans would be willing to accept for a new job - $73,667 USD. In line with rising levels of inflation, money is the top "deciding factor for" mover of employee retention.
Sales compensation had increased in H1'22, but all gains were given back by H2'22. With increasing layoffs, sales comp will move to negative territory in 2023.
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Will put further downward pressure on sales teams who are already struggling to hit targets in this economy.
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