Cost-of-a-Bad-Sales-Hire Calculator
Plug in salary, ramp time, and quota to see the fully loaded cost of a sales mis-hire — the number that turns 'we should be more careful hiring' into an approved budget for better screening.
What's inside
- Full 8-line cost formula (A through H) with definitions
- Required inputs list (OTE, ramp time, quota, margin, etc.)
- Fill-in worksheet table
- Fully worked example on a $120K OTE AE totaling roughly $452,000
- Quick 'napkin math' simplified formula
- Guidance on presenting the number to get hiring budget approved
What this tool does: turns "we should be more careful hiring" into a specific number you can put in front of finance to get budget for better screening, a longer interview process, or a recruiter.
The formula
``` TOTAL COST = A (Recruiting) + B (Comp Paid) + C (Onboarding/Tools)
- D (Manager Time) + E (Missed Quota, margin-adjusted)
- F (Team Drag) + G (Backfill Cost)
− H (Revenue actually collected during tenure, margin-adjusted) ```
Inputs you need before you start
- OTE (on-target earnings): base + variable
- Loaded comp multiplier (typically 1.2–1.35× base salary for payroll tax + benefits)
- Months employed before termination/departure
- Ramp time expected to full productivity (months)
- Annual quota (or pro-rated for the role)
- Gross margin % on revenue this role sells
- Actual bookings/revenue produced during tenure
- Recruiting cost (agency fee % or internal recruiter hours × loaded hourly rate)
- Manager's loaded hourly rate
- Extra weekly hours manager spent coaching/managing this person above baseline
- Expected ramp time for the replacement hire
Line-by-line worksheet
| Line | What to calculate | Your number |
|---|---|---|
| A — Recruiting & hiring cost | (Agency fee % × OTE) OR (recruiter hours × loaded hourly rate) + interview-panel hours × loaded rate | $______ |
| B — Loaded comp paid | Months employed × (loaded annual comp ÷ 12) | $______ |
| C — Onboarding, training, tooling | Enablement/manager onboarding hours × loaded rate + (monthly tool-seat cost × months employed) | $______ |
| D — Extra management time | Extra coaching hours/week above baseline × weeks employed × manager's loaded hourly rate | $______ |
| E — Missed quota, margin-adjusted | (Pro-rated expected bookings by exit date − actual bookings) × gross margin % | $______ |
| F — Team drag | 5–10% of one peer's monthly comp × months of coverage/backfill by peers | $______ |
| G — Backfill cost | Repeat line A for the replacement search + (replacement's ramp months × monthly quota × coverage gap % × gross margin %) | $______ |
| H — Revenue collected (subtract) | Actual bookings during tenure × gross margin % | ($______) |
| TOTAL COST | A+B+C+D+E+F+G−H | $______ |
Worked example (SaaS AE, $120K OTE)
- OTE $120,000 (72K base / 48K variable); loaded multiplier 1.25× → $150,000/yr loaded → $12,500/month
- Annual quota $1,200,000; ramp curve to full quota over 4 months
- Terminated at month 7; actual bookings during tenure: $90,000 (against a pro-rated target of ~$450,000)
- Gross margin: 75%
- Recruiting: 20% agency fee = $24,000 + $2,000 internal hours = A: $26,000
- Comp paid: 7 × $12,500 = B: $87,500
- Onboarding/tools: $4,500 enablement time + $1,500 tool seats = C: $6,000
- Extra manager coaching time: 3 hrs/week × 30 weeks × $100/hr = D: $9,000
- Missed quota: ($450,000 − $90,000) × 75% = E: $270,000
- Team drag: F: $5,000
- Backfill: $26,000 re-recruit + (4-month ramp gap × $100K/mo quota × 90% coverage gap × 75% margin ≈ $90,000) = G: $116,000
- Revenue collected: $90,000 × 75% = H: ($67,500)
TOTAL: $452,000 — roughly 3.8× OTE, almost entirely driven by line E (missed quota). This is why "they were cheap to hire" is the wrong frame — the hire's salary is rarely the biggest number in this table.
Quick napkin-math version (when you don't have time for the full worksheet)
``` ≈ (months employed × loaded monthly comp)
- (recruiting cost × 2, original + backfill)
- (missed quota × gross margin %)
- (replacement ramp gap × monthly quota × gross margin %)
```
How to use this number
Present line E and G together to whoever controls hiring budget — that's the "what we're actually risking" number. Then propose the fix as a fraction of that cost: a $3,000 assessment tool, a paid work-sample exercise, or an extra interview round is a rounding error against a $450K exposure. That comparison, not the abstract idea of "hiring better," is what gets budget approved.
How to use it
Fill in your own numbers line by line using your last mis-hire as the test case, then keep the worksheet on hand to pressure-test every future sales hiring budget conversation.