# 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.

Free calculator/tool for sales leaders. Topic: [Hiring, Interviewing & Team Building](https://www.peerlab.ai/library/topic/hiring-interviewing-team-building/). Published by PeerLab in the [Sales Enablement Resource Library](https://www.peerlab.ai/library/). Source: https://www.peerlab.ai/library/cost-of-a-bad-sales-hire-calculator-2/

## 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.

## 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.