Ask Andi: Our salespeople are too comfortable. A productive sales force is key to our future success. It’s time to get them in gear. How do we measure sales performance?
Thoughts of the Day: There are two types of comfortable salespeople. One builds relationships. Makes customers feel comfortable. The other breeds complacency. With the latter, agree on goals. Measure performance against cost. Involve employees in problem-solving. Foster engagement and growth. Be clear about Conditions of Success. Make sure company needs get met.
Salespeople too comfortable
The good news is that there is a sales team in place. Any company looking to grow has to have people in place to help bring in new business. Now it’s time to figure out what your company needs. Put your salespeople on a mission. Compare the payoff of sales to the cost of acquisition. Here’s an example of how to calculate a sales goal.
- Estimate the salesperson costs $100k, including salary and benefits, travel costs, desk, phone, managers time, etc..
- Assume that the company’s gross profit is 60% of revenue.
- Assign a minimum standard multiple of 3x cost to what a salesperson should bring in.
- Multiply sales person’s cost of $100k x 3 (minimum standard multiple) = $300k.
- Divide the $300k by the company’s gross profit of 60% to get a revenue goal = $500k minimum revenue sales goal.
- Compare that to what salespeople in your company and industry are already producing today – is that high, low or in the ballpark.
- Adjust the goal up, if you think there’s room to produce more. Resist the temptation to bring the goal down to make it more realistic. If you’re not making money on your salespeople’s efforts, you have to figure out what else to do.
Fight complacency
Now work backward. What’s an average sale for your company? Divide the minimum revenue sales goal by the average sale. That’s the number of sales per year this salesperson has to produce.
Wondering how many salespeople you need? Figure out the company’s overall sales target for the year. Deduct the amount of revenue that will just roll in the door, from existing clients, from the website, and any other non-sales force-related activities. The remainder is what the sales force has to bring on board. Divide by the minimum revenue sales goal per person. That’s the number of salespeople you’ll need if all salespeople are just hitting minimum performance.
Want to break through to more than minimum performance? There’s real value in giving people challenges. Gather your sales team to brainstorm how they could kick sales into high gear.
When measuring and managing people it’s best to know how high to set the performance bar. Take a look at what people on the sales team have produced in previous years. Find out what competitors demand of their sales personnel.
People buy from people they trust
Take a look at how sales conditions have changed over the past few years. For many companies, the sales cycle has gotten longer. The number of sales per salesperson has also gone down, as salespeople spend more time nurturing potential sales along a longer path to close. That’s a lost opportunity unless you can shorten the sales cycle.
Is there anyone on the team who seems to be getting any performance breakthrough? What can be done to model their behavior, attitude, and skills?
Maybe it’s time for some sales training. Everyone gets rusty. Getting into a structure to exercise and build sales skills could be exactly what the sales team needs to get their game on.
Make it clear what you expect. Make sure people know you’re watching what’s going on. Put performance reports in a place where everyone can see what’s going on. Don’t hesitate to make changes if someone isn’t trying.
Ask people to make incremental performance improvements. Increase sales results a little each month. Push for one more sales call, one more prospect, and one more referral request. They’ll add up over the course of the year.
Looking for a good book?
52 Sales Management Tips: The Sales Managers Success Guide, by Steven Rosen.
