It’s official! The recession will end in September. No joke. I read it in the USA Today. Evidently, something called the “Economic Outlook Index”—a composite of eleven forward-looking indicators, including a slightly-bullish stock market, the steepening interest rate yield and a notable increase in orders for big-ticket durable goods used to build roads, buildings and machinery—points toward an upturn in the economy this fall, followed by a mild recovery.
Seeing that decorated-apparel-business owners didn’t have to withstand the heavy fiscal losses of companies in the housing, automotive and banking industries, our marketplace is poised to rebound nicely, provided we get our ducks in a row . . . now. Specifically, by gaining control of the quality, frequency and allocation of your company’s sales efforts.
Far and away the most frequently asked question I’ve been fielding from business owners and sales managers lately is: “How can I tell if what my sales reps and I are doing day-to-day will result in larger, profitable business?” My reply, much to the chagrin of inquisitors, is in the form of another question: “What key metrics are you using to assess your salespeople’s effectiveness?”
Sales-to-date versus last year’s sales-to-date? Profit dollars this quarter compared to profit dollars for the same quarter last year? For, if you are depending on studying after-the-fact revenue and profit reports to gauge the proficiency of your sales team, then you are running your business as if you were navigating your car by staring into the rear-view mirror. In most small businesses, there have not been measurements and practices in place to evaluate the investment of time and effort in pursuing sales opportunities and/or managing current accounts . . . until now. Interested in learning more? Let’s explore.
Five simple sales truths
Take a moment to peruse a list of the current clientele of your business. Read each company or individual’s name. Now, consider this: Eventually, every customer you have will either quit or fire you. Every one of them. That is the first of five simple truths in selling. Some customers will cease to exist or relocate and buy from a comparable vendor in their new locale. You may even decide to stop selling to certain customers because of their lack of creditworthiness or failure to uphold their end of the bargain. But, eventually, the customer list you have at present will look nothing like the customer list you may have five or ten years from now. For that reason alone, every business must practice active prospecting for new customers.
The second simple sales truth is that, at best, only ten percent of all of the business contacts you make will ever buy from you . . . ever. Business contacts are comprised of not only prospective customers, but of suppliers, advisors or service providers, business neighbors and fellow business-association members and advocates of your enterprise that steer people to it—all good people to know, but mostly people who aren’t in the market for the goods and services you offer.
Another simple truth in selling is that customers and prospects who don’t initiate a call to you are basically of the opinion that you need them more than they need you. Whatever you decide to do to practice better time and opportunity management at your company, establish a good reason why clients should seek you out rather than you beating the bushes to hunt them down.
The last two simple truths are “time is never on a sales person’s side” and “any sales person is only as good as his/her next scheduled appointment.” It is far too easy for a sales professional to rationalize why a particular day, time of the day, or time of the week/month is not a good time to make a sales call. Likewise, many sales people end a face-to-face encounter and/or phone calls with customers and prospects with a friendly—yet non-committal—“I’ll contact you in a few weeks to continue our conversation,” rather than making a firm appointment.
Accepting the fact that these truths are self-evident and promising one’s self to never allow any of them to stand in the way of having a good selling day, every day, or ever having them become excuses for poor sales performance is the first step toward developing good time and opportunity management habits.
Therefore, a sales team would be wise to adopt some or all of the following policies:
A minimum of 20 percent of prime selling time should be dedicated to prospecting for fresh leads and qualifying them as viable opportunities.
At any given time, sales representatives should be actively pursuing an adequate number of opportunities—“adequate” being defined as 20 times the number of new accounts one expects to close in a given month—so as to continually feed the sales pipeline.
End every sales call or conversation with a set date and time when the two of you will resume the discussion, and stated, agreed-upon reasons why the prospective customer needs to further consider doing business with your firm.
Start every business day with a sales call or two. End every business day with a sales call—especially Friday afternoons when you are certain not to bump into a competitor. And “fish” only where there is a high probability of the presence of hungry fish . . . er, I mean, prospects.
Crunch the numbers
For the sales and customer-service professional, time and opportunity management means being held accountable for everything that happens—and doesn’t happen—regarding their assigned accounts, territory and/or responsibilities to generate sales. The “secret” formula for selling success is:
Limitless sales success = Q x N x A
Where Q = the Quality of one’s sales calls
N = the Number of made sales calls, and
A = the Allocation of time (investing time with the right prospects at the most appropriate moment)
So, how much time is available to the sales or customer-service professional? At best, there are 220 days in a calendar year to sell new and service existing business—once weekends, holidays, sick days, vacation days and miscellaneous “planned for you” days are subtracted.
That’s 55 days per quarter or 4.25 days per week. If the average amount of time a sales person is face-to-face or voice-to-voice with customers and prospects on a given day is four hours, that equates to only 880 hours for the entire year or 17 hours each week to plan and execute one’s selling strategy. That’s not much time to grow the business when you subtract the time you must invest with current customers in order to sustain their patronage and factor in the average length of a sales call.
Let’s assume your face/voice time with customers and prospects is divided 50/50 between the two groups. That means there’s only 440 hours per year to “court” prospective clients. If the average length of a sales call is 20 minutes—note: your mileage may vary—you should be able to conduct 1320 sales calls in a year, 25 in an average week or, in other words, six per day. If a good sales person expects to make six sales calls each and every business day, she must have seven or eight pre-call plans to account for prospects that cancel, fail to show or become unavailable. A good goal to shoot for is 80 percent of all planned sales calls actually happening.
Ah, but what if the average length of your sales calls is not 20 minutes, but 30 or 40 minutes? Now, the maximum number of sales calls you can make in a year is 880 or 657, respectively. That’s still enough sales calls to convert opportunities into two new accounts per month provided your close ratio is between 37:1 and 27:1.
Never heard of a close ratio? It’s a measure of a sales rep’s effectiveness in keeping the selling cycle as short as possible. One’s close ratio is the total number of sales calls divided by the number of new accounts claimed in a given time period—usually not shorter than six months. It is not unusual for rookie sales reps to have a close ratio between 80:1 and 100:1 during their first year. Accomplished sales professionals can achieve a close ratio between 10:1 and 15:1. The average among technical sales people—and selling in the decorated-apparel industry constitutes technical sales—is between 25:1 and 40:1. Just like a person’s blood pressure, every sales person has a close ratio; knowing what it is just depends on whether they or their manager decides to measure and monitor it.
At a minimum, a good sales manager should strongly encourage—a.k.a. require—sales reps to log enough details about each sales call in order to calculate:
Average face/voice time with prospects and customers per business day
The percentage split of time between selling to prospects and servicing existing accounts
The average number of sales calls per week/per day
The average length of a sales call and average length of a call on a current customer to sustain the business
Every sales professional’s close ratio and the direction it is headed—the lower, the better.
DISHing up customer care
If the close ratio is the key metric to measure sales proficiency—and it is—then Dollars Invoiced per Service Hour (DISH) is the key metric in measuring how well a sales person is managing the customer-supplier relationship. For a given time period—again, not shorter than six months—take any sales rep’s territory value in invoice dollars and divide it by the number of hours he invests at the customer account or on the phone providing technical support, entertaining clients, conducting services such as inventory control or warranty work, and collecting repeat orders.
The DISH can—and should—be made for an entire territory and for individual accounts. There is not one ideal territory DISH average, but the establishment of one and the direction in which that figure heads is critical. For example, if a rep nets $528,000 in invoiced sales and invests 440 hours maintaining the business in a year, the DISH is $1,200 per hour. If, the following year, that same rep’s DISH drops to $900 per hour, several conclusions can be drawn:
The increased attention being given to current customers is justified because there’s strong competitive pressure being applied, or
The size of orders from existing customers are not as large as in the past—as in recessionary times—or
Sales reps are “camping out” at customer accounts because there’s solace in spending time with people who like you and aren’t always slamming the door in your face.
For even the most “hands-off” sales manager, figuring out which scenario is reality is not difficult to determine.
When the DISH creeps up—to let’s say $1,500 per hour in the example above—either business is booming and price increases are relatively easy to pass along or—more likely the case—sales reps are taking their clientele for granted and not spending as much time with current customers as they should.
I think you will find if you begin to measure sales activity and monitor the direction the key metrics of close ratio and DISH for your sales-team members, you will be able to take control of your own “economic recovery” and forecast with amazing accuracy what success you should enjoy once the recession ends, instead of just wishing and hoping for an upturn in business. Good luck!
Broad Strokes-This month’s broad strokes include:
The most frequently-asked question from sales managers lately is “how can I tell if what my sales reps are doing day-to-day will result in larger, profitable business?” The answer lies in forward-looking measurement of key metrics.
Acceptance of the five simple sales truths means promising one’s self to never allow any of them to stand in the way of having a good selling day, every day, or ever having them become excuses for poor sales performance.
The “secret” formula for Limitless Selling Success is the Quality of one’s sales calls, times the Number of made sales calls, times the Allocation of time with the right prospects at the most appropriate time.
If you, the business owner or sales manager, begin to measure your team’s sales activity and monitor the direction the key metrics of close ratio and DISH, you will be able to take control of your own “economic recovery.”