Sales Laundry

Are you swinging a sledge hammer to kill an ant in your sales organization or are you taking a fly swatter to a tank battle?

Better stated, perhaps, have you taken the time to calculate the costs of your various sales tools vs. the revenue potential of your product offerings to make sure you have a sales strategy that makes sense?

When I am evaluating sales management and their sales organizations this is one of the first key metrics I look at to determine if sales resources are allocated properly.

Let’s say you have sales representatives costing you $60,000 in base that have on target earnings at $120,000/yr.

In simple terms, assuming this sales representative is working 40 hours a week (stop laughing!), and has two weeks off a year, he is going to work an average of 2000 hours a year. Doing the simple math, $120,000/2000 hours, this sales representative costs $60 an hour before you factor in benefits, cell phone, car allowance, etc. Let’s estimate his cost at $85 an hour to execute his sales work properly.

Subject Matter Expert: (Could be an engineer, analyst, auditor, etc.) $80k/yr; $80,000/2000 = a cost of $40/hr. We will keep it simple and skip the benefits add on.

Inside sales representative: $40k/yr; $40,000/2000 = a cost of $20/hr skipping the benefits add on here as well.

So let’s look at our costs for these sales representatives and their potential sales tasks.

Site Visit: (Assuming 1 hour of prep, 30 minutes of travel, 1 hour meeting) $212.50 + plus the literature he left, lets call it a cost of $215 for that sales call.

Technical Sales Call (Assumes Subject Matter Expert and Sales Representative) $215 for the representative plus $100 for the SME or a total of $315.

Telephone Call: Inside Sales Representative: (est. 5 minute call) $1.68
Telephone Call: Outside Sales Representative: (est. 5 minute call) $7.10

Mail: Inside Sales Representative: (Lit cost, plus postage plus time) $3.00 for lit + $.40 for postage + $3.00 worth of time.

Etc. etc. etc. You get the picture.

Now take these costs and apply them to the products you are selling and the revenue they produce in general terms.

When I do this I am mentally asking myself what is the most cost effective method of sales for this offering (that is not going to negatively impact customer service.)

I have seen situations where entire outside sales organizations were in danger of being fired and replaced because they were not hitting their quotas. After analyzing what they were being asked to sell vs. revenues generated it became clear that the company was swinging a sledge hammer (or using their most powerful/expensive form of sales) to kill a fly (some of their least profitable more commoditized offerings.)

The obverse is true as well.  I have seen inside sales teams and telemarketers trying to sell solutions that were far too complex for the tools available to make the sale.

In many cases I have been able to lower the cost of sales by making these kinds of changes and making individual groups (inside sales, outside teams, etc.) more efficient and more profitable as a result.