For 30 years in sales and marketing, metrics have been important to me. Metrics are measurements against a standard. That, of course, is the challenge. Who sets the standard? Is it set by some industry organization or is it set by you?
While you can go find standards that your industry uses, as a small business owner or manager, the most meaningful ones will be those that you develop by actually tracking your activities and those of your sales people. Business-to-business sales people, in my experience, are notorious for hating paperwork so fortunately, your small business accounting system should be able to track many of the numbers you want.
Intense global price competition makes it ever more important for you to make sure your sales team's efforts are invested wisely. I knew this for decades as a salesman and as a sales manager. It was even more important to me as a small business vice president of sales and marketing and then as a small business owner.
Ideal Customer Profile
To make sure my time was most effectively invested, as the head of sales and marketing for my own company, I would call on larger manufacturers in Cd. Juárez because their accounting and manufacturing departments fit my ideal customer profile. Despite my expertise, though, when I decided to add a Sharp all-in-one type of product to my line, I wasted my time calling on very small businesses.
I thought that the lifetime cost of ownership for this desktop printer-fax-copier would impress them when compared to the expense of similar inkjet devices. It didn't. I loved this product because it included maintenance and toner in the cost of ownership calculation. The good news is that I stopped wasting time calling on the wrong market.
The Goal of Sales Productivity Analysis
The goal of this particular analysis is to determine what it costs you to put a sales person in the field and how much time it takes to make a sale. With that, you look at your other numbers to decide how many sales each sales person needs to make a year to earn an above average income and to repay any draw against commission you put out. If you prefer to pay commission only, you need a generous commission and a strong likelihood of making a high income.
The sales cycle for an outbound,* business-to-business sales person typically includes these activities:
- Prospecting: research to find prospects who match your ideal customer profile; telemarketing to schedule appointments; cold calls & warm calls**
- Build relationship & interview: find wants, perceived needs and motivation, i.e. qualify
- Presentation: focus on providing only what your prospects want and feel they need; discover if they are open to what else you feel they need to get what they really want
- Objections & discussion
- Prepare and present a proposal and/or quote
- Agreement / Close
- Sales Follow up
*Outbound applies to sales people who go out of the office to meet with prospects.
**Cold calls are calls on total strangers; warm calls are sales calls on people whom have expressed an interest or to whom you have a referral.
Here are key concepts to understand:
- What activities does a sales person have to do to get through the sales cycles to get a sale?
- Develop your metrics for each step in the sales cycle. Work backwards, in other words, how many quotes does it take to get a sale? How many cold calls to get an appointment?
- Eventually, you want to know how many prospects for every sale closed.
- The point of this is to know what activities and how many of each does it take to close a sale?
- How much time does the entire sales cycle take for every sale? That determines how many sales your sales people can make per month.
In business-to-business sales, the number of sales can be fairly small because of the length of the sales cycle. Twenty years ago, I had one year where I sold approximately 9 systems and made $50,000 selling a turnkey solution of hardware, software, training, installation, hardware maintenance contract and software support for the first year.
Understanding what numbers it takes to reach your sales, you can better tell if your sales people are on track. The most important thing to get out of this analysis, though, is that the better your ideal customer profile, the better your sales will be because your sales people will be focused on those most likely to buy. Likewise, the more your marketing produces interested prospects, the less time and effort is wasted trying to find good prospects.
Using metrics can help you recognize the time and effort to get a new customer. You will have a more realistic expectation of results as well as an appreciation for the importance of aiming your sales people towards the best prospects, those who meet your ideal customer profile. Then with good time management to keep focused and good marketing to attract interested leads, you will increase your sales to everyone's satisfaction.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
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