Building a Cost-Effective Sales Force

In response to last weeks column on putting together a sales leads pipeline, one frustrated reader wrote,

“Preaching to the choir. How do I get stubborn management to see the light?”

Great question, and one that keeps many a sales executive up at night! If your companys management is among the unenlightened in this regard, today we offer some techniques for lighting the way.

Our consulting practice puts us in contact with lots of Internet company executives, many of whom fully acknowledge that the sales area is not their personal strength. These individuals dont have the time or inclination to become experts on running a sales force, and they are unlikely to engage in a detailed conversation about how the sales leads are to be handled. But in almost every case, these aggressive business leaders do respond to the truth in the numbers. Show them the math, and they get the point.

So, heres an exercise to go through, alone or with your management team…

• Estimate the number of client contacts your average salesperson makes in a day.
  Its best to do this from actual call logs; few salespeoples memories match the actual number of contacts listed on a calling log. And sales managers are apt to overestimate, forgetting that no one works a perfectly efficient 100 percent results-driven day.
• Calculate the close ratio of those calls.
  Make sure you are counting the ratio of closes to calls, not closes to accounts. If your salesperson has to call a given prospect ten times before the contract is signed, thats a ratio of one close to ten calls, or ten percent, not one call to one client (which would yield a very nice but unrealistic 100 percent figure). Salespeople tend to talk about the percent of accounts they close, not the percent of contacts.
• Now have a salesperson or two focus a few days on only those accounts that have been pre-screened (by themselves or others). Calculate the close ratios on those contacts.
• If the two ratios are the same, pre-screening is not a moneymaker in your current system (but dont rule out room for improvement well come back to that next week).
• If the two ratios are significantly different, you have the potential for immediate increases in efficiency by adding a qualifying layer to your sales process.
• Now figure out what you are paying your best salespeople. And what it would cost to hire (or convert among current employees) some junior salespeople to screen leads.
• Compare the costs and returns on a two-tier sales system to the lost opportunity cost of having your expensive senior salespeople spend time on preliminary contact screening. Annualized, the numbers will be striking if there is an advantage to be shown.

For experienced sales forces calling on vast numbers of unqualified leads, it is almost always more cost-effective to run a two-tier system. And this creates an “on-deck” situation, where your next group of experienced salespeople is being trained in-house, on the job, in the account-screening role. This is the least expensive way we know to recruit and train future sales stars.

If those numbers dont add up to making the case for more screening, dont despair. Next week well take a deeper look at some other symptoms to watch for in re-engineering your sales process.