Most managers plan. They set a goal for the year, work out how much revenue they need to achieve it, and then set sales quotas accordingly. Each month they ask their sales people whether they will hit their quota and which sales are going to close. As the month proceeds, they ask whether everything is on track to close and then put on the pressure towards the end of the month to make sure the salespeople are doing everything possible to close the prospects in the pipeline.
Here’s the problem. By concentrating on the pipeline, we see our prospects as a rare commodity. There are only seven prospects in the pipeline and we need six sales. We have to do whatever is necessary to close those deals. Frequently, “everything necessary” includes giving the store away in discounts, extra goodies, expedited delivery – all things that eat away at our profit.
Imagine you have a sausage machine. If you wanted to increase the number of sausages it produced, where would you focus? On the nozzle where the sausages come out? I guess you could stand there saying “Come on, come on, you can squeeze out another one.” How would that help?
Or would it make more sense to focus on the funnel where the meat goes in? Perhaps you’d even look to the delivery vans that brought the meat or even the team that orders the meat.
The same logic applies to sales. You can beat your salespeople with a stick to try to get them to close the few deals that are in the pipeline or you can focus on where those deals came from and apply some science to the problem.
It looks like this.
Over the last two years, our 8 salespeople have closed 137 deals between them (significantly less than the 250 deals we planned for). Having done a little research, we found that on average, it took 4 first appointments to get a sale (around 530 first appointments were booked). Between trade shows, inquiries and cold calls, we had a little over 2,000 conversations to get those appointments so we’re averaging around 4 conversations per appointment. Hmmm. So we need something like, on average, 16 conversations per sale. Interesting.
Now here’s the 'sciency' part: 125 sales per year means a little more than 10 sales per month. That means, wait a minute, we need to have 40 new conversations per week, or 5 per salesperson. If that was happening, we’d be getting 10 first appointments every week and, on average, 10 sales per month. I can feel my blood pressure dropping already.
Let me think about this. Perhaps if we set our sales people behavior goals, instead of revenue goals, and measured them to make sure they were doing their behavior, we would actually hit our numbers without worrying and without having to sell our first-born to get the orders in when we need them.
It’s easy enough to see whether a salesperson is having 5 conversations a week. It’s then equally easy to see if that is turning into 5 appointments a month. We know that, if that is happening, there is a really good chance that, over time, we will average 10 sales a month and hit 125 for the year.
Now we may not hit 10+ in any given month, but we know it will average out because the numbers prove it. Which means that we don’t have to jump through hoops and promise the moon to get an order. We should be close enough to our targets that if one or two slip into the next period it won’t be a catastrophe.
Think about this. If you know that your people are consistently and effectively priming the pump, doesn’t that lower your stress level? If you see that one of your people is missing their behavior goals consistently, you know they’re not going to make their numbers at the end of the year and you can take action. It’s much harder for a salesperson to say”It’s not my fault I didn’t do my behavior” than “It’s not my fault my sales didn’t close.”
Maybe it’s time to manage the things you CAN control.
Author Christopher H. Lee is a Sandler Training Professional, who helps business owners and selling professionals grow their sales and management success as owner of Sandler Olympia. A graduate of University of Maryland, his previously 30-year professional history included selling extensively for health systems technology firms in the U.S. and U.K. email@example.com
This article is featured in the 2017 Small Business Resource Guide, a free publication from Business Examiner Media.