A slow economy does not have to mean fewer orders
As the economy slows, it’s likely that your firm’s order flow will slow too.
But, does it really need to?
For you to answer this question in the affirmative, two conditions need to be in place:
- Your share-of-market needs to be considerable
- Your sales function needs to be operating at (or close to) optimal efficiency
So, think about it. Do these conditions hold true for your organization?
I suspect not. It’s likely that your marketshare is much less than 50%. And it’s highly unlikely that your sales function is operating at anywhere near optimal efficiency.
To validate my second claim, have your sales manager examine your salespeople’s calendars and determine the number of true business-development appointments performed by your salespeople last week (it should be 15-20 each).
If these conditions do not hold for your organization, the implication is exciting. In theory, at least, it will be possible for you to maintain your order flow in these tough times, provided that:
- You can improve the performance of your sales function to the point where you can secure enough new accounts to compensate for any contraction in sales
- You can do this without increasing your marketshare to unrealistic levels
An action plan (five simple steps)
With this encouraging thought in mind, let’s consider an action plan for coping with these tough economic times.
Step one is to estimate how many appointments (in aggregate) you believe it is possible to generate for your sales team each week.
Remember, that the number of appointments you can generate is primarily a function of the appeal of your market proposition. A client of ours in Kentucky just eliminated a problem with appointment-setting by writing to clients offering them $500’s worth of free merchandise. This offer was commercially viable because the value of new accounts was high and because the firm had under-utilized fulfilment capacity. This appealing proposition caused the number of prospects who accepted appointments when offered to increase from less than 1:20 to more than 1:3!
Step two is to determine the optimal size of your sales team. This is simply the number of appointments you can generate each week, divided by 20 (each salesperson’s future capacity).
Step three is to figure out how to remove all activities from salespeople, other than field-based, face-to-face, business-development appointments.
So, activities that must be re-routed elsewhere include opportunity generation (promotions), appointment setting and calendar management, solution-design and proposal generation, customer service and all fulfilment-related tasks.
Step four is to reconfigure your resourcing model. It’s likely that you will discover that you need far fewer salespeople (even considering your increased appointment numbers) and more sales-support personnel.
Our approach to resourcing is to provide each salesperson with a dedicated sales coordinator (who manages opportunities and plans his or her calendar) and then route all other activities to a promotions person, customer-service personnel and technical experts who provide salespeople with field support.
In most cases it is possible to accomplish this reconfiguration with a negligible (if any) increase in operating expenses.
Step five is to eliminate bonuses and commissions.
If you’ve been waiting for the right time to eliminate this caustic practice, a down economy is such an opportunity.
While performance pay makes sense in environments where salespeople are truly autonomous, these environments are few and far between.
As organizations transition to make-to-order (or engineer-to-order environments), the requirement for tight integration between sales and fulfilment becomes critical.
Tight integration necessitates team work, and performance pay for individuals destroys the integrity of teams.
Furthermore, performance pay:
- Signals that optimal performance is optional
- Causes your sales function to become more costly as it operates more efficiently
The bottom line
Typically, when we implement these five steps in organizations, we increase each salesperson’s activity level by 10 times. However, in most cases, we also reduce the size of the sales team.
A typical net result would be twice the volume of true business-development appointments, with minimal change in operating expenses.
If your current marketshare provides you with room for growth, this is a strategy worth considering in these slower times.
We recently published a document detailing three common scenarios: the application of SPE to different sized firms and it’s implications for sales activity and operating expenses. If you don’t currently have a copy of this document, send me an e-mail ([email protected]) with “Scenarios” in the subject line.