I was on vacation last week and had the time to read three books, one of them called Enhancing Your Executive Edge by Kim Zoller and Kerry Preston. Published by McGraw Hill, it is a terrific read for all executives and managers.
In defining "executive edge," the authors quickly hook you in the introduction. They set the stage by showing their methodology, providing the reader with an experience in self-development and growth through an online assessment that determines your current "edge." I would suggest you take this assessment after reading this blog.
As you read through the introduction, Zoller and Preston describe their plan of breaking the book into five major buckets with 18 distinct chapters on:
- self-management and social awareness
- personal branding
- communication and presence
- business protocol -- the details of executive edge
- motivation, perseverance and excellence
Throughout the book, they make you work through various scenarios and checklists to assess your current status and your desired outcomes. In addition, they offer strategies to help executives handle various situations such as:
- strategies for not being and looking arrogant
- strategies for working with arrogant people
- strategies for not posturing and avoiding extreme one-upmanship
- strategies for working with others who are posturing
The chapter on "Knowing How To Read People" is outstanding, with checklists and tips that are critical in enhancing your ability to manage people. This chapter alone can assist any person in becoming a more effective leader.
One of the aspects that I always stress with my clients is to build "business ecosystem partners," or a network of people that can help you grow your business, as well as your personal level of professionalism. In Chapter 6, the authors hit this topic head on and show how to strategically build relationships and influence by providing useful tips.
The following chapter then moves on to showing the reader how to increase their effectiveness by learning to network and socialize in business. They do this by helping you build a BLT -- "believability, likability, and trust" -- in your business environment and in any situation. The authors walk you through their checklist in preparing for an event, how to work the event and how to appropriately follow-up after the event. If your salespeople network, this chapter would make a great sales training meeting. If your managers work events, this chapter is worth a discussion at your manager's meeting.
Standing out is part of the concept of having an executive edge. Zoller and Preston focus on personal branding extensively and how to build it. An entire section provides a great level of insight into how individuals can create a real presence. Their helpful tips will provide you an action plan to increase your ability to raise your position.
This book is a great read for the first-time manager and it would make a terrific book for an organization's management team to read and discuss. Hint: Add this book to each manager's executive development plan.
Posted by Ken Thoreson on February 23, 2015 at 11:48 AM0 comments
Boomsday, the largest fireworks display in the United States, occurs each Labor Day weekend in Knoxville, Tenn. An estimated 400,000 people flock to the riverfront to watch the event. For my first time witnessing those 45 minutes of noise, color and lots of "Oooh"s and "Aaah"s, I had to be prepared. There was also the potential of rain to think about.
For two weeks prior to that Sunday, I asked everyone about the event: where to park, when to arrive. I double-checked my reservations for my dinner cruise and thought of what to pack. The good news was I found a parking spot in the first ramp I drove into. Arriving at 2:30 p.m. allowed my friends and me to casually walk through Market Square, stop for refreshments and sushi, and then walk the 10 blocks to the river walk and boat launch. When the rain came we had hats, ponchos and umbrellas. At 9:30 p.m., when the show began, the rain stopped. On the walk back to the car, I took out my flashlight and the four of us made it home by 1 a.m. A great evening to remember.
What does this have to do with sales management? As a manager you must be prepared at all times for almost any event. The best plan is to have a plan, and to consider what might go wrong or what could impact your ability to exceed your objectives. I have listed below a series of topics for your consideration and for you to double-check against your plan -- or lack of plan. (Hint: This is a great idea for your next management meeting. Simply begin by asking each of the departmental managers about their problems or contingency issues that arise on a day-to-day basis, or what might occur if a disaster of any kind happens. Then ask them for their plan.)
Do you have a plan...
- if you lose a salesperson?
- if your sales team needs sales training?
- to increase the sales culture of your team?
- to increase your networking/partnering function?
- that generates excitement for your products/services?
- to say, "Thank you" to your support team?
- that increases your level of professionalism/education?
- to create a sales contest that drives revenue?
- that adds net-new customers to your base?
- that drives the necessary sales leads for each month?
- to say, "Thank you" to your existing customer base?
- to increase your public relations exposure within your community or market?
- that will increase/improve your vendor relations?
- to improve your CRM effectiveness?
- if your computer systems fail or are destroyed?
That's enough for now, but if I missed anything, comment below. Let's build a complete list for the future.
Why is this critically important today? In any kind of business environment, the organization that operates the most efficiently generally outperforms their competition. In more challenging times, a focus on efficient effectiveness must become the mantra for the day.
Posted by Ken Thoreson on February 09, 2015 at 1:27 PM0 comments
During my keynote at a recent sales kickoff meeting, I opened up the dialogue regarding how salespeople and organizations need to not only create value to separate themselves from their competition, buy also the need for a company to prove their value proposition during the sales process. Many organizations express their value on their Web sites or marketing brochures, but fail in this important step of proof. In a commodity business, it is critical you consider value and what it really is.
At this particular, highly product-driven company, the salespeople were really struggling to understand the concept of being unique or what kinds of value they could offer. During a 90-minute keynote, it might not be possible to create specific ideas around adding value or proving your value proposition, but opening the mind to the concept is critical in today's environment.
It comes down to the fact that without value-added, anybody can do what you do, including your competition. Value-added is up to the salesperson or organization in making the difference and, if it is done right, no one will ever compete with you.
The strategic thought-process question that should be asked before every meeting or client situation is, "How can I add value to this opportunity?"
There are three steps to adding value:
- Forget what business you are in. Understanding your business begins, paradoxically, by forgetting your product/service. You're not the products/services you represent. You sell dreams and you sell solutions; you simply deliver the product/service. I learned the power of this step as a young salesperson: I found out the reason the client was purchasing my computer/software was to enjoy her weekends at the lake cabin! That emotion is what I ended up selling. It is critical you always understand the compelling reason to purchase that is driving your client. I always stress this during sales strategy sessions.
- Move from the big picture to added value options. Ask yourself, "What actions can I take that will add value to my offerings and will exceed my clients' expectations? What can I do that will position me as different from and more valuable than my competition?" These can be the big questions that organizations can ponder during a strategic planning session or that can be driven by the salesperson in each unique sales situation. One client of ours sold heavily on ROI; what we did was assist in creating a sales process where on Stage 3, the salesperson would have the client visit our client's Web site (make it a sales tool). The prospective client then would actually enter a few variables into a data entry form. As a result, the CFO of the client's organization would create a business case for the project. This business case was then presented to the prospective client. This added value proved the company's value proposition and added a unique phase to the relationship. Figuring out what kinds of added value actions you can offer is challenging and will take time to develop. We suggest group meetings with a variety of employees, customer focus groups and brainstorming sessions during this phase.
- Evaluate the value-add. How can I bring this idea to my clients? Can I afford to do these things? Does it duplicate any other service we provide? I always say that competitors can "catch on" to what you are doing, but you don't want them to "catch up." It is critical you continually assess your ideas around the value you are bringing to the sales situation. Every six months, schedule a strategy session to evaluate your sales process and your value-add services.
It is a challenge to create value but the time and investment will pay huge dividends in revenues and profits. Get creative, open your mind, find your competitive edge and win!
Posted by Ken Thoreson on February 04, 2015 at 12:52 PM0 comments
Rich Karlgaard's The Soft Edge, published by Jossey-Bass, is an excellent management book for any level in any company. I recommend to my clients that they need to read a minimum of two business books a year, and this book makes my 2015 list.
In the first chapter, Karlgaard discusses the three sides of the triangle of business. The bottom is the "strategic base," the left side is the "hard edge" and the right side is the "soft edge." The hard edge is the traditional operations, ratios, measurements and systems of running any effective organization. Karlgaard spends just a few pages describing the importance of the hard edge and the five components that make up that side of the triangle.
Karlgaard then moves on to describing what he means by the soft edge. It is made up of five components, as well: trust, smarts, teams, taste and story. Immediately, he begins to build his case for the power of soft-edge management. Each of the following chapters takes the five components and breaks them into greater details and explanations.
Trust: Trust begins with culture and values. As with many management-focused books, The Soft Edge quotes business leaders on the topic to reinforce Karlgaard's points (one such quote is, "Trust is the lubrication that makes it possible for organizations to work"). Karlgaard describes both internal and external levels of trust and makes his point by quoting a survey: "For the first time in in history, impressions of openness, sincerity and authenticity are more important to a corporation's reputation than the quality of products and services."
(The amazing thing was that I was reading this book on my way to Las Vegas to speak at a conference, and one section of my program was on "building trust." During my speech, I picked up the book and quoted from it to help me drive home my points. When I packed my book for the trip, I did not know the contents of the chapters -- it was a total coincidence.)
Smarts: There are two components. One is the ability to learn new things and solve novel problems. The second is the ability to apply outcomes of learning -- call this intelligence -- as knowledge.
Teams: This chapter rang a bell when Karlgaard described the two-pizza rule: A team should never be larger than what two pizzas could feed. He writes on the need to improve speed and execution. It's a great chapter on a topic that many others have tried to cover without Karlgaard's insights and story.
Taste: In this chapter, Karlgaard identifies key organizations that have focused on the "experience" of going beyond the aesthetic of the product, but creating the emotional connection.
Story: The point Karlgaard makes in this chapter is the power of having a corporate story and the need to craft, share and create stories for both employees, customers and prospects. Building belief is critical in creating a sustaining business model.
In the concluding chapter, Karlgaard summarizes the prior chapters with a case study of a situation where companies have focused on the soft edges and where they have not -- and the results. If by the end of this book you are not a believer in the power of the soft edge, this chapter will convince you.
Buy this book for each member of your management team and discuss one chapter a week at your management team meetings. It will make a difference to your success.
Posted by Ken Thoreson on January 19, 2015 at 3:14 PM0 comments
What is the first action all salespeople must do to begin each year? The simple -- but many times overlooked -- answer is to reach out to every one of their existing clients, in a physical meeting if possible, and discuss with them their satisfaction and the impact of the salesperson's products/services on their companies. We call it the Annual Client Audit Review.
The objective of this meeting is actually made up of many sub-steps.
- For the salesperson, the meeting will reinforce the benefits of the products/services that were delivered. This builds belief in the company, and belief -- to a salesperson -- is the most important emotion. It's the desire to serve clients that separates the average performer from the top producer. When the salesperson truly believes in their products/services and their impact on their clients' businesses, they will go the extra mile to win the order.
- The second action during this meeting is to discus the client's strategic objectives over the next 24 months. This will help the salesperson plan a strategic sales roadmap as to how their products/services can potentially be used to assist the client in achieving their goals.
- The third action with each client is to work them through an Account Plan. One portion of the entire plan is based on mapping the client's current use of the products/services used. Next, the salesperson would walk the client through a cross-sell/upsell program, showing them the benefits of new offerings they have not taken advantage of and how these additional products/services will leverage the client's existing products/services and bring new benefits. After the meeting the salesperson can then develop a strategy for the account and then list five tactical steps to further penetrate this account.
- Don't forget to ask for a reference retter or a quote from your client.
- Lastly, always ask for a referral -- who do they know that you can serve?
These five actions will help the salesperson get off to a fast start by working with and selling to existing clients with whom they have trusted relationships and proven solutions. Immediate revenues, larger pipelines and increased levels of belief, along with better customer relationships, are a positive way to start the year.
What is your plan to get a jumpstart on 2015?
Posted by Ken Thoreson on December 29, 2014 at 12:41 PM0 comments
The concept of selling based on your buyer's personality style has been around for a while, but I'm often surprised at how many sales professionals aren't familiar with it. Knowing the four basic personality styles in the model can help you communicate and build a relationship with your prospects, increase your sales volume and improve your velocity.
1. The Director is to the point and focused on the job. Relationships are not important. When dealing with a director, emphasize short-term benefits and appeal to a need to gain advantage. Briefly cover main benefits and isolate dollar-related topics or verifiable benefits. Recognizing signs of impatience will help. In presentations use brief, bottom-line visuals, ask open-ended questions designed to make the prospect talk and allow the director to lead. To speed up closing, provide alternatives, handle objections by taking issue with the facts and not the person, and motivate a director to close by using objectives, results and a sense of urgency. Ask for the order -- be dramatic and brief, then be quiet.
2. A Persuader is outgoing, expressive and wants to be the center of attention. Approach a persuader informally -- go with a first name, listen for personal information and use it as you work to develop a relationship. Avoid formal visuals and PowerPoint -- use handouts with testimonial information that is woven into an unstructured and interesting discussion. Show personal respect by being open and honest, even about weaknesses of your solution. In closing, provide examples of solutions accepted by others the persuader respects. Offer incentives for a willingness to take a risk, avoid too many details, speak to the persuader's dreams and make the person a hero. Create a sense of urgency and help the persuader to buy, but don't make the close too obvious. Focus on next steps and use an assumptive close by providing ideas for implementing action.
3. Analytical personality types are the record keepers, but don't get them confused with only being the CFO or controller. Many executives can be analytical. During your sales process you will need to emphasize research. Know the client's situation thoroughly, state facts and prepare alternative choices. Your discussion must be detailed, logical and low key. Emphasize the tested, proven and well-documented aspects of your implementation process and probe for issues that might be barriers. With this group, your presentations should use visuals, charts and statistics that can be left behind for review. These individuals will be skeptical and especially wary of exaggerated claims. During your closing it's important that you be thorough. If you can't get a commitment, ask for specific next steps. Restate your summary and those newly provided next steps as a trial close before ending a meeting.
4. In working with Supporters it's important that you realize your role in their decision process. As a professional you will need to research a client's growth plans and show how your solution will benefit the client company. During your sales call, ask open-ended questions that reveal future and current plans, then relate how your solution benefits those plans. In conversation, allow some latitude to give the client opportunities to open up. During your presentation, think laterally and invite a supporter's comments on plans and wishes; use the supporter as a sounding board. Be careful not to push or crowd. You must build trust and convey respect by recognizing their achievement and intelligence. These people prefer cooperation and stability, not confrontation. During your closing, provide examples of others that have accepted the solution. Use a low-key, assumptive close to assist them with their goals. Avoid hard, "ask for order" selling and help them to make a positive decision. Selling trust and confidence is critical.
People are complicated. Everyone has a portion of each of the four personality structures, but people often have a dominant style and a secondary style. The more you know about them and the more you know about how to professionally work with your prospects, the more money you will make.
Take the time to improve your close ratios by remembering that selling is an "emotional art." Use all the available tools you can and pay attention to your prospects' personalities.
Posted by Ken Thoreson on November 17, 2014 at 3:37 PM0 comments
Last week, I did a webcast for a vendor that was designed for its channel resellers. Its purpose was to discuss effective business planning and to review a specific process to ensure the vendor's plans -- and, more importantly, its execution in 2015 -- will be at higher levels.
The content of the webcast was based upon our ESTEEM Formula, a format we use to work our clients through a process to build their business plans. When people think about a business plan, we normally think of an Excel spreadsheet with estimated revenues and expenses. But we believe it needs to be more comprehensive, with specific departmental action plans. The program was an effort by the vendor to increase the professionalism and productivity of its partners.
While I obviously can't share the entire 60-minute program here, I thought I might share a few elements.
First, take the business assessment evaluation from our Web site. It is a comprehensive tool designed to reflect your organization's maturity level. It will measure management, sales, HR, marketing and other components of your business. The assessment will grade each section and provide you with insights into what to potentially focus on in the new year.
Second, pass out the following questions to your management team. They have two weeks to complete them. At your management meeting, compare everyone's thoughts and discuss the findings. Then you can begin to develop your business plan.
- What went well in the past year?
- What did not go well?
- What are the key drivers?
- What are the key metrics?
- What are the risks?
- What are the opportunities?
- What are some of the specific factors you will be facing in 2015?
- What assumptions are you making about the market in 2015?
- What assumptions did you make about your product offerings in 2014? Still true?
- What assumptions did you make about your company capability in 2014? Still true?
Third, use a format that makes sense for your firm. This is Acumen's ESTEEM format:
- Tactical effect
How ever you get ready for 2015, it's critical to establish a vision and strategic objectives, and then develop actionable/tactical programs that are designed to achieve the goals. Then, as these action plans are detailed, assign responsibility and hold people accountable! We use a tool call the Business Plan Roadmap that allows executives to follow each objective and the action tracts and timelines to ensure success. If you want a copy, please send me an e-mail at Ken@AcumenMgmt.com.
Posted by Ken Thoreson on November 10, 2014 at 3:25 PM0 comments
In every book on sales management, especially those that are focused on recruiting and interviewing salespeople, there are always tools, sample questions, salesperson assessments and descriptions on various techniques used during the process. In my own book, Your Sales Management Guru's Guide to Recruiting High-Performance Sales Teams, I have included a variety of sample questions, interviewing ideas and even a three-week new hire on-boarding sample.
One of the most highly used tools to improve selection is the "candidate interview scorecard." How can you build one? Take action on the next two steps and you will improve the quality of your selection process dramatically.
Fundamentally, the two elements that I believe need to be absolutely part of the interview process are:
1. A clear definition of what your ideal candidate looks like. Simply put, it is critical you define specifically a minimum of the five work experiences/areas of knowledge that you require, and the five psychological or emotional characteristics the job demands. Examples might include:
- Has four years of sales experience in your industry.
- Has worked a regional sales territory versus a local geographic one.
- Has knowledge of a specific vertical market.
- Has new territory development/hunter experience.
- Can work independently (home office).
Knowing these elements will help you write your advertisement, job descriptions, determine your interview process, evaluate and scan resumes and begin to narrow down your candidates.
2. The next step is to take the emotion out of your hiring process. I mention this for a reason: It's critical. I often hear managers compare various candidates by saying, "I really liked this one. I feel good about her. He seems to be what we are looking for." These kinds of comments generally come from the gut and lead to poor selection.
We recommend creating a "candidate interview scorecard" to assist the interview team with accurately assessing each candidate. This tool is used during the interview and right after the interview is completed. The scorecard contains a list of 10 to 15 words from the list in No. 1, with each word listed and ranked on a scale of 1 to 5. During the interview, the scorecard is upside down and the interviewer simply takes any notes on that document. When the interview is complete, the scorecard is turned around and the candidate is immediately scored simply by selecting the number associated by each word.
All the candidates' scorecards are then shared with their individual rankings totaled. You will then easily see how each candidate was ranked by each interviewer and you can rank/stack each candidate. I like to recommend having at least three people on your interview team.
Take the time to define your "candidate interview scorecard" and dramatically improve your sales candidate selection. Many of my clients have taken this approach and implemented it in all employee selection processes.
What other tools do you use to improve your interviewing and hiring process?
Posted by Ken Thoreson on November 03, 2014 at 1:37 PM0 comments
While right now everyone else might be thinking of their Halloween costumes or what tricks or treats they may provide, as sales leaders we must consider the bigger picture. It is a scary world out there and many fears exist -- about the future of the business cycle, new taxes that will hit in 2015, consumers concerned about their livelihoods and the fears of your sales team as they face another challenging year. All of these fears impact your planning actions.
Emotion has always been a major element in the sales environment. Buyers today are more risk-averse, salespeople are more cautious and less self-confident and, worse than that, the relationships between buyers and sellers are caught up in "cost vs. value."
It is evident the Wal-Mart mentality has taken hold.
Wal-Mart for years has pressured vendors for the low-cost option. Just today, I listened to a prospective client describe how prospects are treating his sales teams and how his sales team dreads attempting to call on "net new" opportunities. "It's all about low-price vendor relationships versus how we like to work as a consultative partner with our clients," he stated.
The good news is in the technology sector, two factors separate us from Wal-Mart mentality. In selling solutions, partners can sell productivity enhancements and business efficiency, as well as cost effectiveness. If you do it right, you can sell both at the same time! I challenge you to consider what other industries address these most important business challenges.
The question is, as an owner or sales leader, how are you lowering the fear in your sales teams and how are they approaching their prospects or clients to lower their fears?
At a recent conference I led three back-to-back breakout sessions. In reading the evaluations and in conversations afterward, I heard these fear-based questions: "What should I do...?" "What do you recommend...?" "How should I address...?"
What are your action steps to reduce fear and finish off 2014? Here are some suggestions.
- Create a sales theme. Most would consider this a weak action, but if you spend time creating a mantra or maxim that you believe in and focus your energies around reinforcing it with your sales team, the desired attitude will build. Displayed at the University of Tennessee, for example, are the seven maxims of former coach General Robert Neyland. His first is, "The team that makes the fewest mistakes will win." I have used "Be brilliant on the basics" or "We will dominate our market and take an assertive sales approach." Each of these is designed to build a certain sales mentality.
- Focus your sales team on selling to the business challenges of the non-IT decision makers. This requires sales training that includes adding roleplay in your sales meetings. The issues your team must understand are operational efficiency, cost containment, customer responsiveness, revenue growth and increased market share. What issues do the CEO, COO, CFO, VP of sales/marketing, VP of HR or VP of manufacturing care about? If you make the business case to the COO, they can find the money. Make your sales team more confident; give them the knowledge to hold their own in tough sales situations. Mental toughness is critical.
- Re-evaluate your marketing and messaging. To gain attention you need to be considered "edgy" and stand out in the market. The important element is to create multiple messaging that addresses the business challenges from No. 2 above. Campaigns should be focused to the specific job title you are attempting to address. Most partners use the same messaging to address all job titles or, worse, use a technology message expecting business decision makers to understand or translate the technology pitch into valid business benefits. Run your "Business Breakfasts" or "Executive Forums" campaigns aimed specifically to a job title with the appropriate message for that title. "Drive an increase in customer satisfaction and lower your costs" certainly would get the attention of the VP of marketing or COO.
Don't be scared; be aware. The important action is to take action. Sales leaders must recognize their environment and build a culture of success with an organized plan of attack.
Posted by Ken Thoreson on October 29, 2014 at 12:37 PM0 comments
Depending on the client's situation, one of the top five actions we take is to perform an A-B-C analysis of their customer base. This exercise can be valuable for many reasons that impact sales, marketing and operations.
If you are unfamiliar with this concept, essentially, the client generates a list of all of their customers showing total combined revenues and margin over a recent three- or five-year period. After this report is created, the next step is to perform a lifetime value analysis.
First, let's explore the A-B-C analysis. In looking at the report, you will generally see the following trend:
- 15 percent of clients make up 65 percent of sales = A
- 20 percent of clients make up 20 percent of sales = B
- 65 percent of clients make up 15 percent of sales = C
Note: 35 percent of your clients make up 85 percent of your business.
Second, the percentages may not be precise, but what you are looking for is where to draw the lines where you can see a separation. Once you have these lines drawn, we recommend you schedule a meeting with the sales team and management team to discuss what you have found. You want to analyze the various segments and look for common demographics of the As, Bs and Cs. Examples might be:
- Total revenues
- Number of employees
- What vertical markets
- Number of locations
- Types of services/products they purchased
What you are specifically looking for are the common traits of the As and Bs. Then, those kinds of prospects with similar demographics become your only targets for marketing and for sales prospecting. If you purchase databases, those demographics become your criteria. In your CRM system, call frequency patterns are set to connect with all the As and Bs, six times a year. Your focus becomes capturing more As and Bs, not Cs.
The reason to focus on the As and Bs is that, for whatever reason, they are in need of your services, agree to your value proposition and most likely are your best clients.
Third, look at your C customers and perform a lifetime value calculation (this formula is actually good for all clients, but focus on the Cs first). This analysis is run for the past three or five years showing the total cost to acquire a client, cost to support the client over the three or five years, and the real profit generated by the client. In many cases, we have found that companies are over-supporting a large number of their customers and many C-based clients are also the slow-paying, unhappy customers that cause the most pain.
Take an analytical approach to understanding your customer base. It will drive better messaging, increase order rates and improve your profitability -- sounds like an excellent formula to get started on 2015!
Posted by Ken Thoreson on October 23, 2014 at 11:31 AM0 comments
When it comes to how businesses pay their salespeople, there's no one-size-fits-all approach. That's especially true for many companies with diverse products and services that include a mix of products and services. Some pay commission based on sales, while others only pay on margin; still others blend both with incentives and special bonus plans.
No matter which approach you use, success depends on awareness. Your sales management team must understand your company's overall goals and structure compensation to align with them. In short, sales compensation should be not just a tactical focus for your organization, but a strategic one, as well.
Sizing It Up
Compensation plans shouldn't be developed in a vacuum. You and your sales leaders need a solid grasp of your overall industry and your organization's place in it. You'll need to factor in variables such as new product launches and major promotions, as well as consider your personnel structure.
You should also address these questions: Is your company a startup or an established business? What are sales goals? How long are your delivery cycles? What are your objectives to secure new clients, increase average order sizes and grow margins? Do you want to open a vertical market or new products? Each answer will help you design a compensation plan tailored to your company's specific needs.
Finally, take a hard look at your sales organization. For instance, do you need to attract new representatives to make C-level sales calls? Do you want to retain employees to build a long-term, client-based sales team, or is rapid turnover acceptable?
Understanding Cost of Sales
Of course, you can reduce selling costs and enhance profits by capping sales compensation, but in the long run you get what you pay for. If you hire good salespeople and compensate them poorly, expect high turnover, which comes with costs of its own. A sales plan that compensates strong performance will allow you to attract the best salespeople -- and retain them, as well.
Calculating the cost of sales (CoS) is an important part of planning a compensation package. For a quick CoS ratio, simply take an individual's salary plus commissions earned at 100 percent of quota and potential bonus opportunities, then divide by that person's revenues to obtain the percentage. A more sophisticated approach adds in marketing expenses, corporate overhead, direct expenses paid to the salesperson and expenses related to sales support costs.
Examining the Options
Compensation plans vary widely, but all should include "accelerators" -- that is, increased commission rates for employees who achieve target levels.
- Profit-Based: Commission rates change as margin levels increase. These plans are generally based on invoice, product or monthly averages of margin generation.
- Revenue/Quota: Compensation is based on sheer volume achieved over the previous sales period or on a percentage of a quota achievement.
- Balanced: Compensation is based on margin, revenue and a third component, such as quota attainment.
- Team: Bonuses go to all team members when quarter-to-date (QTD) sales goals are achieved.
There are many variations and we recommend multiple combinations based on the objectives of the organization.
Here are a few final considerations to keep in mind as you customize your compensation plan:
- In new organizations focused on expanding within existing markets, the compensation plan will differ dramatically from that of an established company in the same industry. A mature, market-dominant company that receives a large percentage of its revenues from a small, loyal customer base can offer lower commissions and, perhaps, lower overall salaries. But a newcomer to an existing market probably needs to offer higher compensation to attract top-performing salespeople who can build a strong customer base.
- New organizations in new markets need compensation plans reflecting the volatile environment, usually with higher-than-average base pay.
- Companies in transition or undergoing a turnaround typically experience a higher CoS ratio; they may be best served by flexible plans incorporating morale- and team-building components.
- Organizations positioned for high growth should develop plans covering brief, six-month periods. This will let management test theories and change direction while allowing the sales team to adjust accordingly.
No question about it: Creating an effective sales compensation plan is hard work, but the effort typically pays off in both improved sales performance and achievement of your corporate goals.
Posted by Ken Thoreson on October 07, 2014 at 11:43 AM0 comments
Last week, during a client's sales meeting, we got into a discussion regarding pipeline values. Needless to say, the number of prospects and dollar values were insufficient to achieve the overall corporate revenue objectives. Several of the salespeople blamed marketing for not generating enough quality leads (ever hear that before?) and, as the discussion of "territory development" evolved, several of the salespeople said they simply didn't feel it was their responsibility to prospect because of the futility of cold calling/phone calling and event marketing.
In many organizations, marketing is expected to develop leads via a well-messaged, nurturing campaign with a quality database with an objective to set up the salesperson with a highly qualified opportunity. In this format, there may be a series of marketing campaigns, telesales people and a well-designed CRM reporting system.
In other organizations, there is limited marketing of this nature, with an expectation that sales will build relationships that lead to additional business opportunities. The question is: As a sales manager, how should you structure your sales team's expectations around prospecting?
First, it depends. What is your sales process? Are you selling large accounts with a complex sales cycle or are you more transactional, with short sales cycles selling to small business? Are you territory-based or open territories? Your business type will alter what works.
Second, it is my belief that salespeople need to prospect continually. The real question is how. Below are a few ideas with brief descriptions (brief simply because of space; if you have questions on the specifics, just ask!).
- Networking: Every salesperson should attend one event a month. This is not negotiable.
- Circles of Influence: Develop a list of individuals who can influence your sales opportunities or who can refer business to you. Depending on your business, these could CPAs, commercial real estate brokers, contractors, architects, et cetera. Each of these individuals needs to be contacted at least once a quarter.
- LinkedIn: Read my blog on Acumen power networking or ask me for it at Ken@AcumenMgmt.com.
- 20/20 Plan: Each salesperson sends two distinct direct mail pieces referring to your products/services to 20 suspects -- 20 pieces one week, 20 the next week. In the third week, the salesperson calls the 20 suspects. This process is repeated each week.
- Thought Leadership Events: Schedule one breakfast event a month with a topic based on thought leadership marketing. This event is driven by marketing, but the salesperson is responsible for calling/inviting individuals to the meeting. This gives the salesperson a reason and message to communicate to their prospects/suspects.
- Referral: The salesperson should ask their customers for referrals twice a year.
- Bus-Ecosystem: Each salesperson should develop relationships with three to five other salespeople who sell non-competitive, but related products/services into common marketplace.
- Who-You-Know List: Each salesperson should create a list of everyone they know -- friends, business associates, professionals. This is a good sales meeting idea to come up with "titles" of individuals your sales team might know. Then, make sure they know what you do and what problems you solve using a personal letter.
- Review Calendars: A good thing to do this time of year is to review your calendars for the past 12 months. You might find someone you had forgotten to follow up on.
That's a good list to start with. What prospecting ideas are you using that are working? Care to share? Let's build up a comprehensive list so that everyone can finish the year strong and be positioned to make 2015 your best year ever.
Posted by Ken Thoreson on September 29, 2014 at 11:55 AM0 comments