Closing Ratio

A simple way to evaluate your performance as a salesperson or as an organization is to determine your closing ratio. What percentage of your activities results in success? Over time, is there a trend upward or downward? Your closing ratio is a great barometer for the status of your career and your business.

Calculating your closing ratio is not rocket science. If you deliver ten proposals and close two of them, your closing ratio is twenty-percent. It is simple math.

I have a client who has increased their closing ration from seventeen percent to just under thirty percent over a five year period. Now, that is real progress. Getting there wasn’t easy.

The company made an effort to improve success and thus increase sales. Step one to improve results was to learn how to say no. In other words, they tracked and began to recognized opportunities that were winners and learned what opportunities they had little chance to win. They learned to pick their fights. Saying no to an opportunity is not always an easy thing to do.

Time is a precious commodity in business. Spending time on good projects and passing on long shots naturally improved the odds for my client. Losing is not fun. In reality, we lose more than we win, so winning more orders is great for moral and for your income.

Not everyone agrees with my argument. An associate recently told me that anyone with a closing ratio over ten percent isn’t trying enough. He thinks that if you make a sufficient amount of sales calls and proposals that you will lose more deals. I don’t agree with his logic.

Winning is more fun and profitable than losing. Figure out what works and what does not work in your world. Learn to say no to bad business opportunities and then keep score by measuring and tracking your closing ration.

Good selling.

We Went to a Picnic

I have been consulting with my marquee client for five and one half years. It’s been a great engagement. My client has become one of my best friends. I have been able to help him make his vision a reality. Over time, sales have soared and the company grew from fifteen employees to sixty five. A great company, a leader with a vison and a determined dedication to reach its goals.

The company manufacturer’s pollution control equipment. It is a great market. When we complete a project the result is clean air, clean water or both. The payoff is job creation, a cleaner environment and profit for the business. What could be better?

We design and build equipment for business, industry and municipalities all over the United States, North America and the world.

So then, where’s the problem?

We don’t do much business in Michigan, other than with the automotive companies. It’s our home state. This fact bothered me. What to do?

The answer to the problem was to reach out to the other major corporations, utilities and municipalities in the state. I was convinced that if we could get in front of environmental engineers at these huge organizations and tell our story, doors will open, we will be invited to compete for environmental equipment locally and book sales in our backyard. It sounds easy enough. It’s not.

We have two monster big utility companies in Michigan. They have significant needs for our type of equipment partially due to the need to replace older, poorly performing equipment and partially because of the government. A nudge from the EPA will gets everyone’s attention.

So, last year I started attempting to reach out to these utilities, locate decision makers in their organizations and get in the game. The problem was getting the names, phone numbers and e-mail addresses of key contacts. Who to call? When I did penetrate the curtain protecting these people from me, they either didn’t respond or turned out to be the wrong person. I wasn’t surprised by the recurring outcome but I didn’t stop trying.

To my surprise, I got word from a colleague at another company that the big utility was hosting a picnic for their employees and vendors. This was exactly where we needed to be. I got the contact information for the organizer. I asked an associate to reach out and ask if we could attend. By golly, they said yes.

Our outside salesman and I went to the event, set up the display table and proceeded to meet people and tell our story. We identified and spoke to the right people. The outcome from the picnic is an open door for conducting lunch and learn presentations for the decision making engineers. And that’s where we find ourselves today. The door is open, the carpet is out and the decision makers are welcoming us to compete for their business.

Was this luck. No, I don’t believe in luck. That’s magic. I’m not on the magic team. My take on this is that it is a case where planning met opportunity. We had an opportunity, recognized it and went for it.

Will we book business from this event? I can’t say. What I can say is that we now are on the radar of the right people because we went to a picnic. And, the food was pretty good too.

When Sales Tank

So, you are moving along, growing your book of business and feeling pretty good about how things are going when your revenue takes a sudden tumble. What the heck? What happened?

If you are out there, I know this has happened to you. I have experienced and lived through this more than once in my forty years plus sales career. It is discouraging, but there is no reason to panic. Take a step back. Take a deep breath and find out why sales have fallen.

A few places to look…

Why do people give you money? This is your value proposition. It’s the reason that you get the purchase order instead of your competition. Have you stopped reminding your customers of why you should get their business? Or, has your value proposition lost its luster and needs an update. If you are driving business by being the lowest price you are vulnerable to let’s say…Amazon.com and a host of others. There has to be a compelling reason to buy from you. Feature your value.

What are you doing differently than before? Have you stopped being a problem solver and turned into an order taker? That could be a core source of the problem.

Is your competition out hustling you and/or out smarting you? Better yet, do you have new competition that you weren’t aware of? Find out and if there is a new player in your back yard, learn who they are, how they work and where they are vulnerable. If your competition is taking your business because of effort, better sales skills or better product and industry knowledge, you have work to do. Fix it.

Has anything changed in your industry, your markets? You should know. Change is constant in business and in life. Nothing stays the same. Staying the course can become stale. Standing pat is not a good long term tactic. Be prepared for and recognize change. Then adapt.

I’m not asking you for excuses. Excuses don’t help. I am suggesting that there might be correctable reasons for a sales slump. Find them, fix them and recover your lost sales.

The Journey is not the Destination

I am a big fan of sales activities. One of my favorite sales trainers nailed the value of sales activities in very simple terms. “More sales calls equal more sales” and “No sales calls equal no sales”. It seems simple enough.

The sales landscape has changed a lot in the last forty five years. New tools and tactics have emerged to throw a wider net aimed at getting our message out and attracting customers (orders). The Internet, for instance, is a great sales tool. However, it is just a tool. No meaningful business to business sales are generated on the Internet. Ok, I purchased ink toner online last week. I would never buy a machine tool or a car online.

Companies invest a lot in their websites, literature, e-mail marketing, direct mail marketing, pay-per-click advertising, trade shows, and lunch and learn presentations and, finally, good old person to person sales calls. For many, these investments produce results. If they didn’t work, these tools and tactics would go away. But they do produce and are here to stay until the next generation of gadgets and gizmos emerge.

So, my question is: “Why do some salespeople thrive while others struggle to survive?”

It is easy to point to lack of activity, lack of product knowledge or lack of sales skills as the reasons for underperformance or non-performance. It also could be easy to decide that an individual salesperson is in the wrong profession, a bad fit. These are all good and viable reasons for failure.

What has me mulling this topic over is a salesperson who works for a client of mine. In spite of years of experience in the industry, a mastery of current sales tools, well documented sales activities and a great personality, he routinely under performs. He does not make his sales quota, ever, and once in a while doesn’t even sell enough to cover his expenses, let alone his base salary.

The logical thing to do is to fire him.

After some deliberation, I have decided that he has every reason to succeed. He may have me hoodwinked, but it occurred to me that this fellow spends a whole lot of time on his journey without reaching his destination. He doesn’t seem to understand that the only measurements of a salesperson are the sales he or she books and the profit margin earned.

I am going to try and get him on board with the program. If he needs sales training, so be it. If he still can’t close business, in spite of all of the things he does, he will have to move on.

Change

It is that time of year when I reflect on what happened in the last year and recent past and look forward to the future. From a high level view, the most dominant factor in our journey are the continual changes that face us. Change is relentless.

Embrace change? Should we embrace change? Maybe we should and maybe not. Not all change is good.

Over the last few decades’ pay phones disappeared. You can’t find a travel agent with a search warrant. You really don’t need a checkbook anymore to do your banking and to manage your finances. My new car doesn't even have a key. It has a FOB. What is a FOB? When I have computer or software problems I consult with my grandchildren. They know more than I do about technology. When and how did that happen? Yes, change is in the air and continues to happen.

My marquee client manufactures environmental equipment. Their systems help clean up air and water pollution. The Environmental Protection Agency (EPA) continues to enact and enforce pollution laws that are progressively strangling business and industry. Talk about relentless. The EPA has put business and industry under considerable pressure and continues to tighten down on polluters. Business and industry, in general, is not happy with these continual new rules (changes). On the other hand, my client is delighted by the new and ever stricter regulations. For them, this change is good, very good for business, it means money. So I guess the value of change is subjective.

I am looking forward to and planning my 2015 professional and personal life to the best of my ability. Markets, opportunities, technologies, processes, procedures and people continue to morph. I can’t stop change and don’t intend to try.

In my opinion, the best way to deal with change is to identify and attempt to understand changes and how they affect us. Once understood, we can deal with change, good, bad or indifferent and leverage it to your advantage and future success.

Order Taker? Order Maker?

I have not blogged much in 2014. I have been busy and distracted by summer, my garden, coaching football and other non-work stuff.

I had lunch with a client last week. He owns an industrial distribution company.

Distribution is a great business. Distributors sell things that customers need and make some profit from every sale…very straight forward. Not too complex. That is, unless the distributor decides to raise the bar, create separation from competitors and leave them behind.

My experience in distribution is that some distributors and their salespeople earn their business by offering the lowest price to the customer. This strategy is a loser. It is a race to the bottom. Winning orders by being the lowest bidder results in slimmer margins and slimmer sales commissions. Is that really a win? Winners strive to make money and not to give products and services away.

A solid strategy to hold margins and separate yourself from price cutting competitors is to provide added value to your customers. If you are in distribution, consulting, manufacturing or any other business you can button down your revenue and profits by being better, providing more value.

My client runs a relatively small operation in a world of big box distributors. He can’t compete on price. But the big boxes can’t provide the comprehensive services that his organization delivers on a day-to-day basis. His customers get expert advice. His team helps the customer make the correct product purchase every time and guarantees it. He maintains a repair shop that fixes broken equipment, configures new equipment before shipping and can reverse engineer and fabricate parts for older equipment, keeping those oldies but goodies in service. When you call his company you talk to a seasoned product engineer. When you talk to the big box order desk you had better have a product number because, for the most part, there is little product knowledge at the other end. My client  delivers added value to his customers and earns their loyalty.

By pushing the differential advantage message, “We’re not a catalog, we are engineers” my client has kept his competition at bay and maintained profit margins in a business world racing to be the low price option.

My own experience as a salesman for a medical supply distributor is another example of how to maintain profit margins by providing added value. The tactic was simple. It wasn’t my original idea. I had a once in a lifetime sales manager who ate our competitions lunch and taught me how to do it.

As I called on doctor after doctor I asked for a moment of the doctor’s time…not easy to get. My reason was that I had something new to show him/her. I made sure to have something new and interesting in my bag every day. Since I called on the doctors twice a month, I just needed to come up with twenty-four cool things a year to maintain my access to the doctor, his office staff and their medical supply orders. After a while my greeting when I arrived at the offices became “Hi Dave, What’s new?” Mission accomplished. I did have to offer competitive prices, but I did not have to be the low bidder to earn business. And, my margins were solid on the new and innovative things I detailed to the doctors.

The easy way to do business is to sell on price. When you earn little in profit you can make it up in volume…I guess. That is nowhere I want to be.

If you want to maintain fair margins for yourself and your company and endear yourself to your customers, it takes a strategic value added plan and a little more effort.

Are you an order taker or an order maker? The choice is up to you.

Good selling.

Sell More - Make More

What a concept. Sell more and make more money.

My first real sales job was selling medical supplies to doctors. It was a straight commission job that offered a salary for 90 days and then a draw against commission. That suited me just fine. In fact, when I received the offer I went home and told my wife “You won’t believe this. If I sell more I make more money!” Holy cow. I couldn’t wait to get in the territory and earn. I hit the ground running and made a great living.

Most companies that I deal with have some form of performance incentive in their sales compensation plans.

The primary two companies that I regularly consult with have different, but effective, commission plans.

The first offers a base salary and commission on every sale. The base is enough to get by on but the combination of the base plus commissions make the performing salespeople very well compensated. The catch is that the salespeople have to sell more to earn more. The irony of it is that their job is to sell. That is why there are employed. If they do their job they are well paid. If not, not so much.

So, sure enough, one of the salesmen just wasn’t performing and complained about his income. When we tried to work with him and help him close more business he abruptly quit for a “better job” and more money. I am guessing that his job search began when we took notice of his poor performance, kindly confronted him and thus triggered his exit decision.

Now, fast forward two months. He decided that he had made a bad decision. He realized that he had walked away from a great opportunity and asked to come back. Bringing him back didn’t make sense. He couldn’t close business. He completed a lot of sales activities resulting in few sales for the company.

A lesson to be learned is that not every salesperson is created the same. Some “get it” while others do not, and all points in between. Selling is not for everyone. The man I have mentioned has a great personality, has a good work ethic, is intelligent and has all of the tools to succeed but probably needs to get out of sales and get into something more aligned with his abilities.

I have never heard of a company telling a salesperson to “slow down, you are booking too much business”. That will never happen. I also know that companies are delighted to cut big commission checks to honor sales accomplishments. As sales and profits grow, so does the company.

The bottom line is that salespeople have dominion over their income. Compensation plans vary but one thing is certain. If you sell more you will earn more. It is fair to employee and employer alike and it is the truth.