Every January, no matter where you look—magazines, newspapers, TV—everybody talks about how it's time dive in and get a "new you" makeover. Reinventing yourself ought to be about more than just getting a new outfit and haircut. Why not start by making changes where it really counts—in your sales results! More sales this year means more commissions…which means you'll have more money to really spoil yourself later on.
The first step is to know where you stood at the end of last year. Like most sales professionals, it's likely that you can quickly recite exactly how much you closed and how much you earned last year. But have you stopped to consider just how productive you were? It's a question worth pondering.
Recently I conducted a poll with my clients—most of whom were in leadership positions—to determine their biggest sales concerns. The overwhelming answer was sales productivity. In other words, how much revenue per period can each team member produce, and how can we make that better.
You can chart your sales productivity daily, weekly, monthly, quarterly or even annually. Given that we have just finished a calendar year, you have a great opportunity right now to take a look at your own productivity or that of your team from last year.
There are two ways to do this…
1. Look at your ratios
At a minimum, sales reps should produce 6-9 times what they're paid. The best companies achieve ratio of 10-12 times what they pay their sales staff. If the total take-home pay for a rep (commissions and salary combined) is $100,000, then the best reps produce at least one million dollars in sales. Granted, these numbers are moving targets. You need to take into account accelerators, bonuses new hires, among other factors, but it is nevertheless a reasonably accurate measure to use when assessing sales productivity.
Let's test your own productivity for last year. What was your total take-home pay (i.e., salaries plus commissions)? What was your total revenue tally? Simple division will tell you if your productivity levels were mediocre or high. I recommend that managers conduct that test for each team member, as well as for the entire sales team.
2. Examine your sales capacity
Another way to look at productivity is to analyze your sales capacity last year. Do that by multiplying the following:
(# of reps) X
(average hours you work per day) X
(number of weeks you work per year) X
(% of selling time) X
For example, if you worked 10 hours per day, 52 weeks per year, spent 100% of your time selling, and had a 100% closing ratio, your sales capacity would be a whopping 520. This, of course, is an entirely unrealistic number, but it serves to illustrate how this kind of analysis is conducted.
Realistically, most sales people work an 8-10 hour day, up to 46-48 weeks per year. Selling time per day is a huge variable. The key question is how much time you spend talking to customers. Most sales people report 30% of their day is spent talking directly to customers—and I find it can be as high as 60% and as low as 10%. If you're unsure, estimate that 50% of your time per day is spent selling and the other half is spent in meetings, at lunch, driving, talking to co-workers, entering data into CRM, research or doing general administrative work. Enter this number as a decimal in the formula.
Closing ratios can be as low as .008 (125:1), and as high as 0.5 (1:2). It depends on whether you're cold calling from the yellow pages (which has the lowest closing ratios), or growing your business based on referrals (which has the highest closing ratios). Be honest with yourself and make sure you consider your closing ratio from net new contacts to close—not just the closing ratio from proposal stage to close.
Now that you have your sales capacity number, you can set some goals to improve it. Try to get as close to the unrealistic 520 number we mentioned earlier!
What to improve first? For starters, don't think about increasing the number of weeks you work in the coming year. That number should be decreasing not increasing. Also, there's no point in adding sales reps to the equation if your sales capacity is already too low. Instead, consider the following activities.
Optimize your number of hours selling — Can you outsource some non-sales work to others so that you can increase the number of hours you spend per week in front of customers? Consider outsourcing low-return tasks (e.g., expense reports, preparation of slide decks, editing).
Improve your closing ratio — Are you asking for referrals every day from clients? Can you target your market to a smaller niche? Can you improve your qualification steps? Do you have a targeted marketing program to help the right clients find you? Are you reaching out to your existing customers at least once per month?
Sure, we all want improved productivity, but if you don't know how productive you were last year, how will you know what to improve? To reinvent your sales this year, you must know your benchmarks from last year. Once that's established, you can choose the right activities to improve. You must measure results at every step, and make decision based on the numbers—not your gut feeling.
As I do every year, I invite you to set a goal for yourself for the coming year and send me your implementation plan. I am happy to hold your feet to the fire every month—just a friendly check-in to see how you're doing!
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Make sure you check out Colleen's latest book, Nonstop Sales Boom for powerful strategies to drive consistent sales growth quarter after quarter, year after year.
Colleen Francis, Sales Expert, is Founder and President of Engage Selling Solutions (www.EngageSelling.com). Armed with skills developed from years of experience, Colleen helps clients realize immediate results, achieve lasting success and permanently raise their bottom line.
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