Last updated on May 13th, 2019 at 02:27 pm
The real cost of sales
By Jerry Stapleton and Nancy McKeon, for SBT
When we think of "cost of sales" what usually comes to mind is the direct expenses associated with acquiring customers: salespeople’s salaries, benefits, travel and entertainment and the like.
A popular business magazine conducts a study every year to calculate the latest "cost per face-to-face sales call" (The latest number, incidentally, is around $700). But that way of thinking about cost of sales is incomplete, understating-often by orders of magnitude-the real cost of sales.
In most companies, salespeople have a certain power to color the bottom line in shades of red or black that goes far beyond what we often think about.
In a recent column, I defined the four ways salespeople can do this. One of the four is that they commit their company’s resources according to potential return. Let’s drill down on this one because there’s some serious money at stake.
Here’s an example. Gary is sitting at his desk working and probably wishing that things were a little better than they are. Times just aren’t what they used to be at Gary’s company. Business is slow. Suddenly, a request for proposal shows up in his inbox. He prints it out and peruses it. Looks like a beauty. Being in sales, he takes the lead on coordinating the response. Like most RFPs, this one will require input from numerous people throughout Gary’s company: the techies, the bean counters, production staff, etc.
He pulls the team together. They look over the RFP, agree to their respective duties and go to work on the response. About twelve man-days later, the proposal is off to the prospect, ahead of the deadline. Gary starts the follow-up process, "How are we looking?" "When will the decision be made?" he inquires. After a few weeks of this, things go quiet. Well, you know how the story ends.
Now we’re talking cost of sales! If Gary had asked the tough questions before deciding to respond to this RFP, he would have learned that this "opportunity" was really just so much tire kicking.
For years we have been saying that in this new era of selling, one of the greatest contributions salespeople can make to their companies is to size up opportunities and then make judgments on what resources to put into winning those opportunities.
Well folks, it ain’t gettin’ done. And it’s costing your company a fortune. Let’s remedy that. If this is a problem in your company, here are three things — ordered from hard to hardest — that you can do to fix it.
Hard: Give them permission to say "No"
Everyone knows that salespeople hate to say "No." They also hate to ask tough questions. So you have to give them the approval, indeed the exhortation, to do so.
It’s up to you to create an environment where salespeople feel a sense of accountability for your company’s money to the point where they are not afraid to ask customers the direct questions that need to be asked about how real an opportunity is and how likely your company is to win the deal.
Don’t think you can say it just once, though. This is a cultural thing. You will need to reinforce it at every turn.
Harder: Give them the criteria to decide
It’s one thing to tell your sales team that it’s OK to ask customers direct questions and to say "No." It’s quite another to give them the rules and guidelines for doing so.
Sizing up an opportunity’s winnability — and its "reality" for that matter — is not an easy task. It requires far more than just looking at the technical specs to see how well they match your company’s expertise. It requires understanding the business drivers behind the project, the real decision process, the political agendas, and the competitive landscape to name just a few. It’s your job to give your salespeople the questions to ask.
Hardest: Give them the words to use
Maybe you think you should be off the hook here. "I pay salespeople for this skill, don’t I?" You might think that’s the case. But we’ve yet to meet a sales team that understands its role in this way.
Either because of formal definition or by inference, virtually all salespeople put "responsiveness" at or near the top of the list of their job descriptions.
Because of that orientation toward responsiveness, a mutual value discussion of this type falls outside of the range of even the best sales professionals. But be careful here.
If a salesperson says he or she does this, be sure to listen to the exact words. Most likely, the language sounds something like, "We have a few questions we’d like to ask you before we get started on your proposal." It should sound more like, "We’re trying to make some decisions about resources. So before we roll up our sleeves and start dedicating time to your proposal, there are some things we need to better understand."
The difference is subtle but powerful.
Elevate the accountability bar for your sales team. Elevate their proficiency to ask the tough questions and to say "No." And, in the process, elevate your company’s profitability.
Jerry Stapleton and Nancy McKeon are with Stapleton Resources LLC, a Waukesha-based sales force effectiveness practice. They can be reached at 262-524-8099 or on the Web at www.stapletonresources.com.
Sept. 5, 2003 Small Business Times, Milwaukee