If your company’s maintenance person bought $500 of supplies to repair a specific problem, you would pay the bill with little question.
But what if the maintenance person spent $500 every day, you would have questions like:
- WHOA!! Do I know exactly what it’s for?
- Who authorized it?
- Is there a priority list?
- What’s the payback?
- How do I know the expenditure will solve the problem?
- Do I need to spend at all?
- Should I be spending it on something else?
You would put together a spending plan and schedule to make sure Maintenance was spending their budget correctly, getting on-time deliveries and doing preventative things to avoid future catastrophes. It would be regulated and managed to the nth degree.
If you’re so smart about controlling Maintenance, how come you don’t ask the same questions about the Business Maintenance Department: Your Sales Department? No maintenance group is more important than this one. It maintains the current business and maintains the business rate of growth. It also may be spending as much as $500 a day per person.
What is the cost of a sales call?
Annual compensation is only a fraction of the real cost of selling. Surveys of large companies show that the cost of each sales call varies from $100 to $750. The low end of industrial sales calls is about $200. And if air travel is involved, the cost per call can be much more. Some companies report costs of $750 per sales call.
Sales costs per call are determined by summing all direct sales expenses per individual salesperson (salary, benefit allocations, travel cost, entertainment, supplies, proposals, promotion, etc.) and dividing by the average number of calls made by that person in the same period of time.
Let’s start real conservatively. A salesperson “on the road” working as an employee with a $35,000 compensation, has $7,000 in benefits (insurance, taxes, pension, holiday pay, etc.), turns in a $12,000 annual expense reimbursement (travel, entertainment) and uses $3,000 in promotional materials and sales literature. That’s a total of $57,000 for one person.
With three face-to-face calls per day, 4 days per week, 48 weeks a year, that’s 576 calls. So, it costs you $100 per sales call. WOW. And that’s a low number by most industry statistics.
Here’s your challenge: Go back to the seven questions you just asked the Maintenance Department spending $500 a day. If you can’t answer the same questions for your Sales Department, your costs may outweigh your profit.
The “Head in the Sand” Syndrome. “My Sales Team is top drawer!” (you are correct). “They are Pros” (absolutely). “They know what to do in the field!” (I agree). “They know what I need them to accomplish” (maybe). Take the challenge. Divide their wage plus their other costs by the number of sales calls they make, then gasp! Now pull your head out of the sand. (I’m being polite).
It’s 2 PM. Do you know where your Sales Force is?
Of course, you’ve got the best and most loyal sales people. Of course, they’re working hard for you.
It’s 2 PM:
- Are they in front of the right customers?
- Are they at your best customers too frequently? Not frequently enough? Not at all?
- Are they balancing business maintenance with business development?
- Are they seeing enough customers in a day, week, month to fill their pipeline (exceed their goals)?
- Do you know if they have a chance of making their budgets (without the advent of a windfall sale)?
- Are they spending your money the way you expect them to spend it?
It’s 2 PM. Do you know where you are?
- Have you worked as hard for your salespeople as you expect them to work for you?
- Do you have a feedback, control and monitoring system?
- Do you track each salesperson’s activities and performance so you know when and where to help them?
- Are you confident you will meet your sales goals?
- Have you provided your sales team with efficient contact management software?
- Do you utilize the latest technologies (laptop computers, pagers, car phones)?
- Are you at Maximum sales efficiency and minimum cost per sales call?
- Do you know many of your people are in trouble making goals?
- Do you know how to help them if they are in trouble?
The road to success is a two way street.
Do you have a plan that breeds successful salespeople and minimizes your costs? Management (that’s both Sales Management and Senior Management) needs to plan, not just set goals and budgets, for the Sales Department.
Management is responsible for their salespeople to be calling on the right markets and customers with the optimum frequency of calls. There needs to be a detailed plan for filling the sales pipeline. (How many of your sales people tell you in the fourth quarter: “Don’t worry, I’ll find the business.”)
Success Tactic: There is no moral to this story there is only morale. That of your Sales Team. So when you prepare them for battle, but take off their armor and unlock their handcuffs. Train them. Support them. Encourage them to succeed by giving them success tools. Lead them. Make them mobile and agile not hostile!
Sales Call Cost Worksheet. Calculate your cost per sales call for individuals and your sales department. Just go to www.gitomer.com, click Access GitBit, register if you’re a first time user and enter the words, Sales Call, in the search box.