Sales Managers: How Much Does a Bad Week Really Cost?
Everyone has a bad week, or simply a bad day. Even the best sales professionals. Not every deal goes the right way, or some take far longer than expected. And in the meantime, you still have to hit target — that goes double for sales managers and directors.
Both managers and sales people are focused on getting deals on the table and closing them. That goes without saying; but, they approach these goals with different motivations.
When a sales person misses target, they generally worry about not earning a bonus/commission that month. Getting sacked is high on their list of concerns, but there are safeguards, such as contracts, training and a formal process.
Whereas managers and directors have to consider the bigger picture.
Sales targets and revenue goals are closely linked. Missing activity targets means revenue is likely to be down. Potentially harming the entire business. On top of that, there is the cost of employing a sales person that is underperforming. Now, there could be many other reasons a company fails to hit revenue. Not everything comes down to the sales teams activity. However, for this article, let’s work out the true cost of a bad week for a fictitious sales person working in a mid-sized SME in the UK.
Playing the Numbers Game
Sales is a numbers game; you cannot manage the output, i.e. revenue but you can manage the input. Making sense of the numbers means understanding the logic behind them. Therefore, we have already worked out — for the sake of this example — that there are five sales people in this fictional team, all earning around the same. It is a competitive market, with a fast moving sales cycle, which means a comfortable base and low commission is paid.
We are also using information from our two previous articles, since working out the cost of the average week means knowing how many meetings an sales person should take, on average.
Based on a twelve-week timescale (one-quarter), let’s also assume that an sales person makes 5 meetings every day. That’s 300 potential sales meetings per quarter, with several deductions:
— 6 days holiday (on average): 30 calls
— 4 days admin, training, etc.: 20 calls
— 50 calls/meeting time for prospecting (hunting)
Total number of meetings*: 200 every 12 weeks.
For this example, meetings means a sales person sitting down with one account. From all of the data we have gathered, to ensure sales staff have a manageable workload, whereby they meet with all of their accounts every quarter, we have found that 200 is an ideal number
Now we have that figure in mind, here is the average annual cost of employing a sales person in a British SME.
With those figures worked out, we can accurately cost a week of meetings, depending on how active and productive — or not — those meetings were.
A sales person having a bad week, or month soon gets expensive, regardless of the lost sales and missed opportunities. Taking fewer meetings means each meeting costs even more, and the pressure to hit the big deal rises. Based on 30% gross margin at five calls per day a sales person needs to sell on average £330 per visit while at three calls per day this rises to £553 and that is just to cover the cost of the visit. Taking the wrong meetings — clients who rarely buy, or those where a sales person spends more time talking to a gatekeeper than a decision maker — is equally expensive.
When applying this to your own team and budget, consider the following:
- What are our gross margins? How much does an account need to spend to justify a sales visit? Are our sales people meeting with the right prospects/accounts and decision makers to achieve this?
- Are they making enough calls to get enough meetings to make them cost effective?
- What is the variance across my team in activity and how does that relate to sales?
- Are they meeting with the highest value accounts often enough? Apply the 80/20 rule.
- Is your pipeline management working? Here are a few things worth thinking about.
Find out how we can stop you worrying about the number of meetings your sales people are taking so that you can take action quickly to ensure they hit target: SalesVisits.com.
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