What surprises me is that many business owners do not know how much their Face-to-Face Selling actually costs them!
This article is intended to encourage you to calculate how much your Face-to-Face Selling activity is costing you.
Understanding the total cost of your sales activities will make you love your existing customers even more!
Understanding your total Sales and Marketing Costs per Year
As a Marketing specialist and not an accountant or financial guru numbers are not necessarily my strong point. However, there are some basic numbers that we can all calculate that will help you understand the total cost of your Sales Activities.
Just how much your sales person or sales team is costing you may be a real eye-opener!
If you are the owner/operator of your business and the primary sales person then I am also talking about how much you cost! The numbers for each business will be different. I suggest you create a spreadsheet to complete your own calculations for how much your Sales Person costs per Year. At a top-line level you need to answer the following questions:
- What is the total cost of your sales person (or team) including total salary package, super, travel, supporting materials and other resources including overhead allocation etc.
- What is the total number of Face-to-Face sales presentations made during the year
- What is the total number of ‘unique’ sales presentations made in a year (this excludes repeat presentations to the same individual)
- What is the total number of sales converted in a year
- What is the dollar value of those sales and profit margin
In this article I am going to concentrate on point No. 1 above, understanding your total costs.
What is the total cost of your Sales Team per year?
It is natural to jump straight to the cost of your sales team’s salary package (or your own if you are the principle sales person). However, there are a few additional items to consider when calculating the total cost of selling activity including:
- Total salary package including super and WorkCover levy
- Cost of incentives, rewards and bonuses including any Christmas bonuses that may be provided
- Cost of motor vehicle, mobile phone, lap top and other tools
- Cost of travel and accommodation
- Entertainment and other related expenses
- Cost of supporting materials and activities such as samples, brochures, memberships
- Cost of conference and/or special event attendance
- Cost of support staff required to support the sales process
- Cost of reporting and management of the sales team
- Cost of software licences etc.
- Training and coaching expenses
- Contribution towards total company overheads
- Other activities and costs that contribute towards supporting the sales team and selling activities
I have worked with numerous clients to determine how much their sales teams cost them. Many clients had been used to simply using the cost of salary and incentives plus super as their total cost. On occasions I have calculated that the total cost of a sales person can be more than double the base salary.
Costs per Presentation and per Sale
Gathering the above information may be an exercise in itself. However, understanding these total costs will add valuable perspective to your sales planning and decision-making. It will be useful if you can refer to sales history or your projections for:
- The total number of Face-to-Face Sales Presentations
- The total number of unique contacts made (i.e. account for multiple sales presentations to the same customer)
- The total numbers of sales made in a given year.
From here you will be able to calculate the following:
- Average cost per Face-to-Face Sales Presentation
- Average cost per unique sales contact
- Average cost per Sale made
Sales Planning and Sales Volume Projections
The above information is useful just from the perspective of understanding your costs. However, there is also significant improvements that can be made to the quality of your sales planning and accuracy of sales projections. In articles to follow I will delve further into how to use the above information to develop useful sales plans and sales conversion and sales volume projections.
Until then I recommend that you invest some time in getting an accurate understanding of the numbers discussed above.