Last week I wrote about understanding the total cost of your Sales Person or your Sales Team. This week I wanted to share some suggestions for actually drilling down and calculating sales contact projections. Ultimately, you will want to calculate the average cost per sale.
Value of the Sales Person
Sales teams and the sales people within them are one of the most valuable and powerful elements in the sales and marketing arsenal. Face-to-Face Selling activity can achieve rapid and profitable results if monitored and managed well. My motivation for this series of articles is to help business owners better understand the cost and the value of their Sales People. I hope that this increased understanding will encourage them to put more time and thought into sales planning and target marketing to ensure they optimise their bang for buck.
Obviously, if you have sales history and data that can be accessed then this is the place to start. However, for a lot of business owners calculating sales projections for new sales staff can be a daunting task.
The most common mistake that I see is over-estimating sales outcomes.
This is usually through a combination of two factors. Firstly, setting unrealistic projections for the total number of unique sales presentations that can be made in a year. Secondly, under-estimating the amount of follow up and proposal work that needs to be implemented in order to actually convert a contact from prospect to a paying customer (This obviously impacts on the first point).
How many days a year spent on Selling and Marketing?
In one of my first jobs my boss showed me that I was only working 220 out of 365 days per year. Only 220 days per year! Naturally, I was shocked, offended, angry, hurt and I felt dirty. Yet I was quietly impressed with his calculation.
Funny thing is that 20 years later there are still only about 220 days available for selling and marketing activities!
Many business owners calculate sales projections assuming that their sales teams work on sales and marketing activities every working day of the year. Perhaps they do, but here are some items to consider as a quick reality check for you:
- No. of weeks of annual leave
- No. of weeks of sick leave
- Impact of public holidays
- Impact of training days and special events
- Impact of conferences, trade shows and other industry events
- Total No. of days available for selling activity
As a result of the items listed above you will have about 220 selling days available per sales person (give or take about 5 days). Who knows, you might do more training or have staff who are quite robust and never get sick. Please make sure your calculations are accurate for your business.
How many sales presentations per day or week?
Naturally, if you have historical information this is the place to start. However, if you are like many small business owners employing their first sales person you may be starting from scratch. If you do not have historical sales reports to refer to it can be beneficial to determine how much time per week is needed for the following activities:
- Organising and booking appointments
- Preparation for individual appointments and maintaining the company database after each contact (Tip – this is a hint i.e. maintaining the company database)
- Following up on sales presentations to determine interest regarding next steps
- Completing proposals or quotations etc.
- Following up on proposals and/or quotations to close the sale
- Completing all of the other activities that are required to progress and finalise the sale
- Travel time to and from appointments
- Physically making the sales presentations
From the information above you will be able to determine how many sales presentations your sales people will have time for in a given week. As an example, you might arrive at the conclusion that your sales people need two days for organising sales presentations, follow up and proposals. This would leave three days for actual Face-to-Face Sales Presentations. If for this example, a sales person can complete five sales presentations in a day then the average would be 15 sales presentations per week or an average of 3 Face-to-Face sales presentations per day across a typical 5-day week.
How Many Total Presentations per Year?
In bringing it all together you could use the numbers from above and conclude:
- Your team have 220 selling days per year
- Your team average 3 Face-to-Face Sales Presentation per day
- Resulting in 660 Face-to-Face Sales Presentations per year per sales person
If you calculated that your total costs per sales person were say, $150,000 per year for example, you could then calculate that the average cost of a Face-to-Face Sales Presentation is $227.27.
How Many Unique Presentations?
Closing the sale often requires more than one sales contact. This needs to be understood and accounted for if your sales projections are to be accurate. For example some sales may be completed after one meeting but others may require three meetings. If this were the case then you may conclude that the average is two Face-to-Face Sales Presentations per prospect. This would be irrespective of sales conversion rates. If this were the case your total of 660 Face-to-Face Sales Presentations per year per sales person would then result in 330 Unique Presentations. This means that your sales person would have presented to 330 unique prospects. Naturally, your average cost per 330 unique Face-to-Face Sales Presentations per year per sales person would be double your first calculation (i.e. $454.55 each unique contact).
Sales Conversion Rates
Let us reflect back on our journey so far. Last week we worked through issues to consider when calculating the total cost of your sales person or sales team. This week we considered the key metrics associated with calculating the exact total Face-to-Face Sales Presentations and also the total ‘Unique’ Face-to-Face Sales Presentations. Next week we will take a further step and review approaches to calculating Sales Conversion Rates and the ultimate cost of acquiring each individual new customer.