Continued Q&A From Our October 2017 Webinar

In this blog posting we will continue to address the many questions that we received on our latest webinar on improving profitability.

Q: How can we measure the true cost for an individual salesperson based on the number of leads they receive?

A: There are several things you should be looking for:

The first is called an efficiency rating. Take the number of leads that have been issued to a salesperson as appointments (no allowances made for the inability of the salesperson to make a presentation). Divide these into the net revenue sold by the salesperson in that period.

Example: Assuming that the salesperson was issued 24 leads, set appointments, in one month and sold 6 approved contracts at $10,000 each (total $60,000) he is selling 25% of the leads issued.

And — dividing the $60,000 by the 24 issued leads, he has an efficiency rating of $2500, meaning that for every lead he is issued he is averaging a net of $2500 revenue per lead issued (remember he sold 1 out of 4) so the revenue for 4 leads was $10,000. He had 6 sales, (1 out of 4, 24 leads). When training this individual, that is the first measurement.

The second measurement is a little more complex, but in today’s market, even more important. First you should know the cost of an issued lead, for example, you may get leads from various sources, print ads, or those from canvass shows and events, television, whatever. Some of the leads you get may never convert to an issued appointment. These add to the cost of the issued leads. If you take the total of all your marketing expenditures for one month and divided it by the total number of leads issued, you would arrive at the cost of an issued lead.

Incidentally, the average cost per lead issued throughout the US, back in the March survey for the prior year, was in some cases as low as $185 and in some over $700 (average $375). 24 leads at an average cost of $375 each = $9000 x 12 months = $108,000 invested in leads for the salesperson.

If the salesperson sells a net of $1 million revenue (installed business) then that salesperson’s leads cost is 10.8%. If the salesperson sold only $800,000, it costs 13.5%.

Q: Does purchasing (from vendors) via credit card increase cash flow?

A: It depends how this is utilized.

If you have established a good credit rating with your vendor, your business is valuable and the use of a credit card enables your vendor to get immediate payment. Many vendors utilize credit card sales because it completely obviates carrying an account.

Now, examine your statement from the issuing bank for your credit card. You will note that your account has a “close date” each month. If that close date were the 23rd of each month, then a purchase made on the 24th of that month paid for by credit card will be due 30 days later (this may vary based on the type of card you have); however, in essence your good credit rating and your prompt payment of your credit card indebtedness has given you an extra 30 days use of “your cash”.

Then examine the credits earned by your credit card usage, which can be utilized for vehicle renting, meetings or travel expenses, office equipment, etc.

Q: What is your solution to the high turnover for finding salespeople, canvass and events managers?

A: This requires a complex answer. Recruiting, in general, has become very expensive. Turnover is costly. The amount of time it takes to advertise, interview, hire and train is costly. In the case of salespeople even more costly, when you consider, once they are trained you are going to be giving them leads (issued appointments), which by an earlier example, could be $375 for an issued lead and in that same example, the salesperson was only selling 1 out of 4. That is a cost of $15,000 in one month.

However, none of what was just mentioned answers the question. In many organizations, mis-hires are normal, not exceptions. In certain classifications, new hires didn’t fulfill expectations. Years ago, we worked on methods and formulas to offset what we call the 13 Immutable Laws (see below). Our answer to these issues includes the use of behavioral profiles, specifically designed to offset these immutable laws and assessments to measure sales aptitude (when hiring salespeople). Note: To receive, at no charge, a sample of the behavioral profile or the sales aptitude appraisal, email your request to admin@daveyoho.com c/o A. Ward.

13 IMMUTABLE LAWS FOR HIRING PEOPLE ©

  1. Hiring the right person takes twice the time you expected and much more time than you seem to have.
  2. The true cost of “mis-hires” doesn’t show up as an isolated item on your operating statement.
  3. After numerous interviews or fewer applicants, less qualified candidates start to look better.
  4. The majority of resumes received seldom match the job description of your search. Most are products of creative writing.
  5. The 3 keys to recruiting; (1) Can they do the job? (2) Will they do the job? (3) Do they fit the business plan or model of the organization?
  6. “What ever happened to “what’s his name”?” is the story of the last person hired, who you believed would be a super star and wasn’t.
  7. “Gut feelings” work best when indicating it’s time for lunch, and seldom when it comes to choosing the best candidate.
  8. Unless the interviewer has been trained in a modern recruiting process – mis-hires become the rule rather than the exception.
  9. Great salespeople seldom become great sales managers.
  10. Hiring salespeople requires a deep understanding of the job role, usually, on a first person basis.
  11. The ideal candidate – may go “undetected” due to poor or improper interviewing methods.
  12. A candidate’s true behavior is usually “masked” during an interview and can be discovered by a behavioral profile or by disappointment after being hired.
  13. You cannot use your personal standards or what motivates you, to conduct an effective interview.

Q: How do we get more referrals?

A: If you ask those who run companies or those who “sell” for companies, they universally believe that a “referral” is a great lead. Some call it their favorite. Many relate it to their brand or “customer satisfaction” rating in their market. Some companies emphasize the age in history of their company, all of which raises the question, “so why don’t you get more referrals?” The answer is – in all probability; you (your people) didn’t ask for them or ask for them properly.

Incidentally, there are some consumer protection regulations, which restrict the manner in which you can ask for a referral (this may sound funny, but it is true). Let’s confine our suggestion to asking for them after the sale is made and since the regulations exist in most markets in the US, the request for referrals should include reference to “now that you are our customer”. A similar phrase should be built into the “post close statement” and it helps to have this in a printed format.

The verbal statement might sound like this:

“Once your job is in progress or sometime shortly after completion.  You will note that some of your friends, relatives and or neighbors, will admire what you’ve had done and may even make a statement such as, — this looks great. It isn’t something that we are ready to do, but we will get in touch with the company that did your work.”

“It is at this time Mr./Mrs. Homeowner, that we ask that you make a note of the individuals name and simply tell them, you would like to turn this in to the company that did the work, not to pester you, but to put you in their system and send you information if product changes are made and/or special prices arise.”

Note: This is purely an example and not one of our stronger ones. However, if your company has a coupon book; something that offers a bonus, prize or dividend for referrals, the same printed format we mentioned earlier can act as a receipt that they received one of these.

  • When the job is completed, whoever wraps up the paperwork should remind them of this.
  • 30 days after the job is completed, your customer satisfaction employee should call them and repeat the offer and perhaps email them in a format again.
  • 60-90 days later, they should be solicited again from your office or call center.

This latter process should be taught to newly hired sales trainees and if they are successful in the introduction and referral leads are the outcome, the salesperson can be bonused on issues such as the number of leads and the revenue acquired through this source.

If you missed the webinar we encourage you to review it now and even if you did participate, re-watch it as you will reinforce what you learned.

Stay tuned for more webinars in the coming months.

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