The fundamental equation of sales (part 3) - The Rock Solid Case Study

Case study no. 2 (The "Rock Solid" case) for the "Fundamental Equation of Sales":

Educational and Training Services Sales Department

X=T/(H*ARPU*N)

Lets say your monthly Sales Department Target is T=90,000 USD according to the budgeted income.
Your department's Hit Rate is H=10%, meaning your Department's consultants / account managers sign 10 contracts for every 100 visits they report.
Average Rate Per Unit is ARPU=3,000 USD. This is the average value of a signed Educational and Training Services contract.
Number of consultants / account managers in your department is N=4.
In this case X (the number of necessary visits per month per consultant) becomes:

X=90,000/(0.10*3000*4)=75 visits/month/consultant

Still good news! 75 visits per month means an average of 3.75 visits per day, round it to 4. This rate allows your consultants to properly prepare every detail of their consultative sales visits but not in the relaxed manner as in Case Study no. 1. Keeping in mind that on an average, a consultative sales meeting should not take more than 1.5 hours (which is very long!), there is one hour, maximum two hours left for your consultants to prepare everything they need for their meetings.

You will need perfect activity planning, very dedicated consultants and a great team spirit among your team. Why? Well, because you and your consultants are facing a tough job and you need to be supportive to each other. Otherwise, because of the very close limits your team morale could hit the ground and from that point there is even more work to be done.

What can you do from this point? In my opinion you have 2 key points where you could make a difference: 1st. The hit rate and 2nd. ARPU

In future posts I will treat each one separately and in detail because this is a battle many managers lose. They tend to overwork their consultants and add unnecessary pressure on their teams and the breaking point is not very far from there.

This is why I call this case the "Rock Solid" case. Rocks are tough and hard but they do brake at excessive pressure.

Questions:
1. Is your Sales Department in a similar situation?
2. How do you think you can influence the Hit Rate of your consultants?
3. How do you think you can influence the ARPU of your department?

The fundamental equation of sales (part 2) - The Happy Ending Case Study

Case study no.1 (The "too good to be true" case) for the "Fundamental Equation of Sales":

Web Design And SEO Services Sales Department

X=T/(H*ARPU*N)

Lets say your monthly Sales Department Target is T=21000 USD according to the budgeted income.
Your department's Hit Rate is H=15%, meaning your Department's consultants / account managers sign 15 contracts for every 100 visits they report.
Average Rate Per Unit is ARPU=500 USD. This is the average value of a signed Web Design and SEO Services contract.
Number of consultants / account managers in your department is N=5.
In this case X (the number of necessary visits per month per consultant) becomes:

X=21000/(0.15*500*5)=56 visits/month/consultant

Great news! 56 visits per month means an average of 2.8 visits per day. This rate allows your consultants to properly prepare every detail of their consultative sales visits in a relaxed manner. On an average, a consultative sales visit should not take more than 1.5 hours (which is very long!)
Further more, your department could easily cover a 20-30% Target raise in the near future and with efforts even a 50% Target raise.

My advice is to force a promotion or at least a salary negotiation following these steps:
1. Ask for a superior management position or, if you are not really ready for it, at least ask for a better salary.
2. In exchange, offer the achievement of a new set of objectives: 10%+ each month for the following quarter.
3. Push the team a little harder and achieve a 12%-15% monthly raise.

The outcome could and inside a objective driven company should be your promotion to the next level or your targeted salary raise.

Happy end for the moment.

Although this seems as I said before "too good to be true", in fact it is not. There are many sales departments in this situation. The figures are different for each company, but the number of visits required is still more than reasonable.
NOTE: Before engaging in any procedure restructuring process PLEASE do reassess your department's activity as a whole as there might be a source of discomfort among your consultants. Make sure the changes you are about to implement are not too much of a burden to your people.

Questions:
1. Is your Sales Department in a similar situation?
2. Do you think that there is any Sales Department in a situation like this?

The fundamental equation of sales (part 1)

How much can you ask of one of your sales consultants / account managers? Where is the limit between reachable and unrealistic? How many units can your team REALLY sell? How do you know if the budgeted income for the next year is tangible?

Well, in my 10+ years sales experience I found out the hard way that sky is one of my favorite limits but not the most often occurring one. There is a limit in EVERYTHING. There is one saturation point in all aspects of your job. Oh, yes! Even if you are a fresh promoted Sales Manager, start thinking about limits: your limits, your consultants /account managers limits. And then, strive to reach these limits.

Here is one of the main equations you have to take into consideration when establishing limits:

X=T/(H*ARPU*N)

where:
T - Number of targeted units to sell for one of your consultants (Target)
H - Number of reached goals on 100 attempts (Hit Rate)

ARPU - The number of targeted units covered by an achieved objective - Average Rate Per Unit N - Number of salesmen in your department
X - Number of required actions for the dream 100% Target achievement

By evaluating the number of necessary actions for your target achievement you can estimate the outcome of the month.
What do I mean by that? I mean that the number of necessary actions could well be too much for your department. More hours needed than available, more people needed than available etc. Or on a contrary the next month could be a great step towards your promotion.

Reading my next posts you will find few case studies and then my solutions to each identified problem.

In the end, I would love to hear your opinion on this subject and dare you to speak up your mind. Do you know other ways of KNOWING if or how you will achieve your targets?

Please use the comments option below.