If time really is money, why do so many sales representatives squander it chasing anyone with a pulse, including their most horrible prospects? Because they still embrace one of the great myths of selling, common mistakes that drain profit and energy from a sales organization:
Myth #1: Everybody is our customer.
Myth #2: Every sale is a good sale.
Myth #3: Never take no for an answer.
Myth #4: There's always time to make more sales calls.
Myth #5: Sales people pay for themselves.
Why do sales people embrace these myths? Because their sales managers let them get away with it, either unwittingly or by design.
Deep down in our hearts, we know that these statements are untrue. We know that you can't please everybody, and that there are customers whose business is unprofitable, even damaging. We know that sometimes there really is no more time; that sales people don't always cover their own costs, that sometimes NO is the only answer we're going to get. But in business, we continue to act as if the Five Great Sales Myths are the basis of rational sales management. Enough already. It's time to equip sales manager with the myth-busting insights they need to get great performance from their people, with less cost, less effort, and far greater rewards.
In this research brief we will review each of the Five Myths in turn, provide a Mythbuster to reverse the practice, and end the brief with a set of five suggested Best Practices for Sales Management that will sustain and enhance sales force productivity.
Opportunity Risk describes the amount of targeted revenue that is put 'at risk' every time a sales person does sales work. Much as we would like it to be so, sales people simply do not spend 100% of their time selling to prospects. They also devote a surprising amount of time to non-selling activity such as record keeping, preparing reports, training, travel and the like. Studies show that the average sales person only has about 900 hours of selling time per year, once you take away all the required time devoted to boring stuff like expense reporting, travel, and conference attendance. That's less than 50% of a person's work year. A representative with a $1 million sales quota risks an $1,100 loss for every one of those 900 hours. Each time that representative wastes an hour on an under-qualified prospect or unproductive sales activity, the "risk value" of the remaining 899 hours goes up. And up.
So sales managers, sit up and pay attention. Unless you want your sales people to put your number at risk.
Myth #1: Everybody is our customer. In spite of the thousands of words that have been written about the value of selling to the right prospects, sales managers still tend to assess their reps' performance on volume, not potential. They act like activity is more important than results. So what happens? Sales people turn in lots of activity. Too bad that activity comes with an $1,100/hour price tag. The simple truth is that "everybody" is not your customer, nor mine, nor that of the business down the street. Only the customers who want our stuff, and are willing to pay our price for it, need apply. But if sales managers don't provide a benchmark for selecting those opportunities, a simple prospect profile, then sales people will do what comes naturally and call on anybody with a pulse and an address.
Surprisingly, fewer than half the companies we studied in our 2008 assessment of sales force productivity provided any sort of documented prospect profile. 54% stated that they either had no prospect profile at all, or an "undocumented" one. For "undocumented" read, "sell to anybody who'll write you a check."
This myth may be the most damaging of all five, since it actually encourages sales people to waste their very expensive selling hours on DOA's, prospects who are "dead on arrival" and whose business you probably don't want in the first place.
Mythbuster #1: The right prospects seek the value you add. In other words, sell what you do well to the businesses and people who want it. Sales managers have a simple solution to this dilemma, if they choose to take it: write down the criteria that characterize a qualified prospect. Give it to every sales person. And hold them accountable for using it.
Finally, make sure each representative uses the profile as a selection tool. Train sales people to ask probing questions that reveal whether the prospect is a reasonable match to the criteria. During sales meetings and individual coaching sessions, query the extent to which a particular prospect matches the profile. Guide the team to investing in prospects with a higher potential for lifetime customer value.
Myth #2: Every sale is a good sale. Myth #2 has been growing like kudzu ever since the recession of 2008. And like kudzu, it tends to choke out the beneficial growth we all seek. Whenever business is slow, unused capacity and idle labor (including idle sales people) drive anxiety levels through the roof. An easy, but not very wise, response is to chase smaller and smaller deals, without recognizing that the costs for winning these deals may outweigh the benefits of profit and reputation.
There's no getting around the fact that most businesses suffer painful losses during serious recessionary periods. But that doesn't excuse the fact that even then, some sales are simply better than others, and some are simply worse. A "good" sale should produce at least three positive outcomes for the seller: financial profit, positive resolution of a customer problem or issue, and new learning for the selling company. And for the buyer, a "good" sale must resolve their defined business problem with a solution that costs less than the cost of having the problem.
Mythbuster #2: A good sale must bring profit, learning and satisfaction to BOTH the seller and the buyer. Now that you have a definition of your ideal customer, add the definition of a ‘good sale.' Write down the margin you have to earn to achieve basic profitability, and don't violate it. Add other characteristics that define the ‘good' sale, such as evidence of customer satisfaction. Praise sales people when they decline business that is unprofitable or likely to disappoint the customer's expectations. The qualitative criteria of your Ideal Customer Profile, should include the exchange of value between buyer and seller; for example a good criterion for a company selling warehouse management software and services might be "Customer values optimum efficiency in warehouse operations and is willing to invest in it."
Seems simple, doesn't it? Remember this rule. Sell what you do well to customers who want it, at your price and in your style.
Myth #3: Never take NO for an answer. This myth is one of the most difficult to identify and therefore to uproot. After all, our society prizes this attitude; we build monuments to it. But think about it. Refusing to take "No" goes hand in hand with ‘everybody is our customer' and ‘every sale is a good sale.' If you never take NO for an answer, then you encourage your sales people to mis-use their scarce and costly time.
Always remember that a sale is not a one-way transaction. If it isn't right for one of the parties, then it is probably wrong for both. And it it's wrong, then don't keep throwing good money (i.e. Opportunity Risk) after bad.
Mythbuster #3: Don't beat a dead horse. Adopt an analytical attitude. Qualify each prospect, and each opportunity, carefully, to learn if the deal is in fact going to be (a) profitable and (b) satisfying to the customer. Assess the investment costs of continued sales effort, always remembering that your selling time is probably worth $1,000 an hour or more. At some point, the deal passes the point of diminishing returns. Guide your sales people to a more effective use of their time. Remind them that you, and by extension they, seek a high return on their hourly selling effort, usually around $1,100 an hour. And maybe much more.
Sales people thrive when they have the facts at their command. They need to know how much income is at risk for every hour of selling time. They need to have clear-cut criteria for assessing whether a given prospect justifies the investment of their time and effort. And they need to have the facts at hand to know when to bow out.
If they're going to lose anyway, they should lose early.
Myth #4: There's always time to make more sales calls. This myth comes into play when the sales team is focused on activity instead of results. But it's a dangerous practice. First of all, there isn't much more time left to make sales calls. If the average sales person has only 100 days (900 hours) of selling time in a year, or less, where is that time going to come from - sleep, sick time, training, keeping reports up to date?
Selling is hard work. To do well at it, sales people have to be on their game, physically and mentally. When sales people are burned out, physically tired, or in need of a break, they should take down time. They need it. And they're vulnerable when they don't get it.
Mythbuster #4: Make scarce sales time count. When sales people go after the wrong prospects, pursue unprofitable projects, or waste time on unproductive activities, then "more sales calls" may not equate to more sales. So the sales manager's job is to ensure that four things occur:
In order for sales managers to lead and coach properly, they too must have access to the right information. The Ideal Customer Profile and the Opportunity Risk value are two important landmarks for effective sales management. A third one is the way the sales manager defines sales stages. When the sales manager knows the sales person's Opportunity Risk factor, the extent to which the prospect matches the Ideal Customer Profile, and the current stage of the opportunity, that sales manager is equipped to be a powerful coach, and to ensure optimum sales performance.
Myth #5: Sales people pay for themselves. It's true that plenty of sales people get paid on straight commission, so it seems as if they can pay their own way. But it's not so simple. Sales people may earn compensation from a share of the profits, but their true costs include impact on customer satisfaction, market presence and awareness, lost opportunity and perhaps other considerations such as internal efficiency.
Mythbuster #5: They pay for everybody. The Sales department funds the entire business operation. So sales people have to do much more than pay for themselves. They have to pay everybody's salaries, fund R&D, underwrite marketing expenditures, and put enough reserves on the books to justify investments in capital equipment. And they can't do that if they don't have the right support and guidance.
Replace Myths with Best Practices
Selling is probably the single most important contributor to the health of a business, even more important than products and services. It's a difficult art to master. So it pays to develop good mechanisms to support and guide the sales effort. Here are five Best Practices that help sweep away the myths and make the Five Mythbusters come alive. They are:
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