In this video tutorial Professor Drew Boyd discusses the need to optimize a company’s current resources before exploring new sales growth opportunities. By providing specific formulas and examples, Professor Boyd demonstrates how to maximize the resources within your grasp as you take advantage of the new growth opportunities.
- Before identifying new sources of growth, it makes sense to optimize what you currently have. After all, you've invested a lot of time and resources to commercialize your products and services. It makes good sense to make sure you're getting your money's worth before chasing new sales opportunities. You want to optimize by measuring both the outputs of your sales activities as well as the inputs. The outputs include things like their sales revenue, number of units sold, gross margin, and number of new accounts.
Inputs are all the activities that go into earning those sales. These include things like the number of calls made per day by your reps, the number of days worked, the actual selling time per call, as well as things like number of phone calls made to prospective clients. But also look at your hiring, training, field deployment, and compensation programs. They may need tweaking to get optimal performance. But the most effective way to optimize is to look at the ratios of inputs and outputs.
Here's an example. Imagine you're evaluating two sales reps. One of them has made 100 calls this month and the other has made only 90. So, which rep is doing the better job? Well, if you look at just the total calls, it would appear the first rep is working harder. But when you consider the number of days worked, the picture changes. You should compare the ratio of sales calls made divided by the number of days worked. Look at this example. Rep A has made 100 calls in 20 days for five calls per day.
But look at rep B. 90 calls in 15 days equals six calls per day. Viewed this way, clearly, rep B is working harder. Now, here's a tip. Look at your sales objective and create a ratio of outputs divided by inputs to achieve those objectives. Look at this example of how these ratios can be used to create a sales effectiveness index. The index equals calls divided by days worked times orders divided by calls times sales divided by orders.
Let's go back to our example. Rep A has produced $250 per day, but look at rep B who has produced $300 per day. Once again, rep B is more effective even though she's working less days and not taking as many orders per call. But she seems to be focusing on higher value sales per order. When you evaluate your reps using this index, you're going to see exactly who's getting the most output for the amount of input they make to the job.
So, use this index as a guide to what needs change to get optimal performance. If I were rep A's manager, I may want to go on a sales call with them and coach them on ways to get higher value sales per order the same way rep B is doing it. Sales growth opportunities are out there to be taken advantage of, but don't overlook the ones right under your nose. Keep your current sales structure operating at peak performance so you can go out there and hunt for new sources of growth.