A new season of sales: Contractor's Corner - Mar 2016
By Dave Stafford
According to Chinese philosopher Lao Tzu, “A journey of a thousand miles begins with a single step.” But before that first step, you must define where you want to end up. To do that, you have to analyze where you’ve been. Is it any wonder that businesses spend so much time in planning?
As you are reading this in the first quarter of 2016, most of you will have begun this analysis during the last quarter of 2015. If not, you should have. How did your business fare during 2015? Did you meet your volume goals? What about profitability, expansion within certain a certain business niche, quality and personnel requirements? When reviewing your 2016 checklist, here are some things to consider.
Where have you been? Most flooring companies evolve from a single segment into a myriad of other businesses. They find a single segment too limiting and are unable to expand the way they want.
One highly successful East Coast flooring company was the premier installation workroom within a large metro area. However, its marketing was limited “to the trade.” The firm could not make enough profit on installation and supplies and was at the mercy of its customers’ own business cycles. The owners wisely decided to enter the commercial arena with high quality broadloom and carpet tile. Their contacts among designers and general contractors made for some instant successes.
Another company leveraged a cash and carry retail store into light commercial work and on into local, state and federal government contracts. A specialty cleaning company learned all about marketing its unique product and services, and to the staff’s delight many clients began asking, “If I need to replace carpet, will you also provide carpet and carpet tile?”
More than one company has entered a related business when a valuable supplier suggested it as a way of increasing their business. “Jeff, I happen to know a corporate client is looking to let a turn-key contract for some office space they want to occupy. You’d have to handle the design concept including the design boards, painting, wall covering and flooring. Of course, I’d like for you to offer our products for their consideration. I’ll recommend you, so don’t let me down, okay?”
A new niche for you is limited only by your imagination, expertise, ambition and capital.
Where are you going? To have the most effective and realistic goals requires you to build the business piece by piece. If you don’t like its numbers or it doesn’t reflect the outcome you want, take it apart and move the pieces around to arrive at another total. What if you did more institutional business or bid on larger commercial work? Which segments are realistic and which are pipe dreams?
My suggestion is to use the component approach, whereby you review the niche segments that comprise your business from the top down, starting with recent history. Use statistical info from industry sources like the WFCA or cooperatives such as StarNet to benchmark your results. If you’ve found your profitability lagging or sales costs creeping up, this comparison among your peers may pinpoint where you’re lacking.
Where do you feel growth is most likely? What was your growth rate over the last three years? What is reasonable growth for this year? Now look at each niche and the forecasts from sales personnel. Are the two in sync? Do you need to hire more people—or asked another way, does extra personnel cost and the learning curve make sense in order to achieve more volume? Sometimes the extra cost, physical plant and infrastructure make a new business impractical, since it will hurt other profitable sectors.
How does your sales staff stack up? The most logical times to do a thorough review with sales personnel are late in the fourth quarter of the year, prior to their sales planning for the next year, and early in the first quarter, when all sales numbers are finalized. The numbers must be accurate. This eliminates the guesses and excuses.
Calculate your sales per position, average profit within a niche area, and personnel cost to produce sales. What is the range between top producer and the marginal salesperson? Where do you need to make changes? Is it time to add personnel? And if so, in what area of the business? Although you may not share all of this information with sales and support personnel, you still need to have it. Incorporate as many other pieces of information as possible. So long as you accumulate it in the same manner for each person, you’ll end up with something of value. And it may simplify some of the HR and legal challenges we face in this litigious society.
An example of a personal rating criterion would be the hidden cost of inefficient handling of the installation orders by sales personnel. You’ll already know there are certain culprits because of a litany of complaints. Why not have the installation manager and two or three key members of his group individually rate each of your sales team on their cooperation, accuracy, timeliness, response to a problem, or request and coordination? Keep it to a simple scale, say one through five. Average the scores from the group, and now you have a salesperson rating. Then look at individual scores. Yes, it’s based upon opinion, but so is a customer service rating.
“I want to make more money!” How many times have you dealt with a statement like, “Boss, I need to make more money, my wife insists”? When you know the sales personnel cost to produce a dollar of sales for the previous year, including extras, perks, fringe benefits, then you can average and rank them. If the average represents 1.0, and ole Joe is at 1.4, this is helpful to know when going over the total value of his package with the company. This is a more telling statistic than who sold the most and at what profit. “Joe, the value of your compensation package with the company last year was $82,350—46% sales commissions, 38% base salary, 16% fringe benefits and reimbursed expenses. If you look at last year, almost half of your total compensation was based upon sales commissions. You can make more money by adding more sales this year.” Having had this type of conversation with sales and support personnel many times, it is striking how often their point of view changes when they realize they control their own bottom line.
Build your goals. For most commercial business, I’ve always believed the most accurate forecasting was a variable based upon building monthly sales numbers into a quarterly amount. When I got an annual sales projection from a team member where each month was the same, I knew they had not put much thought into it. So I provided their previous year’s volume on a month-by-month basis and asked for their forecast for the next year. I also asked them to list their top ten target clients and the expected volume from each. When you accumulate your niche target goal this way, and the volume isn’t adding up, you need additional personnel or more production from existing people.
Everyone has their own philosophy about sales and profit reporting intervals. Most rely on monthly or quarterly time periods and calendar year annual tracking. Some of this will depend upon the type of niche—retail usually has a shorter interval than commercial or government. Most niches are somewhat seasonal. Retail is usually soft until late in the first quarter, while most government reaches a crescendo late in the third quarter. Commercial business varies according to the amount of institutional work, which usually peaks in the summer.
Stimulate sales. Some rely on daily or weekly sales meetings, others on monthly meeting with special events. A one-on-one review of individual efforts is a great time to deal with shortcomings and underperformance. A group setting is not as effective when dealing with most individual statistics, unless it’s a straightforward recitation of sales rankings and accomplishments. The goal is to motivate, not humiliate. Praise in public and correct in private is a good guide.
There is nothing wrong with applying some pressure by way of contests, especially weekly or monthly. Pushing longer term sales goals, say for a quarter, will focus the salesperson better than annual target awards. There is a good deal of benefit in a rating system that focuses on how each salesperson performs in relation to their own individual sales targets toward their team’s annual goal. This allows both experienced and newer team members to compete more evenly than a strict volume or profit-dollars production. The key is to set the targets fairly and to prevent low-balling by the sales team. This does require more effort on the manager’s part to make sure the goals are an adequate representation of the individual’s talent and experience. Carefully orchestrated targets allow direct comparison of the individual and diverse niche market sales.
Review and coach. Start with a review of each month’s sales and profitability. Where are we having success and where are the problems? Go to a top-down niche review, all the way to individual team members. Anyone can have a bad couple of months, but longer than that may mean an adjustment of the company’s annual target. Is there something wrong with that business segment? Is it time to change some focus and allocation of marketing dollars to another area? Waiting until a quarter is over for this evaluation is generally too long a time, unless there are some unusual or seasonal influences. One always needs enough time to make up any lost ground.
Offer sales training. Investment in education generally pays big dividends. Don’t make the mistake of focusing only on new products or within just a few product lines. Certainly it is imperative to know your products and installation parameters, but equally necessary is training on how to close a sale. I do not buy the concept that “a product sells itself.” One still has to ask for the order, repeatedly. We’ve all seen a great presentation, a superior product, and then the salesperson just waits—a pregnant pause fills the room—until finally someone says, “Well, great presentation. We’ll think about it.”
People need to be pushed to make a decision, and a salesperson needs to practice so as to be able to smoothly ask for the order. I don’t care how experienced a salesperson may be, they should always be coached in how to ask for the order. Why do you think highly effective sales organizations write a prepared script, including multiple closing statements, and then make you practice it in a group setting? Why do actors have a script to follow? Because ad-libbing is ineffective, yet that’s what most sales team members do unless they are trained. If you incorporate this one coaching tip as a part of every sales meeting, I guarantee you will increase your sales and turn average team members into stars. (Send me an email with Closing Tips in the subject line, and I’ll send back some tips.)
Look at history, set reasonable or even unreasonable goals, make a plan to ensure success by regular progress reports and adjustments. Nothing is perfect, so expect challenges. Education and training is mandatory to inspire your people to buy into your vision. Good luck this year!
Copyright 2016 Floor Focus