How Much Is a Salesperson Worth?
There once was a water equipment dealer who needed a new delivery truck. He wanted a new Dodge with all the power and accessories he needed to get the job done and enhance his company’s image. The truck retailed for $32,000 but our subject went to a lot of dealers and offered them far less. Finally, he got a great truck but never changed the oil or washed it or maintained it. He never inspected its performance and the truck quickly became useless. His conclusion: "You can’t get good trucks anymore. They just don’t perform like they used to."
Many companies want to have great salespeople but have trouble attracting and keeping them. This may be partially due to a failure to recognize how much a good salesperson is worth. In our industry, a reasonable performance for a salesperson is two demonstrations per day and an average closing rate of 33 percent. This means that a reasonably good salesperson will complete 40 demos per month and sell about 13 times. Assuming some fall through in finance, let’s assume we end up with 11 sales. If half are doubles, a reasonable performance is 11 softeners and six reverse osmosis (RO) systems. You can adjust the numbers for your area, but these are nationwide averages.
If you make, on the average, a gross profit of $900 per softener and $500 per RO that means an average salesperson should be contributing $12,900 per month or about $154,800 to your profit. These are averages. I have met salespeople who contribute much more and I have met many who contribute much less. No matter what numbers you use, good salespeople are a very valuable commodity.
If you have any machine, person or article that contributes that much to the health and success of your business, I am sure you would want to spend a lot of time attracting and maintaining them. For example, if you had a printing press that would generate $154,800 per year in profit I am sure you would protect, maintain and keep it in top working order. How you value, attract and maintain your sales team is a harbinger of the health of your company.
Is there anything you have on your calendar for today that will contribute more than $154,800 to your bottom line? I certainly don’t. Why then do we often fill our days with paperwork, meetings and fires, leaving recruiting and motivating our sales team for our spare time? An average manager or owner in our industry spends less than 5 percent of his time motivating and attracting great salespeople. If the Beatles were right when they said, "The love you take is equal to the love you make," then we could twist that to say, "the amount of success you have developing a great sales team is equal to the effort you spend on it." Not a great lyric or saying, but it is true in managing. If you value salespeople, spend a reasonable amount of time attracting, motivating and maintaining them. They are your number-one priority. Everything else should be done when you have spent enough time on these crucial money-making endeavors.
Also, no matter how much we think it builds character, with unemployment at a 17-year low, it is very difficult to attract the best and the brightest on straight commission. Take a look at your pay plan and whom it has attracted lately. If it isn’t working, you may want to consider upgrading it in view of how much a good, well-managed salesperson produces.
Have very high standards. You will only attract new salespeople at the level of your current staff. Have high standards for achievements and activities. I suggest you write in all salespersons’ contracts that they must complete two demos per day and they must close 33 percent of the homes they perform demos in. Having no standards or low standards is asking for failure.
Unfortunately, salespeople are high maintenance cash machines. If you want the cash, you have to do the maintenance. What is maintenance? You have to tell them every day that they are doing well and you appreciate their work. You also have to let them know in a nice way that if they ever fall below your standards of two demos per day and 33 percent closing rate, they will be working elsewhere. Stop wishing you could find a self-motivating salesperson. There is no such thing. Salespeople have not gotten lazier over the last 20 years, managers have reduced the amount of motivation and maintenance they invest in them.
Maintenance also means selling them every day on great reasons to buy. Get them excited about new products, new terms and special prices and they will excite the customers. If today is just the same old boring day, you have not done a manager’s greatest job—exciting your team.
The Bottom Line
There are only two things you need to inspect and enforce every day to have a great sales team. The first is how many demos they did yesterday and the second is how many did they close yesterday. I recommend that each morning, you go over the previous day’s performance for each of your team members. If they got into more than two homes, congratulate them. Make them feel great for a job well done. If they did fewer than two, tell them they are in danger of losing their job. Ask if you can help with anything. Do they need training? Do they need you to go out and get appointments with them? Let them know they must achieve to stay on board.
The second thing to inspect daily (yes, I said daily) is their closing rate. Each day, you should help them calculate their closing rate. Inspect their price book and their demo kit. Is it clean and complete? Ask them to do a section of their demonstration for you. Does it follow the company guidelines? Are you proud of it? Do they use your approved script or improvise? Once again, praise those who are doing well and offer to help and train those who are below your standard.
I realize that this takes time. If you have three salespeople, it might take you 45 minutes to do what I have outlined above. Realize, however, that if you have three salespeople performing at the level I outlined, you are making about $242 per hour from their collective work. Is there anything else on your agenda that produces that kind of return?
About the Author
Carl Davidson is president of Sales & Management Solutions, which provides sales and management training designed exclusively for the water equipment industry. For more than 13 years, he has helped more than 1,400 companies in seven countries.
For a free demonstration tape and catalog, contact the company at 800-941-0068; www.salesco.net.
If you have questions or a topic you would like to see addressed, please e-mail [email protected]; fax 847-390-0408.