As an entrepreneur, it may seem as if there is always something more that needs to be done. But in the area of sales, there is a way to know when you have done enough for the day, talked to enough new people, made enough presentations, and close enough sales in order to meet your goals.
Whether you are solely responsible for your company’s sales or have salespeople who work for you, applying this system can help you create solid benchmarks by which you can tell “how much is enough.” This method can also assist you in becoming more effective at each stage of the selling process, thereby improving the final result — increased sales. Whether you have a retail establishment or sell consulting services, you can easily adapt this system to your specific business.
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The Sales Pipeline
Each type of business has a generally accepted selling cycle, a step-by-step process that starts when you first make contact with a potential prospect and ends (at least for the moment) when you close the sale. If you are in retail, this may all happen fairly quickly; if you sell capital equipment, the process will take much longer. Of course, once you have closed that first sale with a particular customer, the cycle may begin all over again, depending on what product or service you offer.
While your goal is a certain amount of sales, you will never reach it if you look only at that figure. For example, Julie Kimsey sells health insurance to small businesses in the North Dallas area. She knows that she not only needs to close sales every week but must also talk to a certain number of new people every day, as well as follow up on her qualified prospects. If Kimsey focused only on closing sales, eventually she would run out of prospects. In order to have the sales come out at the far end of the pipeline, she has to keep putting new prospects in at the front end, and following up with existing prospects in the middle.
But how many new prospects are enough? How many conversations with new or existing prospects will it take for Kimsey to reach her sales goal? Here’s how to figure out what that number is for you.
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Ten Steps To Sales Success
Please keep in mind that what follows is a fundamental system. Although you can apply it to rather sophisticated businesses, it still results in a set of guidelines, not rules. Use these steps as tools to help you do a better job of selling, not to define a rigid structure.
Also, this method assumes that you are already in business and have some experience with your sales process. If you are just starting out, research your industry enough to understand the typical sales process, and then come up with your own data. With thanks to Hank Trisler, author of No Bull Selling, here’s how to know when you’ve “done enough.”
1. Annual Sales Goal.
Determine a realistic annual sales goal in dollars, if you haven’t already done so. Nobody ever got where they wanted to go without a goal.
2. Average Sale.
What is an average sale worth in dollars? This entire system is a game of averages. Don’t worry if your sales vary widely. If you have a realistic average sale figure, the rest of your statistics will make sense.
3. Number of Presentations to Make a Sale.
Trisler defines a presentation as “any time you get to tell your story to a qualified prospect.” This could be in person or on the phone. It could even be in a retail store where you help a customer find merchandise. To get to this number, keep track of your presentations and sales over a month’s time. Then divide presentations by sales to determine the number you need to make a sale.
4. Dollars per Presentation.
Divide your average sale dollars (2) by presentations per sale (3). This gives you the dollars per presentation. One way to look at this figure is that every time you make a presentation, you are theoretically bringing in this many dollars, whether the customer buys or not. Therefore, make more presentations — don’t just follow-up with your existing prospects.
5. Number of Conversations to Get a Presentation.
A conversation can be with a new or existing prospect, or with a customer who might place another order. To calculate how many conversations it takes to get a presentation, keep track of your conversations over a month’s time. Just make a little mark in your calendar each time you have a conversation. Total them up and divide that figure by the number of presentations you did that month. That’s the number of conversations you require to get a presentation.
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6. Dollars per Conversation.
To get this figure, divide your dollars per presentation (4) by conversations per presentation (5). This is the amount you make every time you have a sales conversation, whether the customer buys or not.
7. Weekly Sales.
Divide your annual sales by the number of weeks in a year. You can use 52, but 50 might be more realistic (the other two weeks are called vacation).
8. Daily Sales.
Divide your weekly sales by five or six, depending on the number of days you work each week. This is how much you need to bring in each day. (Remember we are working with averages.)
9. Number of Conversations per Day to Reach Your Sales Goal.
Divide your daily sales (8) by your dollars per conversation (6). This is the number of conversations you need to have each day in order to reach your sales goal.
10. Making #9 Feasible.
When you finally arrive at this figure, it could amount to an outrageous number of conversations to have each day, in addition to presentations and everything else you need to do. So what are your options? You could settle for less money. Or you could work on being more effective at presentations, thereby improving your ratio of presentations to sales. You could also improve your ratio of conversations to presentations. If none of those options works for you, consider raising your prices. If your average sale is higher, you will need fewer sales, and therefore fewer conversations, in order to reach your goal.
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Improving Your Statistics
Assuming you come out with a realistic number of conversations to have each day, you can now keep track of your progress, and see where you slack off, or where you have improved. If you substantially improve your ratios of presentations per sale and conversations per presentation, you can wind up spending a minimum amount of time having conversations, and much more time writing orders.
As you improve your percentages, you will need fewer new contacts coming in at the beginning of the pipeline and will be able to spend more time managing existing client relationships.
Successful selling may remind you of the Chinese plate juggling trick, where the juggler has several plates spinning on the ends of long sticks. Once the juggler has all the plates in motion, all it takes to keep them going is a little flick of the hand. In the same way, once you get some momentum in your sales efforts, you can keep things going with a minimum of effort, but with a lot of appreciated attention to clients and prospects.
Manage Activity, Not Results
In order to reach your sales goal, you must manage the activity that leads to the desired result. If by using this formula, you make sure you are having enough conversations with qualified prospects, then you will be well on your way to attaining your goal.
Of course, there are always other factors that may affect your sales effectiveness, including the economy, your level of customer service, and the quality of your product or service. However, all things being equal, if you have done an excellent job of putting your business together, using this system will help you reach your desired goal. You will know, without a doubt, that you have done enough if you have had a sufficient number of conversations each day, and kept the pipeline full and moving briskly.
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Single Daily Action
Another way to manage sales activity is to decide upon a single daily action which, if carried out every day, would help you reach the desired result. For many small business people, that action consists of having conversations about new business.
A new business conversation can be with a new prospect or an existing client but must focus on new business — whether that means a new project, an additional order or a new client altogether. Meeting someone at a networking event or making a follow-up call both qualify as new business conversations, as long as that is what you are discussing. If you’re just phoning to say hello, the call doesn’t necessarily move the prospect forward to making a purchase. Focusing on new business will definitely help get you sales.
For Example
The annual sales goal of one of Kimsey, who sells health insurance to small businesses, is $70,000. Her average sale totals $350, and she knows that, on the average, she needs to make two presentations to garner a sale. Every time she makes a presentation, therefore, she is theoretically halfway to a sale, so her dollars per presentation figure is $175, or half of her average sale of $350. This same client has also found that it takes an average of 10 conversations to get an appointment for a presentation. This gives her $17.50 for item # 6 (dollars per conversation).
Working 50 weeks a year, Kimsey’s weekly sales goal is $1,400 ($70,000 divided by 50), and her daily sales goal (working five days a week) is $280 ($1,400 divided by five). To determine the number of conversations she needs to have per day to reach her sales goal, Kimsey divided $280 by $17.50 to get 16.
Therefore, in order to meet her annual sales goal, she must initiate 16 conversations a day. She organizes her week, so all of her calls are made during the first two days (40 calls daily) and then spends the other three days out in the field giving presentations. With her weekly goal of $1,400, Kimsey needs to close an average of four sales a week ($1,400 divided by $350) and make eight presentations. Remember, it takes her an average of two presentations for each sale.
This client has found that this approach works very well for her. Using a simple checkmark system in her calendar, she keeps track of her sales, presentations, and conversations on a daily basis. At any point, she knows if she has done enough, or if she needs to increase her efforts to reach her goal.
