What I’m going to share with you is information that my clients happily pay thousands of dollars for, knowing that they will receive a several hundred percent increase in their income and upwards of a thousand percent return on their investment. I’m going to help you understand the relationship between activity, time and money and how the application of these principles can vastly increase your sales performance and income. This knowledge is not rocket science; in fact it is relatively simple, yet most sales people don’t get it and thus, don’t apply it. There are four distinct steps to this success formula.
Step Number One: Identify your sales process. By this I mean, define the things you do or steps you follow to make a sale. It is possible that you may never have thought about this. It might be that you just do a lot of “stuff” and at the conclusion of doing stuff you either complete a sale or you don’t. Think of those sales that went well. Think of the steps or activities you used to find that success. Think of what you need to do to close one typical average sale. Make a list of the steps from the beginning to the end of the sales process. Identify specifically those activities you typically follow to complete a sale. Now identify how many times you engage in each of those activities in order to close a typical sale.
Step Number Two: Determine how much time each of those activities takes on average. For example, an average cold call takes about three minutes (some may be longer and some shorter, but three minutes is average). A sales presentation typically takes thirty minutes and an average travel time from one appointment to the next is twenty minutes. Break down each activity and assign an amount of time. Next, multiply the number of times you conduct the activity (in the process of completing a typical average sale) by the amount of time it takes to complete the activity. For example, a sales presentation plus travel time may take one hour. Your sales process requires that you make four presentations in order to complete one sale. Therefore, your sales process requires four hours of presentations to make one typical average sale. It might be that you need to make twenty contacts in order to schedule one appointment. If a contact takes three minutes, then it would take three minutes multiplied by twenty contacts to schedule one appointment, or a total of sixty minutes. If it takes four appointments to make one sale, then you would need to invest four hours of prospecting time in order to complete one typical sale.
Complete this step of the process by calculating the amount of time required for each step of your sales process and then multiplying each step by the number of times required to make a sale. Add up all the time required for each of the steps and you now know how much time is required to complete an average sale. The next step is to determine how many hours you work at sales each day, each week and each month. Assuming that the typical sales person spends four hours each day working on sales activities and the rest of their time doing other things, a sales person would spend eighty-four hours each month making sales. If the sales process requires twelve hours of time, then a sales person could make seven sales per month.
Step Number Three: Calculate the dollar amount of the average sale. Dollar amounts might be all over the board. However, if that is the case, simply take the total dollars sold for the month and divide it by the number of sales made. Let’s make a few assumptions to better understand this step. The average sale is two thousand dollars. The average margin is thirty percent. The sales person is paid a commission of twenty percent of the margin. Do the math. The margin is six hundred dollars and the commission to the sales person is one hundred and twenty dollars. If it is possible for the sales person to make seven sales per month, then the total commissions are eight hundred and forty dollars for the month (ten dollars per hour worked).
Step Number Four: Look for areas of improvement. Evaluate your sales process, the amount of time spent on each step of the process and the amount of time spent working specifically on sales. Consider the value of the typical sale and the margins associated with that sale. What could you do better and what could you eliminate. What more could you do in your sales process to improve the overall result. Let me offer a few ideas to allow your thoughts to start to flow. Are there any steps of the process that could be streamlined? Are there any steps that could be added to your sales process? Can you reduce the amount of time spent on various steps of your sales process? Could you increase the number of hours that you spend each month specifically working your sales process? Is it possible to up sell, or increase the value of the overall sale? Are we selling based on price, thus reducing the amount of margin on the sale?
Let’s see the effect of improvement in some of these areas based on the example we used above. Because of improvements in the sales process, it now takes only ten hours of total time to complete a sale. You have become committed to sales and are now working eight hours a day at sales for a total of one hundred and sixty-eight hours per month. You are offering your customer more and doing a bit of “up-selling” and the average sale is now three thousand dollars instead of two thousand. You have learned how to sell value instead of price and the average margin has increased to thirty-two percent. Let’s calculate what effect these improvements will have on your commissions.
One hundred and sixty-eight hours in a month divided by ten hours to make a sale equals approximately seventeen sales per month instead of seven. The average sale of three thousand dollars at thirty two percent margin now generates nine hundred and sixty dollars margin dollars. The commission on the average sale has increased to one hundred and ninety-two dollars multiplied by seventeen sales will generate a monthly commission of three thousand two hundred and sixty-four dollars (almost nineteen dollars and fifty cents per hour worked).
When sales people understand the relationship between activity, time and money they can dramatically increase their sales and their income. By the way, if the sales person in the above example worked during his lunch hour, their income would increase by three hundred and eighty-four dollars. Time really is money! If anyone is interested in receiving a computerized copy of my program that will do all of the calculations described above and also provide a spreadsheet of your sales process, please contact me.
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