Question: Can I (should I?) grow my commercial accounts quickly?
Answer: SLOW DOWN! “Walk before you run”. Steve and Chuck explain below …
OK. It’s late Friday, and I am thinking too much about my brand new business! Is it reasonable to assume that I can bring in $200 annually for every $100 in sales dollar spent? If so, two questions…
Regardless of the sales person/1st year income ratio, if I can bring in income at any rate over my cost of sales person, why wouldn’t I do so? And why would I spread out that sales cost over a year, if I can do it all in 2 months?
For example, rather than hiring a part time sales person to work 2 days/per week soliciting commercial business and paying that cost of 100 days of labor over the cost of a year (50 weeks x 2 days/week), wouldn’t I be better off running a blitz next month with 12 temporary sales people working 2 days per week so that we can get the book of business launched in a shorter time frame? (Assuming I am happy with the quality of hires.)
With this “fast track” approach there might be two advantages. First, I get my “pipeline” filled and my “book of business” built quickly. Second, I am able to train all 12 new salespeople classroom style at one time, conveying one consistent message. Oh, and third, it would build a competitive atmosphere if the incentives and “atta-boys” are properly structured.
What are the drawbacks here, Steve?
Rarin’ To Go in Reno, NV
Congratulations for focusing on regular commercial accounts. As I told you during your recent SFS seminar commercial work can form an important “base” of regular cash flow that “keeps the lights on” while you wait for those juicy restoration losses! (Or survive the seasonal fluctuations of residential.)
OK, now for your key questions:
- Is it reasonable to assume that I can bring in $200 annually for every $100 in sales dollar spent? If so, two questions…
- Regardless of the sales person/1st year income ratio, if I can bring in income at any rate over my cost of sales person, why wouldn’t I do so?
- And why would I spread out that sales cost over a year, if I can do it all in 2 months?
I would reply both yes and no, Rarin’. First for “a”: YES, you certainly should bring in AT LEAST 200.00 for every 100.00 in sales expenses. (Actually much more!) Remember that $100.00 remaining has to cover ALL your costs of doing the job AND general overhead.
So it depends just how high your sales staff is quoting (and getting) jobs for. And not to beat the “regular, contract drum” too loudly but you can justify this high cost of sales if you wind up with a long term, PROFITABLE contract out of it. A one time job? Not so much!
Rarin’, my bigger concern with your projected “sales blitz” is it going to “grow you too fast”? Remember, you are still feeling your way in this new venture. So your sales strategies are still being worked out. So wouldn’t it make more sense to “take baby steps” first while refining your marketing, sales, pricing and bidding and salesperson hiring and compensation procedures?
In general, I LOVE the “part time hiring” concept, Rarin’! But what happens if these 12 part time salespeople DO sign up a huge burst of new accounts? Will you have the production capacity, equipment and Business Infrastructure to produce the work?
But Rarin’, I’m not the “numbers guy” in our SFS team. So I’ve asked Mr. Chuck Violand to weigh in here with his thoughts:
Lots to consider here! Steve will confirm that the very thought of hiring, training, and PAYING 12 sales people (or even 2 sales people) until they actually produce sales is enough to make me “pucker up real tight”! Maybe you’re sitting on a stack of cash and can afford to do this. Otherwise I wouldn’t even consider it.
Steve is absolutely right. You’re not looking for quick commercial sales. There’s no long-term benefit there. What you’re after are larger ($4000 – $15,000 per year) long term accounts. This is where the money is. BUT these accounts typically take a long time to develop and close. Sales people usually can’t close enough smaller accounts fast enough to cover their salaries.
Without knowing more about your professional background, your company’s history and current market position, and your market area let me offer these things for you to consider. (Some of these thoughts are repeating Steve’s comments “for emphasis!”)
1. If I double or triple my sales in one year do I have the financial resources to ramp up and support it (salaries, equipment, increased receivables, etc.)?
2. Do I have the management experience and expertise to recruit, hire, and manage the increased number of people I’ll need to produce this increase in volume?
3. Does the population base of my primary market area support the number of businesses needed to generate the number of new customers I’ll need to gain to hit my sales goal? Rarin’, numbers 1-3 are very logical, “guru-like” questions. But now let me cut to the chase…
4. Am I crazy?
5. Am I trying to drive myself crazy?
Thanks, Chuck! Rarin’, neither Chuck nor I would never want to step on someone else’s dream. (And we respect your initiative and ambition.)
But remember the winner of the game of business is not the one with the most sales, or the one who grows the fastest. It’s the one with the most profit sustained over time while at the same time allowing you that elusive but oh-so-very-precious Personal Freedom! Now let us know how we can help you achieve your success!