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The truth about hidden sales costs

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  • | 9:47 a.m. November 8, 2013
  • Strategies
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We are getting close to the end of the year, which for many businesses is also the end of the financial year. We will be scrutinizing the numbers and trying to figure out where the money went. And maybe trying to figure out how we do a better job next year. The specific terms found below are more than likely not listed as headings on a standard business P&L statement, but these are areas that can cause cash hemorrhaging if not managed properly.

The true dollar cost associated with these 10 items are indeed hidden throughout most business P&Ls.

Turnover can cost your company huge sums every year. Poor hires can cost the average company 10 times their annual salary over an 18-month period. Make sure that your recruitment, selection and hiring processes are robust and include solid behavioral assessments.

Ill-Advised Bids & Proposals
Lottery odds do not make for a strong bottom line. Premature proposals lose more business than they get. Many companies do not know their actual costs of doing bids and proposals. And, if they do have a number, you can usually triple it to get the real number. Track your bidding and proposal process diligently. Be assured, if you track it, it will get better.

Extended Sales Cycles
In many companies the normal sales cycle is two to three times longer than it should be. This represents another hidden cost you pay for sales people who cannot control the sales cycle. Are you tracking your average selling cycle, and can you connect this information to your sales forecast?

'Let's Pretend' Costs
The prospect knows it's over, however the salesperson does not. Result: wasted time, resources and money. One of the most expensive of the hidden sales costs. How much time and effort is spent trying to retrieve a deal that has already been given to your competitor?

Bad Forecasts, Inflated Pipeline
Often times a company will staff up and build inventory for what turns out to be wishful thinking. This situation rarely turns out positive. Does the sales team understand the difference between pipeline and forecast?

Marginal Customers
Squeaky wheels need very expensive grease. Upgrade marginal customers or send them to your competitors and celebrate! Many marginal customers are marginal because you trained them to be, and you consistently provide them with additional services or discounts and credits.

Unqualified Prospects
Chasing people who cannot or will not do business with you, and missing those clients who will costs money. Time management and prioritization are key issues in this case. The bottom line is that not everyone qualifies to be a prospect. Your sales group must be able to tell the difference between a suspect and a prospect.

Unpaid Consulting
If you don't value your services, neither will the customer. These customers will like you, however are sales being made? This is one of the most expensive, profit-draining problems with which companies quietly suffer. And, if you win business by providing unpaid consulting you just might training your new customer to be a marginal customer (see above).

Unnecessary Price Concessions
If you had half of what the average salesperson leaves on the table every year, what would you do with the extra revenue? It is a competitive world out there, and our sales forces are challenged to bring in the business. How well prepared are they for dealing with tough buyers and complex negotiations?

Wasted Days
The latest information shows that on a day-to-day basis, the average salesperson is about 20-30% as effective as he or she could be. Your sales force could be the most underutilized resource you have. How much time do they actually spend selling, and being in front of prospects and clients? Are they focused on activities that will generate revenue (pay time), or are they spending time on research, doing reports, attending meetings and other time-draining activities (no-pay time)?

As you are preparing and finalizing your budget for 2014, it might be worth a quick review of how to improve these cash-draining areas. Tightening up on the preceding points could make a big difference on your bottom line in the coming year.

Jamie Kane is a Lakewood Ranch resident and the owner of Sandler Training in Sarasota. Sandler Training offers sales, management, and leadership training, coaching and consulting. Contact Kane at [email protected]


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