I haven't published any Tuesday Profit Tips from Scott Hallman recently so when this one rolled into my Inbox, I thought I'd better get my act together.
Hiring Sales Superstars with ZERO Out of Pocket Dollars
Hi, this is Scott Hallman and welcome to this week's Tuesday Profit Tip where we bring you real world ways to Build-Grow-Manage-Profit from your business.
Many business owners say the #1 reason they fail to achieve their business growth goals is because of the lack of time (or desire) to sell.
Whether you like it or not, "selling" is part of the game…a BIG part. Yet few business owners we talk to have been able to implement a sales system that produces consistent, measurable results….and even fewer that have a system that requires zero out of pocket costs.
The Fact is the Vast Majority of Business owners Either Hate to "Sell" or Are Poor at Selling….. Are You One of Them?
It is estimated that 85% of businesses are started by "technicians" (according to Michael Gerber) that are good at producing the product or service they provide.
So the consultant at IBM starts an IT Consulting business…the carpet cleaning manager at ServicePro starts his own carpet cleaning business, and so on. And if you are a professional (doctor, CPA, etc) you likely never ran a business, much less were trained to sell.
Now perhaps you are a great salesperson. But often find that you cannot seem to find the time to sell due to the demands of the business.
So what's a skilled technician with weak skills or lackluster selling desire to do? Hire a Superstar Salesperson.
What's a busy business owner with great sales skills to do? Hire a Superstar Salesperson.
But Hiring a Sales Rep Costly, and With This Economy I Can't Afford it …or Can I?
Perhaps you are cash strapped and believe that you can't afford to hire a sales person, even though you passionately believe that they can help take your business to the next level.
Or you have cash but have been burned by unproductive and flakey salespeople in the past and therefore have watched your investment produce little or no result.
I see this all the time; a business will hire a sales rep (after 1-2 interviewed candidates) and pay say $2,500 a month (salary or draw). Then the sales rep fails to perform up to their expectations and the company let's them go after 3-6 months. This results in $7,500-$15,000 of wasted cash.
Then, determined to make this work, the company repeats the cycle 2-3 more times, now $25,000-$50,000 in the hole and conclude that hiring sales reps will not work for their business.
Three Common Mistakes That Guarantee Failure
There are three common mistakes that businesses make that lead to a failed sales team and the $7,500-$50,000 profit loss I mentioned in the above scenario.
1) The first is that they are paying for time and not performance.
2) The second is they are hiring without a system in place for dramatically increasing the probability of success.
3) The third is that they lack a management system that arms the sales rep with proper training and allows the company to scientifically measure and track progress and results.
For today's tip I am going to cover #1 - Paying for time.
The logical solution is to hire a sales rep on a performance basis - paying only for profitable results. This way you can literally build a sales team cost-free.
"OK, Scott, I learned that one in kindergarten", you say? Well, that may be true but if you have failed to get this particular "growth tactic" to work then stay with me for a few more minutes.
The Problems with Commission Only Sales Reps
If you have hired commission only sales reps in the past then you likely faced three primary problems:
1) Massive turnover
2) Poor performance
3) Management Headaches
First, the reality.
Sales turnover is guaranteed no matter how well you hire or you pay.
In fact, a successful ratio is 1:4. One good performer for every 4 good hires (1:10 or even 1:25 without a good hiring, training, compensation and management system in place). It amazes me how the "sales gurus' fail to share this reality.
One factor that causes unnecessary turnover, management headaches and poor performance occurs when the sales rep cannot realistically earn their baseline income requirements in the first month (or longer). They immediately lose enthusiasm and begin looking for another job on your dime.
If the sales cycle (the time to reach a qualified prospect, promote your product, get approval, get the contract signed, get the order placed, get the product shipped, and get paid) is 30 days or greater, then a commission only sales model almost guarantees failure.
As an example, say a company typically takes about 60 days to close a prospect and get paid. And they pay say 10% commission on a $2,000 average sale. The sales rep cannot make any money for at least 60 days! And worse, it may take 90 or even 120 days before they are making enough sales to generate their base income needs.
To help reduce turnover when paying commission only, we created a concept we call, "Salary-Like™" compensation.
What is that?
It is where you pay an accelerated or inflated commission for a short period of time in order to help the rep earn their base needs.
We teach a detailed program on this (I will be doing an upcoming Tele-Seminar on this subject) but the basic concept is to pay the sales rep for specific activities that logically lead to a sale, say for a written proposal and/or "accelerating the commissions" by paying 2, 3 even 5 times higher percentage during the first 2-3 months - so they can earn their base required compensation. As long as this commission does not exceed the gross profit it represents zero out of pocket costs.
Here is a Simple Action You Can Take
First, determine what hiring a full or part time sales rep could generate for your company IF they were cost free. Be conservative in your estimates.
Next, if the upside is significant, create a simple compensation plan that enables them to earn a reasonable commission month 1 - say $2,500. Do not be concerned as to whether you earn a dime on these initial sales (if they will be finding sales you otherwise would not handle yourself).
Next, place an ad in Craigslist and hire yourself a sales rep.
Small Business Growth Club Member Access
To learn how to hire, train and manage Sales Superstars, simply go to the "Sales" Training Section at www.smallbusinessgrowthclub.com to get full access (Platinum Members) to eight sales training workshops by my friend Chet Holmes, author of the Ultimate Sales Machine and Fortune 500 Sales Trainer.
Also, I will be announcing a teleseminar training workshop on this subject in the next few days, where I will go into complete detail on how to create a Salary-Like Compensation Program for any business, regardless of size, industry or management expertise.
Go for it. Do this simple exercise and ProfitNOW™.
To your success,
Scott D Hallman
CEO
Business Growth Dynamics, Inc
www.bgdinc.com
To learn more about becoming a member, visit www.SmallBusinessGrowthClub.com and take the tour.
Thanks Scott.
For anyone who isn't familiar with Chet Holmes idea on how to recruit a sales superstar, you are in for a treat although I wouldn't like to be on the receiving end. I can certainly see how it sorts out the cream.
Just to remind everyone, Scott and I are putting on a teleseminar/webinar on January 15th at 1: pm EST, 6:00 pm GMT and Scott will share some of his main ideas for how you can find extra profit in your business.
I keep telling you that the Small Business Growth Club is my favourite business development resource so join us and find out why I am so impressed with Scott and his techniques.
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