Background
While working for a Regional Staffing Company, which specializes in light industrial labor, I discovered the nine catalysts that can help a company achieve high sales growth. The firm was located in the Midwestern United States. The Staffing Firm averaged a 30.5% annual growth rate between 2001 and 2008. Later, my team and I would look back at the sales process to see what we did better than our competitors. Light Industrial Staffing was experiencing a pathetic 3% industry growth rate during this time. This is not a very hot industry. After developing our hypothesis, we interviewed 30 CEOs to verify our assumptions. We evaluated companies in all industries, as well as a manager from a major-league baseball team. We began to notice very consistent trends at the end. Companies with good alignment of their sales forces in these nine areas saw very high sales results. If a company had at least seven categories aligned, the year-over-year growth rate was greater than 25%. We would later be able to correctly guess the growth rate of a firm within a few percentage points based on our interview with the CEO about the sales process.
We were correct evidence.
Our unique interview solidified our belief that we were on the right track. A Cincinnati-based Venture Capital Turned Around Firm purchased a company and put in place a new chief executive officer. The CEO, a company turnaround specialist, put 8 of 9 catalysts into place. This led to a 37% annual growth rate over a 4-year period. Venture Capital Group sold the company to another business in the same sector. The combined company’s sales team was overseen by the acquiring business. The sales manager removed all the growth catalysts. It was a disaster. The annualized growth rate of the acquired firm fell from more than 30% in the previous year to below 7%. Economic factors were considered when determining the cause of the firm’s performance decline. The effect on other companies in the industry was not felt by the firm. In addition, the company created cost savings for its customers, and the service paid itself off the savings. In a slow economy, a company should experience more growth because cost-cutting is more critical to its prospective clients. The CEO of the turnaround removed the sales manager from the acquisition company. The systems that had been promoting sales growth were re-instated, and the company experienced a much more significant growth rate.
What are the nine sales catalysts that will make your business more profitable?
1. Strategic Hiring
2. Training and presentation
3. Consultative selling
4. Tracking and Evaluation
5. Alignment of Compensation
6. Return on Investment
7. Resizing SalesForce
8. Management
9. Negotiation
Strategic Hiring
The first question we asked a CEO of a firm was about their hiring process. We would hear the CEO smile and say, “I just know a great salesperson when I meet them.” Next, we asked the CEO about the five most recent sales hires. How many are still with the company? The CEO will blush, sometimes saying one, and other times saying two. Sometimes, even zero. Companies with a clearly defined hiring process had lower turnover rates and were more likely to hire more salespeople. A poor hiring process can have a compounding effect. The firm may need more salespeople to grow, but every salesperson the firm hires will end up being a “dud.” All 30 companies surveyed had a clearly defined hiring process. One company had adopted the strategy of only hiring top salespeople from its competitors. The firm achieved a 10% growth rate for the three previous years. This strategy is second in our list of most effective strategies, even though it isn’t going to be detailed.
Presentation and Training
Many companies would offer a detailed training program that covers a variety of roles within their company. It was “trial by fire” when it came time to train their salespeople. The field would be unfamiliar with the products, and salespeople would not know how to answer questions. There was no formalized sales presentation. Low sales growth rates were seen in organizations that did not have at least two weeks’ training and had no formalized sales presentation. We would occasionally encounter companies that had paid a consultant to deliver a week of costly training. These organizations did not fare as well as their counterparts that had no consultant. Each firm should have its own formalized training program. Prospects must be asked questions to identify their problems. Then, the story must be told to solve these problems. This was a critical factor in achieving rapid growth and lower learning curves for sales staff. People who did not receive formalized training or presentations grew at marginal rates.
Consultative selling
Both consultative selling and presentation go hand-in-hand. High-growth companies train their employees to solve problems. It is important not to sell products that aren’t needed by the company. Salespeople would ask questions to tailor their products to customers’ needs. Selling features and benefits is dead. Problem solvers are the best kind of salespeople. The key to problem-solving is understanding the client’s needs and not just reciting product information.
Evaluation and tracking
As most sales managers would recommend, all firms kept track of some data on a weekly basis during weekly calls. Next, we’d ask, “What do you do with all this data?” Over 90% of the time, the answer was “well, nothing.” To improve the performance of any sales team, it is crucial to track sales activity. It is unlikely that your sales organization will achieve double-digit growth if sales behavior isn’t being monitored and compared with the performance of each salesperson. Organizations that used information from weekly meetings, such as the number of calls or meetings a salesperson had each week, to compare these results to their performance were able to find weaknesses in their salespeople and track down their top producers. What was the difference? This was a vital component of the learning process, according to our interviews.
Compensation Alignment
Sales teams with properly aligned compensation structures performed better than those who did not. A company that struggled in other areas had to make painstaking efforts to get all its salespeople to accept 100% commission-based pay. This was after the first year. Even though the company had significant problems in sales management, it was able to grow at 11% per annum over five years. The highest performing company had a starting base salary for salespeople of $100,000 per year. These top performers were earning an additional $200,000 annually in commission. The CEO stated that he wanted to see every top candidate in this market and that he would like every candidate to come to my firm. This pay structure works only if the CEO is sure that all other processes have been completed, such as training and strategic hiring. You should only be paying for the best when you’re going to pay. The results can be excellent when all the pieces are incorporated.
Return on Investment
Sales managers rated salespeople based on the amount of new business they brought to the company in a given year. Accounts were valued according to their harvest period and then discounted back to their net present value. Salespeople who depended on repeat business in previous years were quickly reduced to the commission, and their base salary was eliminated. One of the most successful CEOs was asked how he thought base salary should be looked at. He replied, “Base Salary is what a salesperson gets to bring new business to the table. The commission is what salespeople make for retaining customers.”
Resizing SalesForce
Companies that can analyze and develop methods to monitor their territory are more likely to generate additional revenue through the proper allocation of their employees. Only the fastest-growing company had a program for resizing its territory on an annual basis. The 29 other firms did not have a program for resizing their sales territories annually, and all looked confused when the question was asked.
Management
Management uses Drive Manage to motivate its sales team. It is well-known that people with positive outlooks can outsell those with pessimistic views. Top sales companies provided guidance to employees and helped them create their “dreams” and goals. These companies help employees achieve their goals better than managers who use a “carrot-and-stick” approach to managing sales teams.
Negotiation
The top three largest sales organizations spent significant time teaching negotiation and setting parameters that salespeople could use to negotiate with clients. The top three sales organizations had a better understanding and were able to communicate this information to their sales team. To maximize firm value, the sales manager would offer incentives along with a commission structure. Value is created by teaching people to negotiate and providing them with guidelines. We make money when our salespeople make money. One CEO stated, “This is the only way we can align our interests and maximize profit.”
Get involved
These nine catalysts can be implemented one by one by a CEO, Sales Manager, or any other person who has read the article. When all the components work together, growth becomes a scientifically managed process and not just a prayer for survival. Superior process and management structures are essential to sales growth. This is our belief.
