A regular sales checkup is critical to assessing and addressing the strengths, weaknesses and opportunities in your company’s sales efforts. Frank J. Rumbauskas Jr., author of Never Cold Call Again: Achieve Sales Greatness Without Cold Calling, believes that because entrepreneurs generally don’t have the time or money to allow for waste, they must act quickly to address any deficiencies in the sales process before their company’s profits suffer. He advises entrepreneurs to conduct a thorough sales checkup every three months, with the caveat that any longer between checkups can “allow too much damage to occur–the longer you wait, the harder it is to correct a problem.” Rumbauskas advises sales managers to look at the following elements when conducting a quarterly sales audit.
Conversion rate: Also known as a “close rate,” your conversion rate indicates the quality of your leads. A low conversion rate is a sign that your leads may not be qualified–or your sales force is doing a poor job ruling out those potential clients who have no intent or ability to buy.
Profit margin per sale: Buyers who don’t have a strong need or desire for your product will negotiate hard and insist on a cut-rate price. However, qualified prospects who have an immediate need are less interested in price and more concerned with your ability to provide what they need. If your leads aren’t qualified at the start–or qualified by your reps–your profit margins will suffer. A low profit margin per sale indicates that you need to raise the bar on your lead-generation efforts.
Length of sales cycle: Every industry and every product has an average sales cycle. Is yours above average? Below average? If your sales cycle is below average, you’re doing something right. Recognize the posi-tives that are shortening your sales cycle, such as top-notch sales talent, and stay on that course. If your sales cycle is longer than average, there could be any number of problems, including unqualified leads or sales reps in need of additional training.
Consistent performance among sales reps: If your company makes solid hiring decisions, provides quality leads and trains salespeople well, performance should be fairly consistent among all sales reps. It’s natural for some reps to be stronger than others, but if you have a “big gun” who produces tremendous numbers every month while another rep cannot make quota, something is wrong.
While some sales managers may think they’re doing just fine and see no need for a checkup, Rumbauskas disagrees. “A regular sales checkup is an absolute necessity,” he says. In certain cases, he adds, an entrepreneur may “find a sales plan that works, stick with it and become complacent.” A sales audit often up-ends that complacency by showing that a sales manager’s idea of “just fine” really isn’t up to par–and that there are many ways to increase sales volume waiting to be tapped. “Your sales department is the lifeblood of your business,” maintains Rumbauskas. “Without it, you are out of revenue–and out of business.”
Originally published in the February 2007 issue of Entrepreneur Magazine
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