9 Catalysts For Sales Growth

Background

The discovery of the 9 catalysts that help a firm to achieve high sales growth happened while I was working at a Regional Staffing Company that specialized in light industrial labor. This firm was located in the Midwestern United States. From the years 2001 to 2008 the Staffing Firm achieved on average 30.5% growth rate per year. Later myself and our management team would looked back at our sales process to determine what our firm did differently then our competitors. Light Industrial Staffing during that period as an industry had paltry 3% growth rate. Not exactly a hot industry. We developed our hypothesis and then began interviewing a group of 30 CEOs to test our assumptions. We evaluated companies from all industries as well as a sales manager from a major league baseball team. At the end of the day we began to see very predictable trends. Companies that had good sales force alignment in the 9 areas were achieving very good sales results. In all cases where a firm had aligned at least 7 categories the year over year growth rates greater than 25%. Later we would become skilled enough to accurately guess the growth rate of the firm within a few percentage points based merely upon our interview with the CEO regarding the firms sales process.

Evidence we were Correct

We had a unique interview that solidified our beliefs that we were on to something. A company that was purchased by a "Venture Capital Turned Around Firm" in the Cincinnati area put in place a new CEO. This CEO was a company turnaround expert put 8 of the 9 catalysts in place and achieved a growth rate of 37% each year for a 4 year period. The Venture Capital Group then sold the company to a business enterprise in the same industry. The acquiring enterprise placed its' sales manager over the combined companies sale force. The sales manager removed all of the catalysts for growth. The result was a complete disaster. The acquired firms growth rate went from over 30% the prior year to under 7% on an annualized basis. We did consider economic factors for the degradation of the firms performance. Other companies in the firms industry were not effected and because the firm created cost savings for its' customers the service paid for itself out of the savings. It was intuitive that in a slow economy a firm should experience even more growth as cost cutting becomes more important to the firms prospective clients. The the turnaround CEO removed the acquiring companies sales manager. Put back in place the systems that were leading to sales growth and a much higher growth rate ensued.

So what are the 9 sales catalysts?

1. Strategic Hiring

2. Presentation and Training

3. Consultative Selling

4. Tracking and Evaluation

5. Compensation Alignment

6. Return on Investment

7. Resizing Sales Force

8. Drive Management

9. Negotiation

Strategic Hiring

Our first question we would ask a firms CEO was about the firms hiring process. Time and time again we would hear from the CEO with a smile, "I just know a good sales person when I meet them." Our next question was of the last five sales hires how many of them are still with the company? The CEO would typically blush and sometimes say one, other times say two and even more often say zero. Firms that had a well defined hiring process typically fared much better in terms of lower turnover and therefore were less afraid to hire additional sales people. This is the compounding effect of a poor hiring process, a firm needs more sales people to grow, yet every sales person the firm hires ends up begin a "dud". Of the 30 firms surveyed all firms that had averaged greater than 10% sales growth over the past 3 years had a well defined hiring process. One firm had adopted the hiring strategy of only stealing its competitors top sales people. This firm did achieve a growth rate of 10% for each of the previous three years. So we do give some merit to this strategy if a strategic hiring process is not going to be laid out in detail, this is the second most effective strategy we encountered.

Presentation and Training

Most firms would have a very detailed training program of a multitude of positions with their company. But when it came to training their sales people it was "trial by fire." Sales people would enter the field with substandard product knowledge, an inability to ask or answer question, and no formalized sales presentation at all. Organizations without at least two weeks of training and a formalized sales presentation "one that tells a story" had low sales growth rates. Occasionally we would run into organizations that had hired a consultant to provide a week long session of expensive training. These organization fared no better than their counterparts who had none. The firm must have its own formalized training process in place, with lists of questions that must be asked to every prospect to determine problems they are having and then this must be followed up with a compelling story that solves these needs. Firms that understood this had lower learning curves for their sales force and had explosive growth rates. Those with out formalized training and presentations always grew at marginal rates.

Consultative Selling

Consultative Selling and Presentation go hand in hand. Companies that had high growth rates train their people to solve problems. Not to sell a product that is not needed by the firm. The sales people would do this by always asking questions so that they could tailor their products to their customers needs. Features and Benefits selling is "dead." Effective sales people are problem solvers period. This problem solving process originates with having and understanding of the potential need of each individual client and not spewing product knowledge.

Tracking and Evaluation

All firms tracked some form of data on a weekly basis during a weekly call as most sales mangers would prescribe. The next question we would ask is "what do you do with this data?" The answer in over 90% of the time was "well nothing?" Tracking sales activity is essential to improving the performance of any sales organization. If sales behavior is not being tracked and compared to the performance of the given sales person at your organization it is highly unlikely your sales organization even in the best of time would ever achieve double digit growth. Organizations that took the information from weekly meetings such as number of dials or meeting a sales person had each week and compared these results long-term to performance were able to find deficiencies in their sales people as well as track down more importantly "Why were their top producers, their top producers? What were these people doing differently?" During our interviews it was discovered this was focal to the learning process.

Compensation Alignment

Sales forces that had properly aligned compensation structures fared much better than those without. One firm who struggled in all other areas took pain staking efforts to convert all sales people over to 100% commission based pay after the first year. This company even though all other areas of sales management had large problems was able to grow at 11% per year over a five year period. The top performing company had starting base salaries for sales people at $100,000 per. These sales people were making an additional $200,000 per year in commission. The CEO's rational was "I want to view every top candidate in the marketplace, and I want every candidate in the marketplace willing to jump ship to work at my firm." This type of pay structure only works well when the CEO is confident all other processes are in place, such as strategic hiring and training. When you are paying for the best you had better be getting the best. But the results are incredible when all of the pieces come together.

Return on Investment

Top sales management viewed sales people based upon new business that the sales person delivered to the company that year. Accounts were valued based upon harvest period of the account, and discounted back to net present value. Sales people that rested upon repeat business from prior years were quickly reduced to commission only and the base salary was eliminated. We asked one top performing CEO how base salary should be viewed? His response was "Base Salary is what the sales person gets for bringing new business to the table, commission are what sales people make for retaining accounts."

Resizing Sales Force

Firms that analyze or develop ways to self monitor their territory typically are able to achieve additional revenue by properly allocating their people resulting in more revenue. Only the highest growing firm had a program in place for resizing its sales territories on an annual basis. All other 29 did not have a resizing program in place and looked confused when this question was posed.

Drive Management

Drive Manage is the process by which management uses to keep its sales force motivated. People with optimistic outlooks are well documented to be able to outsell people with a pessimistic disposition on life. Therefore top sales organizations coached employees and helped those employees establish their own goals and "dreams." These organizations help the employees achieve these goals fared better than managers that took a "carrot and stick" approach to managing their sales forces.

Negotiation

The top three sales organizations spent a large amount of time on teaching negotiation and providing parameters in which a sales person could negotiate with clients. These organizations appeared to have a better understanding of their cost model as well as having developed the means to share this information with the sales force. The sales manager would also provide incentives with the commission structure to maximize firm value in deals obtained by the sales force. Training people how to negotiate and giving them parameters to do so in short creates value. "We make money when our sales people make money." one CEO said, "this is the only way to align our interests and maximize profits."

Call to Action

If you are a CEO or a Sales Manager and have read this article attempt to implement these 9 catalysts one at a time. Once all nine parts are working together growth will become a process that is scientifically managed not a voodoo medicine man that we all pray for the survival of the firm. Sales growth is achieved by superior process and management structure. We believe this to be our finding.

About the Author

Todd Luttenegger is a CPA with an MBA from the Owen Graduate School of Management from Vanderbilt.

http://www.salesk.com/
http://harvardbusiness.org/

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