The Cost of Poor Sales

Almost every organization would like to see the top line growth, new business. Very few companies are operating at peak service levels without any interest in growing further. Despite the constant need for growth, not every organization is evaluating their sales team to make changes as needed or investing in improving the talent they have. 

The reasons for possibly under managing sales are numerous and unique to every organization but it usually breaks down to the simple fact that a true understanding of the lost revenue or the return on investment of managing sales is not tracked and understood. 

Every person in sales understands the numbers. Sales is a numbers game. It’s the larger organization or those not directly in sales that don’t always know the numbers and don’t always directly correlate the numbers to top line growth or lack thereof.

So, we are going to run through some numbers and discuss some scenarios. If you manage a business, you should have these types of numbers and if you don’t, it’s time to figure them out.

 Let’s use some arbitrary numbers and say your business sells deals that average $50,000 with 20% profit margins.

 Want to see what this is costing your business if you have a salesperson with poor numbers? That can manifest itself in many ways. Smaller average dollar amount per deal, fewer proposals submitted, longer sales cycle, etc. Let’s focus on just one number, closing percentage.

 In this scenario, if your best salesperson has a closing percentage of 35% and your worst salesperson has a closing percentage of 15%, and your best salesperson closed 24 deals during the year, averaging $50,000 per deal, then that poor salesperson just cost your business over $100,000. How? 

·       If your best salesperson closed 24 deals at a 35% closing ratio, then that salesperson put out 68 proposals.

·       Your poor salesperson would have closed only 15% of these 68 proposals.

·       That’s a 20% difference which would be 13.6 deals if 68 were proposed.

·       Average deal at $50,000 with 20% profit margins is $10,000 profit per deal.

·       13.6 deals at $10,000 each is $136,000 profit not achieved due to poor sales.

·       You more than likely are compensating the high performer more than the poor performer which is why I stated the cost to your business being at $100,000 as opposed to the calculated $136,000. 

So, this scenario demonstrates the impact poor sales can have on growth and profit by analyzing only one metric, closing percentage. The exact same analysis can be conducted on numerous metrics such as the average value of a sale, the number of proposals put out, etc. 

Regardless of whether you are benchmarking and tracking the numbers, the message is clear. Poor sales profoundly impact your business. Analyzing the numbers however does not provide a solution. The solution is rarely as simple as replacing your sales team. It does start with getting the right people onboard, but ongoing training and coaching can improve the numbers. 

Generating organic growth is difficult and is dependent upon solving your sales problems but a solution to a problem can only be implemented if you know your numbers and have diagnosed the problem.