Sales Transformation: The cost of doing nothing.

“If you always do what you’ve always done, you’ll always get what you’ve always got.”

A quote loosely attributed to the late automotive and business titan - Henry Ford. It presupposes that, maintaining the status quo yields no deficit. But is that accurate?

My grandmother used to say to me; the only two things in life you can be sure of are death and taxes. As I grew up, I adapted this, to death, taxes, and, change. Change is omnipresent in today’s fast paced complex world.

Consider your sales organization; what changes have you seen in your market place or with your customers? How are you adjusting to these changes? Do you, like many I speak to, wonder, just how to adapt to the changing demands of your environment? There’s often a tendency to adopt an immutable view of ‘sales’; that it will continue to pump the numbers out, no matter what.

For many of us, change is unsettling, full of potential threats and uncertainty. Yet, the selling environment that existed yesterday, no longer exists today. If we don’t adapt, we get left behind. Doing nothing, can be attractive; there is no need to change - what we have - we know works and it’s OK for now. There is no budget requirement and seemingly, no obvious cost to doing nothing.

Is that really the case? To debunk the Ford quote; doing nothing, gets what you always got, only when everything around you remains static. The selling environment, in which we all operate, is anything but static.

I want to show you the real cost of doing nothing by using some real client data. Company ABC - illustrated in the table below, has seen its win ratio eroded. No decisions have increased by 3% over 10 years. Let’s look at the ‘real’ impact of doing nothing from three different perspectives:

A. The cost of no decision

1. There are 100 reps with a $1.5 million quota each. The average deal size- $50k. Requirement: 30 deals p.a. to meet quota.

2. With a win rate of 50% in 2006, the funnel required 60 opportunities per rep.

3. Now, no decisions have increased and win rates decreased, the number of opportunities required is 64 – 4 extra per rep.

4. For the sales force as a whole, that’s 400 additional opportunities - $ 20 million of additional opportunities required.

5. With a company target of $150 million, that represents a revenue loss of 13%

6. Factor your additional cost of generating leads, conversions and proposals and you would get to a much bigger number.

B. The cost of discounting

1. There are 100 reps with a $1.5 million quota each. The average deal size - $50k.

2. Historic average discount - 18%. Current - 20%

3. List price - $62.5K x 2% (additional discount) = $1,250 Net Margin Loss per Order

4. $1,250 x 30 o,\rders (Average Per Rep) = $37.5K Net Margin Loss per Rep

5. $37.5K x 100 Reps = ($3.75M) Net Impact

6. ($3.75M) = 3% of Top Line Revenue

C. The hidden cost of new rep ramp up

The chart below compares the ‘ramp up’ time of two reps. Assume the lower line represents a rep that takes 2 months more ramp up time, at a run rate of $125K per month. That’s an additional $250K per new rep.

If your sales operation has high sales turnover, and remember, the single biggest reason for high turnover is not achieving quota, there are a broader set of cost considerations, such as; territory loss, competitor encroachment, recruitment and training costs and the impact on management so on and so forth.

Two thirds of sales organizations report a ramp up time for new reps greater than 7 months, shortening the lead time to full productivity can help optimize sales revenue.

The real cost of doing nothing.

The table below outlines the real cost of doing nothing. Those listed, tend not to happen in isolation either. There is often a multiplicity of interdependent factors at play.

What’s the solution? What can you do to prohibit and mitigate many of these risks? Well, let me show you.

The Sales Relationship Process Matrix (SRP)

The SRP Matrix, developed CSO Insights (CSOi), is based on their 14 years of accumulated data on sales process optimization. It is a comparative analysis between the nature of client relationship, and, the type of sales process adopted. For brevity, let’s define only the extremities. In doing so, we can accurately assume that, what lies between are levels of progression or regression for that matter.

The level of relationship: Approved vendor - Rep is focused on product knowledge; basic selling skills. Trusted partner - Rep understands the buying organization and has aligned objectives and strategic vision

The level of the sales process: Random process - Not documented or adopted sales process; managers track activity as needed. Dynamic process - Defined process is documented, reinforced, with metrics tracked on an ongoing basis

Level 1: With A Random Process’, research shows that the sales person can only elevate to the level of Solutions Consultant.

Level 2: Those at level 2, mostly have adopted a formal or informal process, the rep could elevate to Strategic Advisor.

Level 3: Where a Dynamic process is adopted, the rep has a chance to elevate the relationship to become a Trusted Partner.

What’s the significance? What is the payoff for being at these different levels of relationship status? After all, we are talking about investment of time and money to get there.

Based on CSOi’s research, we can quantify the potential outcomes across 6 different metrics. As we move from level 1-3, the impact becomes profound, as you can see from the table below.

For instance; a shift in win rate, from 39-51% - a full 12%, could have a huge impact on profitability. You could stop here and and calculate what that could mean for your business. Based on a 12% increase in your own win rate, what that would mean in terms of business growth?

Moving forward

I started this note with the portent that; doing nothing, is an inherently dangerous strategy with an unseen and potentially significant cost to the business. Now let me ask you two more questions:

If you could calculate what you are losing by doing nothing, add to that, the cost of what you could get by doing something. Now what does that number look like?

What if your competitors get there before you?

The cost of doing nothing is pervasive and unseen, but be assured, it exists. The only alternative, is to get ahead of it, get on the front foot and embrace the change. If you don’t, you could be late to the party.

In my next post, I will talk about the importance of the Sales Enablement function, in the sales organization and within a sales transformation initiative. Some sales organizations, have achieved significant ROI from Sales Enablement. This doesn't happen by accident, and I will provide guidance on how you can achieve that ROI - so stay tuned!

ABOUT EnablingUS

EnablingUS is a sales and service performance consultancy. For businesses who want to improve sales performance, we deploy intuitive solutions to elevate sales capabilities.

We believe that elevating people’s performance, profoundly benefits humankind. At EnablingUS, we empower people with the expertise and wisdom necessary to accelerate skills and behavioral development that are key drivers of improved margins and profitability.

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