|
|
|
Articles
Creating
a Predictable Revenue Stream
Four Ways to Smooth the Waves Anyone in sales knows what it's like. One
month the company hits a new sales record,
the next month it misses the revenue target
by a wide margin, then the next month strong
revenues appear again. The ups and downs are
enough to make you seasick. In fact, we call
it the wave theory. By contrast, our goal in
sales management is to create a predictable
revenue stream. That is, create a positive
growth
curve without the large ups and downs of monthly
fluctuation in revenue.
From the marketing perspective, your sales
program must include a strong mix of direct
mail, trade show and other promotional activities
to build a foundation of potential business,
qualified leads and hence less revenue fluctuation.
However, it's up to sales managers to ensure
that the sales force actually gets the orders,
closes the deals. To do that, you must refine
several elements of the sales program to eliminate
the wave and build a predictable revenue stream.
Here are the major points you should consider:
1. Build the Recruiting
Pipeline
The recruiting process is an often-overlooked
key step on the road to predictable revenue.
First, it's important to understand the revenue
that you can reasonably expect a salesperson
to generate. Then, you must have an interviewing
and recruiting program (a subject for a future
article) that ensures the quality and, equally
important, the quantity of staff to meet the
company's revenue goals.
It's not enough to simply plan to add salespeople
at specific times. You must plan the strategy
and activities necessary to add these salespeople
prior to your assumed hire date. Also, don't
assume that all the existing salespeople will
remain with your company. If you're short on
salespeople, you can hit a wave's downside,
so build the recruiting pipeline.
Hint: Hire several additional salespeople
earlier than you have planned; build turnover
ratios into your recruiting plans; hire in
groups of two or more and recognize that each
salesperson will not perform exactly as you
predict.
2. Develop Measurement
Tools
Determine at least four key indicators to
measure ongoing sales success. These may include,
by salesperson: 1) monthly forecasted revenue
ratio to actual monthly revenue achieved, 2)
number of proposals/ quotes per month, 3) number
of new accounts added to the pipeline each
month, and 4) number of company visits per
month. For new people, one of your indicators
could be the time it takes to become productive.
Is it 90 days, 60 days, 30 days? If it takes
the salesperson longer to achieve productive
revenue than you expect, you may need to consider
retraining or releasing that person.
Simply increasing the level of activity or
increasing the quantity of prospects does not
necessarily mean increasing sales, so ratios
serve as important measurements. The sales
leader must develop closing ratios for each
salesperson; that is, how many prospects it
takes to attain the monthly quota or your company's
revenue expectations. Analyze these ratios,
by salesperson, then roll them into a combined
sales team ratio.
Each sales manager must know the specific
ratio of the revenue forecast to the percentage
of actual revenue achieved. Graph this forecast-to-actual
performance ratio monthly for each salesperson
and for the entire team.
Find your four indicators, set the standards
and track them. Graphing them and letting the
team see everyone's trends will show what it
takes to be successful. These graphs can be
great coaching tools.
Hint: An important lesson for a sales
leader to learn is that declines in indicators
foretell potential revenue downturns. These
trends, caught early, may allow the sales manager
to take the action necessary to reverse the
potential downturn.
3. Forecast with commitment
Most organizations have a forecasting procedure
and an annual sales plan. Typically, each salesperson
completes a forecast each month. Some forecasting
tools are simpler than others, but they generally
provide a list of potentially active accounts
to close for the current month and next three
months, their prospective dollar value, actions
that have taken place and the probability of
closing the sale.
This process serves a purpose well beyond
telling the sales manager what revenue to expect.
More importantly, the forecasting process provides
the individual salesperson with an opportunity
to review his or her progress, develop account
strategies and take responsibility.
With forecasting activities, the sales leader
sets the tone and can increase the chances
of predictable revenue. First, change the forecast
tool to a monthly revenue commitment. This
simple rewording changes the process and perspective.
Second, when reviewing the monthly revenue
commitment form with the salesperson (individually
or in a group) evaluate each account that has
the potential to close within the next 60 days,
not just in the current month. Third, it is
important that the sales leader review the
previous two months when they review the current
month's commitment.
Through this review both the salesperson
and the manager begin to see important trends.
You will uncover accounts that are not moving
through the sales cycle, accounts committed
but not closed and new accounts that appear
each month but then disappear from the salesperson's
list. It is the sales manager's responsibility
to understand and question why each account
has appeared on the commitment form and then
disappears.
Developing a good account won/lost reporting
process can provide valuable insight into sales
strategies. This detailed approach will also
assist the salesperson to review his or her
account development process and understand
the importance of accurate forecasting.
Hint: The sales manager should call
certain accounts that are won or lost and determine
from the prospective customer why they chose
your company or a competitor.
4. Find the Influencers
With these compensation options in mind,
let's look at some scenarios to see what type
of plan works best.
Nothing beats word-of-mouth promotion for
your company or product. A good referral from
a vendor or organization aware of your company's
products and solutions may be the equivalent
of one salesperson's quota. Creating a network
of "influencers" who can put in a good word
for your company will increase your opportunities
to develop predictable revenue, balance your
sales efforts and may lead to new accounts.
Finding and developing the key influencers
is an ongoing process. Once you identify them,
create a campaign to boost their awareness
of your company. Set individual meetings and
create an ongoing contact process. Proving
your expertise to provide a high-quality service
or product will become the key component of
a long-term trusting relationship and smoother
sailing.
Hint: To develop your list of influencers,
ask your key accounts to identify the leading
organizations or individuals in their industry.
Seminar speakers, magazine contributors and
trade show exhibitors may also be good people
to make aware of your company. Also consider
contacting people on the boards of industry
associations, partners in accounting and consulting
firms or retired executives from your industry.
|
|
