Scaling Sales — One Index Card Shop Talk

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Big Red Car here talking scaling sales on a lovely — no, cloudy and gray — day in the ATX. On Earth as it is in Texas, y’all!

So, the Big Red Car comes from the school of SALES SOLVES EVERYTHING which means that CEOs need to focus on sales from the first day they start.

Any argument there? I didn’t think so.

But, once you have some sales, how does the crafty CEO scale the sales operation?

Listen up, dear reader, as the Big Red Car gives you a single index card answer. Ready?

Before we start one admonition: This is NOT a one size fits all analysis and it is NOT a solution. It is a frame of reference from which the clever CEO can craft a bespoke solution for her company. It should be approached in a crawl, walk, run frame of mind. Do not buy the final solution, just sample the first bites — crawl, walk, run — and then tap the accelerator. You can do this.

Starting point in scaling sales

Let’s assume you have some level of market embrace as to your product or service, shall we?

Now, the issue is “how do I grow sales?”

The simple answer — and we love simple answers in the real world of CEOing, don’t we? — is to hire some more sales persons. And, that will ultimately be the right answer, but first we have to do some things.

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This picture has NOTHING to do with the subject, but who doesn’t like a Longhorn?

Document the process

You cannot grow your sales unless you know something about the process and cycle of your sales. So, let’s make a sales process graphic, shall we?

Just draw the process, identify those involved, identify the roles of the individuals (such as the CEO coming to the ribbon cutting ceremony), and identify bottlenecks.

This last thing — identifying bottlenecks or choke points is an added benefit. Do it and clean some of them up.

Now, we know who is involved and what the process is.

Check, doublecheck, re-check the targets

I also want you to take a deep breath and ensure you know your market before you start investing in more sales muscle.

 1. Who have you sold to already?

 2. Why did they buy?

 3. Who needs your product?

 4. How deep is your market?

 5. What are your best client contact channels?

 6. Any new competitors?

Bit of a validation of your basic target market assumptions is nice because you want to ensure your market is big and robust enough to support your sales assumptions, right? Right!

Develop performance parameters

Take your total sales and take out the sales of the most prolific producer and your laggard. Calculate the average sales per salesperson.

 1. Identify total sales in a year;

 2. Subtract out the sales of the highest and lowest salesperson; and,

 3. Calculate the average sales per salesperson.

This number will determine how many salespersons you will require.

Identify your sales target

Identify where you want your sales to be in some specific time period, such as, “In two years, I want my current $4,000,000 in sales to be $12,000,000.”

Big jump? Yes, but we’re talking growth, right?

The quick reaction might be that you have to triple your sales force and that is essentially correct, but not quite.

Calculate the production level

Now, you want to identify the production level of your individual sales persons.

 1. Let’s assume you have seven sales persons.

 2. The top guy rings the bell at the rate of $1,000,000 per year and the low man on the totem pole has ZERO sales because he’s brand new.

 3. Doing the math — $4,000,000 minus $1,000,000 minus $0 equals $3,000,000.

 4. $3,000,000 divided by the remaining five sales persons equals $600,000 per salesperson per year.

Got it, so far? Easy stuff, no?

[Let’s also grade the above average and below average performers and assess the performance of every salesperson in that manner. You may have a chance to cull some underperformers in the process. Be alert to that opportunity.]

So what, Big Red Car?

Big Red Car, what do we actually do now?

 1. OK, so now you want to grow sales by $8,000,000, right? That’s your target of $12,000,000 minus your existing sales of $4,000,000.

 2. So, you take your $8,000,000 and divide by the average sales production level of $600,000 and what do you get?

 3. $8,000,000 divided by $600,000 equals 13.33 additional sales persons. Whoa, Nelly! That’s a lot of salespersons.

Calm down, CEO, you’re going to be tripling your sales and you’re only doubling your sales force, it’s all proportional. Stay calm.

Remember one other thing — we are just trying to figure out how many we need, there are other factors. We aren’t making any hires with our first index card. Calm down.

Other factors, there are always other factors

Here are some other considerations:

 1. Your existing sales force should be increasing its sales on a per capita basis as they master the product, the process, and get better at the blocking and tackling of sales.

Put a sharp pencil to that and see how many people you need if your existing sales force increases their productivity by 15-20%. Play with the numbers.

 2. You may have a series of channels including eCommerce, Internet lead generation, direct-to-client sales. Do this analysis for each of those approaches, knowing some of them are not as person intensive as others.

 3. You may have a tiered market with enterprise sales and direct-to-consumer sales. Again, segment your analysis and do it for each tier of your market.

 4. Once you get ready to make a few hires, you will be choosing between experience versus talent. You may be able to hire folks with proven sales history in the same or a related market. The cost of this talent may have some impact on how to proceed.

The best course of action may be to hire some of both. Hire good people. Hire people you would welcome as family members. Remember culture.

 5. There will be a learning curve. When projecting the impact of new folks, anticipate they will be ramping up over a 3-6 month period.

Accelerate the learning curve through training. Really great companies have really great training.

 6. There will be some culls.

This is two fold: You will want to evaluate your existing talent and see if in the process of hiring new folks, maybe it’s advisable to get rid of a few underperformers. Second, a few of the new folks will not work out.

Hire fast; fire faster. Upgrade the gene pool whenever you can.

 7. One more time — crawl, walk, run and absorb. You cannot triple the number of your sales folks and go home every night happy and contented. It takes time to get them up to speed (learning curve) and to assimilate them into the operation and culture.

 8. You will also have to take a careful look at sales supervision. There is some ratio in your company — number of salespersons assigned to one supervisor.

Figure this out also. Take you time. This is an added cost and may require immediate action as you begin to hire additional salespersons.

 9. Develop a set of parameters, calculate them monthly, track them graphically for the individual and the team. The most obvious one is “sales per person per month/quarter/year.”

Create performance competition and reward your best performers. Whatever performance you reward will be duplicated, but you knew that right?

 10. Develop a fierce pipeline report.

Segregate amongst suspects, prospects, contacts, deals in play, deals ready to close, closed deals. Use whatever description you want for your industry, but track the pipeline for each individual and calculate similar parameters such as “%

And, dear CEO, that is the frame of reference you need to decide what size sales team you need to underpin your sales growth expectations. It isn’t rocket science, unless you don’t do it in which case it is just dumb.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Be good to yourself, but not too good cause you have a lot of work to do this week. It’s only Monday.cropped-LTFD-illust_300.png

 

 

 

 

6 thoughts on “Scaling Sales — One Index Card Shop Talk”

  2. For sales I tend to think that not selling anything is the best way to sell. I worked on a sales team of two people and I watched Glengarry Glen Ross a couple times for training.

    I did pretty well getting most appointments made for 75% of calls.

    What’s funny looking back on that startup, was the other guys thought they were running the company. They sat back and hoped that I would sell most of it for them.

  3. Four suggestions:

    (1) Get Some Idea of Market Potential

    May have some sales territories, that is, have partitioned the world into non-overlapping areas that in total cover the world.

    In each territory that for your selling is relatively mature and stable get what data is available relevant to potential sales or market potential and then using all the data from all the territories do a simple (IBM Scientific Subroutine Package, SPSS, SAS, R, Excel) regression analysis that seems to do well predicting sales from the data.

    So, if you are selling commercial floor maintenance supplies to offices, schools, hospitals, retail stores, etc., then estimate, say, in each territory what the total area is in square feet, and use that to estimate market potential. Some other variables might also help. E.g., might get the area separately for each of schools, hospitals, or just commercial, government, etc.

    Uh, the software may report an ANOVA table; that’s just the three legs of a right triangle as in the Pythagorean theorem generalized, which it does, to higher dimensions (in some cases, to infinitely many dimensions).

    Use the results of that analysis to decide what old territories to split so can assign more sales persons, to pick new territories to attack next, estimate sales growth rates in each territory, and develop sales quotas.

    (2) Poor Performers

    For any poor performers without obvious serious problems, try to manage, lead, motivate, and train them before firing them?

    (3) Growth Curves

    I attach a graph of candidate sales growth curves — you may want one such curve for each territory.

    There is a little freshman calculus here:

    Let t denote time, say, in days, y(t) the sales in dollars on day t, b the market potential for that territory obtained from (1) above, and y(0) the sales in that territory today.

    Assume that sales grow proportional to classic word of mouth advertising, virality, etc. so that at each time the rate of growth in sales is proportional both to the sales at that time, that is, the market potential achieved so far, and the market potential yet achieved.

    So, for some constant k, with the calculus first derivative y'(t) the rate of growth is

    y'(t) = k y(t) ( b – y(t) )

    Can solve for y(t) for all times t with freshman calculus. Extra credit for doing so, or I will post the solution upon request!

    Then depending on the constant k, will get a curve something like those in the attached graph.

    Say that the constant k should be from the sales person in question, beginner, super star, or in between — adjust k with that in mind, and learn what values of k are appropriate from historical data of sales growth.

    First-cut, back of the envelope, simple minded, vanilla pure, common, ordinary, everyday, garden variety, that’s roughly how sales will grow. One Saturday just after noon in Memphis, that equation kept FedEx from going out of business.

    Sure, if there is some exogenous biggie such as a new competitor, an old competitor who quit, an old competitor you bought out, good stories in the news, bad stories in the news, a big trade show, a sales person who got run over by a truck, retired, etc., then this analysis needs some intuitive, manual application of Fink’s Finagle Factor or Kelly’s Variable Constant. Otherwise you have a somewhat useful tool.

    We’re not talking the accuracy of a space flight trajectory to Jupiter here, but we are going for something better than just qualitative guessing.

    (4) Spreadsheet over Time

    You want sales to grow, and you know that that will take some time. So, you are planning over time.

    All along you will be investing in new sales persons, salary, benefits, unemployment insurance, training, assigning them territory, giving them an office, expense account, covering travel expenses, gifts, etc. You hope to make money on this investment, but for now as you hire new people likely you will be losing money.

    Well, you want to grow as fast as you can, but you don’t want to invest so much and try to grow so fast you might go broke along the way.

    So, your mission, and you have to accept it, is to plan how fast to grow the sales team to get rapid sales growth but keeping the bank account current assets nicely positive.

    So, develop a spreadsheet. For each sales person and the territory they are assigned to, use the territory analysis in (1) and the growth curves in (3) to estimate how fast the revenue will grow. Include how your expenses will grow due to the hires.

    Then sit in bed with a good laptop computer next to your spouse as they watch a cooking show for how to make some goodies for the NBA Playoff games, tweak the partitions, the constants k, and the number of sales persons over time, and see how fast and when can hope to add sales persons to get sales growing as fast as possible without the cash in the bank getting too low.

    Sure, do the analysis for, say, two to, maybe, five years, say, long enough for the hew hires to become significantly productive, but actually TRUST the analysis for only a few months into the future. That is, hire in steps, see how it goes, and then adjust the analysis and take another step. “Measure twice, saw once.”.

    Hope that helps.

    Of course, there is another approach: Call sales staff all-hands meeting, explain that have a warehouse full of inventory and past due bank loans on that inventory. So, get all that inventory SOLD in the next 60 days or we will all be looking for new jobs.

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