“We have a sales problem” is a common diagnosis for an underperforming enterprise. If this is correct, and not a symptom of deeper rooted organisational or product issues, then I will refer to two principles:
- Conquest, Basket & Frequency
- The Pie
The Pie is about sales structure, focusing effort and de-risking your business targets. I recount below a couple of examples, based on a sales team for a larger business division and the business development strategy for a growing start-up.
When I met the sales team they were nervous of the outsider. It was Month 1 of a new year, sales targets were 10% higher than the previous year, and now the Board had gifted me to help them. The first thing I did was lift their target by 25% – in other words, the target was 37.5% higher than prior year. Their faces were a picture, but they went on to beat the Board’s business plan.
Each of the salespeople had a target of £1.1M when I arrived, which I raised to £1.375M – we rounded that up to £1.4M. The reason for the raise was to account for growth gradient. At the beginning of the year monthly sales would annualise to less than £1.1M so to offset this at the other end of the year, there must be monthly results which annualise to more than £1.1M. There is also the saying “shoot for the stars: even if you fall short at the moon, you are still a long way up”. There was no expectation to achieve £1.4M (although some did), my target adjustment was to secure the chances of all meeting £1.1M and provide a strong foundation for the following year.
In B2B sales, managing more than about 15 accounts is difficult, not to mention inefficient, without support staff. Serve The Pie! A perfect pie is half the target comprising up to 3 ‘first division’ customers (£700K total; approx. £233K each); a quarter of the pie comprising up to 3 ‘second division’ customers (£350K total; approx. £117K each) with the final £350K comprising up to 10 smaller accounts: any other business.
By ranking existing customers into these categories, the sales team was able to identify the holes in their pies and focus on pursuing customers with appropriate magnitudes of buying power. Their sales target was no longer one big scary number – it was a handful of very specific smaller targets to hunt. No more “I sent out 1000 mailers this week”, they began a methodical process of prospecting. A sense of humour emerged about the opening meeting “we couldn’t believe it when you rocked up and stuck another 25% on us!”
Between the nine of them, they went on to sell £11.2M (YoY growth of 24%); nobody missed their target and the consensus was that it had been one of the easiest of years – it felt easier because they had worked smarter, not [inefficiently] harder.
For a start-up, where the founder – or one of the founders – is responsible for business development, pie management is even more acutely required. Winning one big customer that, say, facilitates breaking even leaves the business vulnerable to that customer. At the very least, the revenue from that customer must be balanced with a customer of half the size, and some ‘any other business’ accounting for the remainder. Every time a big customer is landed, the revenue value must be reinsured with a handful that add up to the same.
So, imagine winning a £250K account: now balance that with one of circa £125K and some smaller accounts which add up to £125K, to make a total of £500K. The next step will be to replicate this with approximately the same again and again to build a £1.5M pie. Even if one of the big customers is lost, the business will be robust enough to withstand it while a substitute is found – which might even be increasing sales to an existing customer.
In all B2B enterprises I will be concerned if there is excessive dependence on too few customers or if there is a lack of focus on customer conquests (which typically manifests itself as indiscriminate marketing to a broad audience). Pursuing ‘any old business’ produces busy fools, wasting time and money.
Be careful of writing big sales numbers in spreadsheets – making them real requires structure. There are many nuances of The Pie, and techniques for dealing with exceptions, but it is a powerful base rule for sales management in all manufacturers and top-tier distributors.