Are you even tracking it? Should you be? The answer to all of these questions is “yes”, and you better make sure your sales performance management system is collecting data faster than one of those Ferraris flying around the Monaco Grand Prix track this weekend!
Over the past two months we have been working on several projects where we have needed to determine cost to sell for specific opportunities. Needless to say, determining this value has been extremely challenging when the organization does not have clean data and an effective sales performance management system.
To resolve this problem we have identified the seven pieces of information you need to determine the cost to sell a single opportunity including:
- How many calls were made on the account?
- Average amount of prep time before each call
- Average call duration, including travel time
- Average amount of post call follow ups
- Sales Representative Base Salary
- Sales Representative Annual Bonus
- The amount of bonus the sales opportunity makes up (% of total)
Once you have gathered all the input data for a given opportunity you can then calculate the cost to sell.
Account segmentation is the biggest beneficiary of determining cost to sell because it enables your organization to ensure limited resources are focused on not just the biggest opportunities, but the opportunities that are the most cost effective to acquire. For example, let’s say one of your sales reps is trying to sell customer X a $20,000 piece of machinery and between client calls, pre and post preparation time, travel time and bonus compensation the total cost to acquire the client is $25,000. The client will never be profitable and even though revenue was expanded, shareholder value did not increase.
As you continue to build out your sales performance management system begin to think about how you are going to capture cost to sell by opportunity which will enable you to target the types of organizations that will make your organization successful.