| IN THIS ISSUE July 2014
Business of Selling
Sales Metrics to Monitor: Part 7
Dr. Jim Weber, Weber Consulting
In addition to those metrics identified in previous articles, this column will address additional metrics that should be on the radar screen for any dealer/sales manager interested in getting the most out of their sales department.
Capital goods salespersonnel should be required to make an average of at least 25 on-site calls per week. Assuming the sales person will work 48 weeks a year after accounting for vacations, holidays, training and sick/personal days, this means that the sales person will make at least 1,200 calls per year.
Anything less than an average of 25 on-site calls per week is a dereliction of managerial responsibility, rather than salespersonnel insouciance. One of the first responsibilities of a sales manager is to clarify expected salespersonnel goals; and making a minimum number of calls per week should be at the top of any sales manager goal-oriented list.
Another goal for dealership salespersonnel that needs to be monitored on an on-going basis is a specific number of contacts to non-dealership customers. In addition, a specified number of annual calls to non-dealership customers should be articulated. Numerous research reveals that converting a non-dealership customer will require anywhere from 5-12 calls over a 12-month period. Ergo, repeat contact to non-dealership customers should be planned, initiated and monitored.
For experienced salespersonnel, two additional metrics should be monitored. First, the number of unit sales and corresponding gross margins by manufacturer and by product mix should be reviewed. Secondly, experienced salespersonnel should be required to complete an annual call schedule as well as a weekly call schedule based on the anticipated gross margin dollars of existing customers as well as the expected sales and margins of non-dealership customers.
Two other metrics pertaining to salespersonnel that should be monitored include a weekly call report and the timely submission of expense reports. Rather than using the call report as busy work, this tool should be completed weekly and used to confirm the previous week’s call schedule and to serve as a preamble for the following week’s call schedule.
For example, if the call report indicates that a quotation was provided, or that a demonstration was conducted, shouldn’t it be obvious that that person’s name appear on the following week’s call schedule. Successful dealers have synched the call report and call schedule to display both side-by-side.
Another metric that should be uniformly enforced is the timely submission of expense reports. All incurred expenses for the month should be submitted within 7 days of the month end. Failure to do so will result in forfeiture on incurred expenses — provided state labor laws permit such a policy. Failure to provide timely expense reports is just one more indicator of poor time management which is generally discouraged by successful sales managers.
Two additional metrics that should be continuously monitored relate to the balance sheet. They are the amount of paid new and used equipment on hand as well as the amount of time each unit has remained in inventory.
While previous articles have emphasized the importance of monitoring a dealership’s new and used equipment turnover, equally important is the amount of inventory that has been paid for. Dealers interested in maximizing their cash flow would be wise to minimize their paid inventory. As manufacturers reduce floorplan terms, dealers should likewise judiciously reduce their orders.
The same is true as it pertains to market exigencies. If a dealer was to forecast a decline in sales, then ordering should likewise be curtailed, regardless of manufacturer threats or claims that inventory will be short. Increasing paid inventory is almost always a harbinger of low turnover and dwindling cash flow.
Closely aligned to paid inventory is the amount of time that a unit has remained in inventory. It is not uncommon to see machinery units on dealership lots that celebrated 2, 3, 4 and even 5 birthdays. You can usually spot these dinosaurs by looking at the circumference of the tree trunk that is “growing” up through the machine’s wheel hub.
How can this be? Wouldn’t you think that a machine that goes 12 months without a sale — or a maximum of 15 months for a seasonal specific machine — would be repriced to sell? Maybe dealers retaining such machines are “hoping” that a customer from the planet of Neptune will magically appear to help them out of their inventory quandary.
But hope is not a strategy and neither is retaining a plethora of overpriced, antiquated equipment. Monitoring both the age and the terms of all equipment and developing a subsequent sales strategy will significantly improve all facets of the wholegoods department.