Glass-half-full people see downturns and recessions as great opportunities for growth, and I don't disagree. In times like these, people are looking for good ideas to help them be more productive or save money. Guys who wouldn't give you the time of day are more willing to listen now. Better still, competitors are cutting back on sales and marketing. To save cash, they're putting fewer boots on the ground to develop new accounts or even take care of established ones. If you do the opposite, there's a chance you can grow in this soft economy.
A well-supported professional sales force can be an effective way to build a service business. But don't just hire a guy to generate revenue when what you really want are profits. Remember, profits are what's left after expenses have been paid. Here's how to break down the costs involved in hiring and supporting a salesperson.
A 10-years-plus pro with a book of contacts and a grasp of the business will expect at least a hundred grand a year, if you can find him. On the other hand, a rookie whose only experience is selling turtles at the local pet store will run you $30,000 and a lot of Rolaids. For Joe Average, with five years in the business and some long-term potential, $50,000.
Travel and entertainment expenses vary depending on your business style and needs. So do marketing and promotional costs, which not only send a message to customers and prospects, but keep your sales staff interested and excited. T&E could run $25,000 — or more if you think golf-club memberships and courtside seats help make sales.
This includes software for managing contacts and sales leads, high-tech tools to keep them in the loop while on the road, plus an admin person to handle paperwork. Top performers also want high-end online customer support tools and a nice BlackBerry. ($15,000)
These are basic operating costs such as medical benefits, office space, etc. ($10,000)
So if Joe is going to cost you $100,000, all he needs to do is generate $100,000 in revenue and he's paid for himself, right? Not quite. Suppose your operating ratio is 95, i.e., you make five cents for every dollar of top-line revenue. Your new rep would have to bring in $2-million in sales to cover what you've spent on him in that first year.
A new salesperson is an investment, and you should expect a reasonable return in a reasonable period of time. How you define that depends on the business you're in and how long your typical sales cycles are. Maybe you can afford not to expect much while your rep learns the ropes. But if you're counting on a new salesperson to help you make ends meet, you may be better off spending more on an experienced pro who's ready to deliver on Day One.
Where do you find someone like that? Forget classifieds and online job boards. Instead, pick up the phone and ask your customers which freight reps they like to deal with. Track them down. Even if you don't find a new rep, you'll get a little inside intelligence on what your customers expect from their sales reps.
Of course, the easiest way to add $5,000 to your bottom line is to cut expenses. Pull a few boots off the ground and scale back on marketing. But that wouldn't be a very glass-half-full thing to do.
Mike McCarron is managing partner at the MSM Group of Companies, which specializes in transportation and logistics service between Canada and the United States.