#4. Engage Your Sales Math
So far in this five-article series, I’ve focused on what you can do at the front-end of your sales cycle to help generate the great results that you’re looking for in your organization. This entails fine-tuning your prospecting and targeting skills and finding multiple ways to get the word out on the street about your work as a sales professional. Getting that component right is crucial. When you master all aspects of the front-end of the sales cycle, it puts you on a direct path to finding great customers and generating more referrals and testimonials. It also makes selling a lot more fun, because you benefit from selling more to the people you enjoy working with the most. And who doesn’t want that kind of dynamic sales growth, right?
Remember that “front-end” describes activities that you need to do really well and to do so consistently, otherwise everything else that follows will likely lead to disappointment. As I remind my clients and readers regularly, it doesn’t matter how good a closer you are. It doesn’t matter if you are the best negotiator in the world. If you don’t have a steady stream of prospects to sell to, you will fail.
Now that we’ve established that at the root of sales success in any market is prospecting—knowing who to target and how to turn these people into loyal customers—we can turn to examine important activities that help support all your efforts on the front-end. This entails getting a better lock-in on what your goals need to be as a sales professional and as a sales organization.
This is what I call engaging your sales math. Don’t get scared! I’m not going to ask you to do advanced algebra in your head. I am going to challenge you to find ways to work harder and smarter, and to make that happen now…not later.
Working harder and smarter means you need to develop a clear understanding of two numbers.
1. Knowing your closing ratio
First, you need to define what your closing ratio needs to be in your organization.
Net new contacts to close—not just the closing ratio from proposal stage to close. So what should that closing ratio be? It depends on your business. For existing businesses on average, one in every two completed sales—approximately 50%—should come from new leads and the balance from existing customers. Based on that, closing ratios can be as low as .008 (125:1), and as high as 0.5 (1:2). It depends on whether you’re cold calling from the yellow page business directory (which has the lowest closing ratios), or growing your business based on referrals (which has the highest closing ratios). Be honest with yourself and make sure you consider your closing ratio from net new contacts to close – not just the closing ratio from proposal stage to close.
However, let’s be clear. This does not mean you should work longer hours to meet that ratio. Rather, you need to look at whether there are ways that you can make better use of the hours in your existing work day. Don’t succumb to distractions. Or as Michael Gerber, author of E-Myth Mastery: The Seven Essential Disciplines for Building a World Class Company, and The Most Successful Small Business in The World (among other titles) advises, don’t allow yourself to be stricken by entrepreneurial seizures every day, day after day.
Instead, set yourself some realistic, measurable goals that help you meet your closing ratio objectives. Make a pledge to yourself: “for two hours a day at this specified time of day, I’m going to do nothing but make sales calls.” Close your office door. Make sure that other scheduled meetings and appointments are outside of that golden zone. Remember that when you’re in sales, you can only do your job when you’re able to be in contact with prospects and customers when they are available. So make best use of your time during typical business hours.
2. Knowing your sales funnel
Calculate just how large of a prospecting funnel you’ll need to reach the sales goals that matter to you and to your organization—-that’s the second number you need to engage your sales math. Make note of this valuable rule-of-thumb: your sales funnel of prospects should be at least three times the size of the amount of business you want to close. Therefore, if you reach a $200,000 sales quota next year, you need to generate and manage a sales funnel of at least $600,000 in potential sales during that same period.
If you define that sales funnel using a measurable, realistic number, then you will have a much better sense of your progress in meeting your sales quotas at any given time. Fall short and you’ll know that your chances of hitting your target are slim. Exceed your necessary sales funnel target and odds are very good that you’ll be reaping the benefits of the great sales results you’re looking for (and that you really are capable of achieving). It’s that simple. It just takes hard work as persistence.
Here at Engage, one of the first things Chris and I did when we moved to our winter office in sunny Miami was to buy a corkboard and a whiteboard, so that I could post our mission-critical numbers right where we could see them. We established our target revenue for Engage and then determined the size of our sales funnel. It’s a simple, effective way to help keep you focused on what matters in your business, and so I encourage you to do the same. I track it in our CRM, and on paper in my office so I always have the numbers close at hand.
True, there are a lot of sales experts out there who will try to convince you that sales aren’t about numbers. Sure, being a successful sales professional is about more than just crunching facts and figures, but you do need to know how the numbers work to be a success. Otherwise, how can you possibly measure your progress along the way?
A couple of favorite quotes come to mind here. The first is from one of my favorite speakers, Zig Ziglar, who said: “Most people aim at nothing and hit it with surprising accuracy.” Another is from Laurence J. Peter: “If you don’t know what you’re aiming for, you’ll end up somewhere else.”
The fact is that most people fall short when it comes to doing the sales math. They just focus on their revenue quota. Successful sales pros take the time to break it down to say “if I need 100 transactions then I need 300 qualified leads.” Go the extra mile. Do the math and figure out exactly what it is that you need to do to hit the sales targets that will make this year your best on record.
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