Develop & Build

Why does my boss wants me to sell 10 times my own salary?

This discussion often comes up in our cost of sales workshops, and I believe it is good for any manager or director to have a simple and straight forward answer to the question. There are many obvious and hidden costs to consider, and by being transparent with your team about where the money goes, you will save yourself potential problems. 

 


 

Let us take the Software example: You are working for a great start up B2B SaaS company, the team is great, you believe in both the company and the idea, but  … they ask you to sell for a million, but your on-taget-pay is less than 100k. How can this be, seriously??

 

Most recent software companies don’t have California-style financing up front, you are in Europe. This means that somehow your company need to be profitable or close to profitable EBIT wise. What is your reasonable quota?

 

Cash is king. two different cases:

 

    • Software have very high grown margins, but cash comes in slow nowadays with subscription and pay-as-you-go schemes.

 

    • Traditional things, machinery etc are paid up front or at least in conjunction with the delivery, but, the internal margins after paying internal transfer – costs of goods are much lower. 

 


 

The software case

 

Back to software –  In the old days, software sales used to book sales during the same year: product/license money came up front, and training, services and installation services were invoiced during the first year. Additionally there used to be an annual fee to stay on maintenance, support and new versions etc. (20%-25% of the initial licence fee normally)

 

Now, subscription softare – SaaS, has completely changed the game plan. What used to be a 100.000 € deal, with annual maintenance of 20.000€ has now become a 3-4.000€ monthly subscription. Over time this is great, but the company needs the money now!!

 

To comlipcate the matter, in many companies, the sales department only sees the first year of revenue after signing. Next year your customer will be handled by the customer retention or “customer success” team.

 

Since your company have no external funding for the moment, what is the reasonable quota, or sales target you should carry?  Lets look at the cost of sales and the money we can expect initially. 

 

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Profitable companies cover costs

 

A rule of thumb for any SaaS company who seeks profitability, is

 

New (first year ARR) sales, should at least cover this years customer acquisition cost (CAC) with new sales (new ARR > Cost of Sales, CAC).

This means for the company any new customer must be paid for already during the first year contract (from signing). Otherwise, the company will need external financing to cover while waiting for the second and future years payments. If first year contracts cover CoS, the company can grow with limited external financing, and not be restrained by a systematic cash flow problem for its growth.  

Think about it:

 

For any new sales, you are using company resources that your activity need on a deal.. such as techsales, new features development, management and admin. (Customer services and support are handling your recurring revenue, coming years, so here both cost and future revenue is excluded), 

 

Without going into any great detail on what may the case in your company, it will probably be a good rule of thumb to think that – If you sell for about 4-5 times the average sales employee total cost to the company, you are all right.

 

The real cost of any employee is around 1,5 – 2 time the salary, this way including social security fees, indirect taxes, the office space you use up, medical insurance, meal tickets etc.

 

Example

 

As an example, if your salary is 60kEUR, your total cost is around 100kEUR, and the reasonable quota is 450kEUR-600kEUR . If your salary is 100kEUR, you should not be surprised if your quota is 800-1.000kEUR. Why?

 

Why is 4-5 times your cost, (or 10 times your salary) a good rule of thumb?

 

  • One is to cover your own cost to the company
  • One is to cover other direct new sales costs, Presales activities, free Consultancy, proofs of concept, development adaptations etc
  • One is to cover other overhead and indirect sales costs, your sales director, your marketing personnel, a part of admin, all more or less involved in new sales. 
  • Between One and Two is to ensure some margin, because during the year one or more of your colleagues will not make their quotas, they may leave, the market was not good in their territory etc. 

Needless to say, this is a very coarse estimate and way to think about quotas. In the companies I have worked I made sense for me and my team, under the circumstances I described above. If the market is bouyant, and your company is very agressive in marketing, for example, then your quota could and should be significantly higher. If the company is spending wast amounts of marketing, you job gets a lot easier, but at the same time the money you need sell to cover for the marketing team will increase.

 


 

For industrial products? 

 

The same reasoning, but here we think that the total cost of sales plus any extras  must be covered by the internal product margins, the contribution margin from your unit. 

 

Example 

 

You sell industrial equipment that is produced elsewhere. The cost when delivered to your warehouse is 65% of List Price, leaving you with 35% to pay for your teaming cost of sales. 

 

Let us assume that the sales effort is the same, one salary for you, one for Presales and other sales support, and one for management overhead and office etc. Add one for internal margin. 

Your pay is 60k€/year – or total cost 100k€ per person. That makes 300k€, plus internal extra of 1-200k€.  Total cost/internal margins from factory =  400k€/0,35 = quota of 1.143k€

The pure cost is 300k€, so if you sell for less than 300k€/0,35 = 857k€ your local unit will present losses! 

 

5 steps to run trainings that stick

Training – an effective tool for change

 

To be efficient and effective as sales managers, there are a number of things we need to learn and become good at ourselves. One of the 6 pillars of sales management is building and developing your team.

Every time we ask our teams to perform something that is new to them, we need to step into the develop and build area to develop the new skills and behaviors.  Sometimes you have the option to bring in professional trainers, but for most daily learning, you cannot bring in external resources.

In this article, you will find some hints and tips for how you can plan your own trainings for your teams.

 

5 steps to build a training that sticks

As you are not (and we assume you do not want to become) a full-time teacher/trainer, we advise you to use this knowledge to build only short, condensed, and interactive sessions, rather than full-day or multiday trainings.

Longer trainings are very complex to build and difficult to run. They require a rich set of competencies to achieve real learning in the team.

 

 

The 5 steps to remember when we are to build effective trainings are outlined below.

 

 

1.      ENSURE YOU KNOW THE SUBJECT

 

Gain a thorough understanding of the materials and the messages that you want to convey. You don’t need to be a black belt 5-star expert, but you need to know enough to convey the content in a credible manner and be able to answer basic questions around the subject.

 

 

2.       UNDERSTAND THE PROCESS OF LEARNING

 

There are many pedagogical models and methods available. One model that we have chosen in this context is called 4MAT. Dr. Bernice McCarthy (USA) developed the first basic structure of the 4MAT system in the late 1970s. Since then, the method has systematically and continuously been used, developed, and linked to the newest research in the field ( http://www.4mat.eu ).

 

Basically, the model stresses that people have different learning styles. This means that for ANY training we want to build, we need to accommodate for these different learning styles and build our training block so that all phases are included. Some people are focused on:

 

 

                • WHY? – “Once I understand why we need something, I’ll figure out the rest.”
                • WHAT? – Intellectually understand what is needed: “If you give me the book to read or present to me in a lecture, I will do it myself later.”
                • HOW? – Activity: “Ok, I got it, just let me try myself. Let’s see here…”
                • WHAT IF?-Finding and testing alternatives. “And why couldn’t we do it this other way?”

 

 

3. MASTER A WIDE VARIETY OF METHODS – AND LEARN WHEN TO USE THEM

 

Try to use a wide variety of techniques in your trainings. Vary your style so you can both lead the class and use more interactive methods.

 

Use the button to download our one-page quick guide.

 

 

One Page Quick Guide

4. A TRAINING SESSION HAS THREE PHASES – BEFORE, DURING AND AFTER – USE THEM

 

A common mistake is to only focus on the training session itself when we design the training. Especially since we want to build short, concentrated blocks, it will be extremely important to use before and after in a good way.

 

  1. BEFORE: Preparation by all involved
  2. DURING: A well-designed training session
  3. AFTER: Structured and active follow-up

 

As you can see in the picture below, a good way to plan your training sessions is to map the content and the technique blocks you are planning to use against a WHY?, WHAT?, HOW? And WHAT IF? timeline.

 

 

 

The preparatory tasks you send out lend themselves very well for the WHY? And to some extent WHAT?, so that you can spend more time in the classroom for WHAT? and HOW? After the session, it will be about putting the learning into practice, and therefore to the HOW? and experimenting with the WHAT IF? The experiences are ideally captured and shared in a separate follow-up session.

 

Plan the activities carefully and think through the steps, creating and writing what we call the Running Master, or Timing Plan.

 

It should contain:

  • Objective– Learning points
  • Preparations(for the teacher)
  • Before – Preparations for participant – timing/dates
  • During – Blocks, content and method/technique – timing minutes
  • After – How to put to practice and follow up.

 

 

5. MAKE WHAT YOU LEARN A PART OF DAILY WORK

Only 10% of the effect in a change effort comes from lectures, training, and reading.  20% can be attributed to tools, systems, and structure such as feedback supporting the training and the changed behaviour. Finally, 70% derives from on-the-job training and experiences.

 

 
En bild som visar text Automatiskt genererad beskrivning

 

Unless on-the-job training, experiences, and reinforcement of the tools and behaviours learnt are truly put into daily use, changed behaviours will not succeed.

If you are the manager of the team you hold the training for, you have a fantastic advantage compared to most teachers and trainers around. Most trainings fail due to lack of management support, follow-up, and integration of the matter into daily work. You, on the other hand, have all the cards in your hand to actually make it stick!

 

Interview candidates with a purpose – free template

If you are a bit new to recruiting and interviewing, and feel you could use some basic tips and tricks, continue reading. As with most things in sales management, putting a little structure and thought behind your recruiting will enhance your chances of selecting the right person and getting off to a great start as a manager.

In this article, we have put together some general guidelines and tips to help you prepare for your interviews.

 

 

Who do I want to work with?

The first area to spend some time on is to define what is truly important for the role.

 

HARD SKILLS

We all understand the importance of understanding your advanced technology, or that the candidate has a great network, is extremely experienced, and is young, hungry, and full of energy. We can call these the “hard” skills. They are often tangible, more easily measurable, and 9 times of 10, they are what managers I talk to mention as the most important criteria when recruiting.

On the concrete or “hard” competencies, you will want to evaluate the candidates

  • market knowledge and network in the territory
  • product and technology understanding
  • sales skills/technique competencies

 

SOFT TRAITS

Very often the “soft” abilities are passed to a second plane. They are more difficult to define and measure, or even to talk about. Yet, they are key to a successful transition into your team and to reach productivity.

In the LinkedIn State of Sales Report 2020: U.S. Edition, 500 buyers and 500 salesreps/managers were asked what 10 characteristics buyers desire from salespeople compared to the characteristics sales managers look for in the sales reps they hire. Buyers ranked active listening, problem solving, confidence (trust), relationship building and communication skills as the top 5 traits. Technology understanding, years of experience, and industry expertise came lower.

During your interviews, pay special attention that the candidate:

  • will adapt to the context and support network you have in your company
  • will learn well and can adapt to ways of working
  • is open to change
  • will fit in your culture, making it easy to work together
  • shares similar values, and will subscribe to the corporate values

 

Recruiting the right person to the wrong place

 

There are only too many examples of great salespeople – absolute top performers who are recruited into a different context but selling something very similar to the same people – who still failed to succeed or even get close to the previous success. The “hard” competencies all fit. Product/technology, market/industry, contact network, and demonstrated sales methods and techniques were all “check!” yet they failed. Why?

 

What happens is that the soft abilities and cultural fit just don’t align with how your team and company work. This is everything from your internal team dynamics, culture, and jargon, but also misalignment with the expected surrounding support, HR, pre/tech sales, support, services, marketing, etc.

 

 

Two classical scenarios:

  • The medium sized company who decides to open a new sales office in a new country/market, and hires a top manager from the incumbent competitor for the job. This is always a bad idea, as the first person in the market needs to do all the work themselves initially, and there is no support network yet.
  • A large corporation that hires people from startups often finds it difficult to accommodate the new hire’s appetite for creativity and room for own decisions, and the employee often feels hindered and suffocated under all the processes.

Note that we are not saying one is better than the other, but as hiring managers, we must be conscious of our own ways, culture, and values, and we must be sensitive to which candidates will fit in our context.

 

 

The Process

 

DEFINE KEY EVALUATION CRITERIA

 

Make sure to complete the “hard” job descriptions with the most important “soft” characteristics you are looking for. Then design an interview template that helps you evaluate the candidate in all these dimensions. You can download a simple template by clicking the button below.

 

USING TESTS

The more important you deem the values, culture, and other “soft” skills for the role, the more you may want to consider a personality test. Make sure you prepare your interview well and focus on these areas. If you are using an agency, they can often set up a DISC test or something similar for you.

If the job requires technical skills, set up a test that your candidate needs to solve, or ask them to prepare a convincing sales meeting if recruiting telesales.

 

MULTIPLE INTERVIEWS

Have at least 2 people apart from yourself interview the candidate throughout the process. Let them meet with different personalities and roles to catch possible moments where non-desired behaviours come up to the surface. You will get a much more complete picture of the candidate. After each round, set up a debrief with the interviewers, and run through the evaluation criteria.

 

 

Interview template

To help you structure the interview, we propose a simple template that you can follow. It should not be a questionnaire, but list the key competencies and personal traits you will want to evaluate.

Use it as a support to help you formulate questions and conduct the conversation so that in the end, you feel confident all areas were covered to your satisfaction. The questions in all cases being:

  • “How well/badly do I think the candidate will be doing……?”
  • “Will the candidate be strong enough in ……..?”
  • “Is the candidate motivated and able to learn this ……. quickly”

 

 

Download template

 

Prepare by thinking through each area, and note what specifics you want to know, and how to formulate the question to get the answers you need.

Remember to ask for relevant references, and complete the interview by contacting those references.

 

Onboarding for growth

The importance of a great Onboarding

 

Studies show that employees give their new companies about 6 months on average before they decide whether to go all in with their new employer. At the same time, other sources point to a learning curve and time to full productivity of a year or more and at least one full sales cycle. In a culture where success often is made synonymous to revenue and sales numbers, new salespeople risk losing interest and enthusiasm long before success and hitting their numbers.

 

The combination of high expectations, a long ramp up/time to sales, together with short patitence of both the new employee and the organization becomes an explosive cocktail of high attrition on new hires, with stagnated growth as the most severe consequence.

 

The onboarding program helps mitigate the effect by

  • Shortening the learning curve and time to productivity.
  • Redefining and widening the term success, since activity metrics, competence development and personal growth are also considered successes along the way.
  • Keeping people interested and motivated from the first day and throughout the learning process.

 

A great onboarding program helps new hired individuals perceive and appreciate the company’s effort to develop and grow them so they are more likely to return the favor by staying on and being more motivated.

 

 

Defining what is important

 

We have prepared a template for a 12-month onboarding plan, where we have selected some standard areas for sales reps in a complex technology sales context. Use this as inspiration to create  your own plan. Consider what is truly important in your company and context.

 

Some things you may want to include are listed below:

  • Market and ecosystem understanding
  • Contact network
  • Customer understanding
  • Product and technology
  • Personal traits
  • Values and cultural fit
  • Sales technique
  • Sales process and strategy
  • Tools and methods

 

A structured approach to competence management is helpful throughout all phases, from recruiting to the periodical evaluations. What you do the initial evaluation, already in the recruiting phase, and construct a initial training program to cover any weakness you discovered, we call it our Onboarding Program.

 

a simple onboarding plan based on competence areas helps providing structure

Onboarding program for a Sales Person

Below is a template to use to create your own onboarding program. Fill the boxes with the training, meetings, and activities that your new hire should plan to do within different time horizons. To help you organise your thoughts, go area by area, one by one, and fill in the boxes. You may be surprised at the end by the quantity of activities the new hire needs to do to get up to speed. Keep this is mind when you set the expectations for sales and productivity for the fist couple of months!

 

Many of the activities, sucha as “getting to know the company,” need to happen early on, and others will be more evenly spread out over the year. We suggest you stage the learning in the following time categries:

  • Immediate (< 2weeks)
  • 1stmonth
  • 3 months
  • 6 months
  • 12 months

In each area, you may also want to add success criteria or milestones that you can check off and celebrate with your hire as they make each one. Click below to download our onboarding template.

 

 

Download template

Sales call coaching – Getting the most out of every sales minute

 

Sales Call Coaching – going together to customers is a great coaching tool

Sales call coaching means visiting customers together with the purpose of receiving feedback and improving sales skills. It is on-the-job-training for all of us, regardless of position or role. It is a vital part of the continuous development for the whole sales organisation. It is a tool for sales professionals to learn and develop while getting to know each other better by sharing knowledge and experiences.

As a sales manager, you need to sharpen your coaching skills to do this well, but when done well, it is an invaluable input for later when you hold more general performance evaluations. Do this live in customer situations, and not by interviewing the sales person. Discussing and coaching on activities and quality of work  is not realistic nor trustworthy without continuously observing and studying behaviours in real-life situations.

 

Sales call coaching is your best tool to get a first-hand feel for sales behaviour. You should consider doing this with all customer facing personnel, inside sales, product specialists, and account managers. We all need to develop self-awareness and understanding of how our behaviours affect the outcome in customer situations.

 

Why should all managers coach on sales calls?

 

The first line sales organization aims to provide increased customer value. To ensure sales reps can perform in line with this and provide this increased customer value, sales management needs to change and provide added value for reps. Sales call coaching is a key tool to achieve this.

 

Doing sales calls with reps will help managers in the following ways:

  • Continuous improvement towards a world-class sales team!
  • Benchmark successful behaviors
  • Train and ensure product knowledge among sales reps and other customer-facing team members
  • Develop sales skills in all staff
  • Find out how sales reps spend their time
  • Obtain good ideas for benchmarking and best practice
  • Ensure value sales is applied professionally
  • Gather information from the market
  • Practice and improve yourself in difficult negotiations, meeting key customers, etc.
  • Get to know staff better and further improve teamwork

 

Download - How To: Sales Call Coaching

 

Evaluating and giving feedback on different customer interactions in the sales process require different skillsets of the manager. Sometimes we may even need to work on multiple roles at the same time, in complex multirole meetings selling as a team.

 

Sales directors and higher management should also make an effort to find the natural opportunities to visit customers, together with their sales reps and managers, in order to help them become better at what they do. For the manager, this is coaching the reps.

 

The sales manager should spend at least 2 working days per week in the field. Some of the visits can be virtual, but make sure you apply a mix of different types of meetings and situations so you coach and support all phases of the sales process.

Sharpen your skills evaluating reps and coaching for all situations!

 

If planned and executed well, this work should not take more than half our week.

 

Download - Sales Call Evaluation template

 

What to look for

 

You should pay attention to basic sales process situations and how different tools and sales situations and parts of the meeting (see example below) are applied.

 

Different steps of the pipeline sales process require different skills. See the evaluation template for inspiration. Adapt the template depending on what type of meeting it is that you coach. How is the sales rep performing in different situations? Notice when they are doing the following:

  • Attempting to open new parts of the business with a focus/growth customer
  • Cross-selling on higher levels of the management of key accounts
  • Applying value selling to increase share of wallet in already well established accounts

… etc. etc. The examples are infinite. Select the situations to train and coach according to your tactical needs, and go for it!