The Australian Small Business Blog

Monday, May 02, 2016

Before You hire a Salesperson……

by Dr Greg Chapman

Are your sales currently disappointing? Hire a salesperson. Want to increase your rate of growth? Hire a salesperson. Many times every problem seems to have a simple answer..... which is wrong! People think, just because they have hired a salesperson, that revenue and profits automatically increase. In reality, there is a hit to your bottom line with the new wage cost which may not be covered for a long time by new sales.

Like any business decision, you must look at the numbers. Hiring a salesperson before you are ready can cost you more than any benefit you might obtain setting your business back many months. This is not just about hiring the right person, which is of course important, but not even a sales superstar will work if the numbers are wrong.

A salesperson is a business investment, and like any investment, you should calculate the ROI (Return on Investment), determine breakeven and risks before you make it. A mini business plan if you like.

Start with an estimate of the total cost of your new sales person. This is the amount of gross profit (not Sales) they will need to generate, just to enable you to breakeven. Of course you don’t want to just break even. You would have a Sales Target with a multiple of their wage as the gross profit result. How many sales does this equate to a month? How many sales calls will this require, since not every sales call results in a sale? If it’s two calls for every sale, is this achievable?

Next we need to move to your Sales Pipeline. (Do you have one? Read more about building a Sales Pipeline here.) How well defined is each step? What is involved? Will the salesperson generate their own leads or will you provide them with a list? Will there be enough leads to produce the sales you require each month? If you run out of leads for your new sales person in a few months, what happens next?

How will the salesperson be getting their appointments? How many phone calls do you expect them to make to obtain an appointment, and how many appointments for each sale? How long will all this take? You may decide that there should be sales administration support (a good idea) so that the salesperson can focus their specialist skills to close the sale. How would you provide that?

Each of these steps should be properly documented in your Sales Pipeline which enables you to calculate the ROI of your investment in a salesperson. This becomes your Sales Plan, as well as way of providing a job description and the required skills of the person you are seeking. It also becomes the training tool for the new person.

A way of leveraging this investment is an incentive scheme that reduces your risk and provides motivation for salesperson productivity. That is, having a lower base wage, and higher commission. This reduces the breakeven gross profit for you. Additionally, there will be training time before they reach peak efficiency. How does that affect your ROI?

If this analysis does not provide the return you are seeking, this doesn’t mean you should give up on hiring a salesperson. It just means that you will need to do more work on sales pipeline development before you are ready.

May You Business Be - As You Plan It!

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Dr Greg Chapman is the Director of Empower Business Solutions and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

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1 comment :

Unknown said...

Thank you for a great article. I find this aspect to be the most difficult part about running my business.

Brian Burrell


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Dr. Greg Chapman is also the author of
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