To Go Boldly Forward.....

Edition: January 2002 - Vol 10 Number 01
Article#: 1144
Author: Wayne Care

The holidays are over, the New Year's resolutions in place, and you're taking your first steps into 2002. It's just another year, but it doesn't have to be a repeat of the past one. It can be better. We spent ten years in the war in Vietnam, but it was actually one year repeated ten times, because we did not learn from the experience. But you have learned and can be prepared for the year ahead. How you are going to make it a successful sales year?




The Hall of Famer
The top reps, whether inducted into the Hall of Fame yet or not, share common traits. One of them is the ability to plan. Whether they have eidetic memories, keep hand-logged records, or use a Palm Pilot or programs such as Act!, the top reps all know where they are going and how they are going to try to get there. They have ''if'' plans and they follow up. They are tenacious in their pursuit of results, and consistent in their sales call patterns.




Call Schedule
Now is the perfect time to review your pattern for calling on customers, and making cold calls. Prioritizing customers is more important than ever, as there are more demands on your time. Keep in mind the wise Italian economist Pareto's 80/20 theory, which says that 80 percent of your dollars are generated by 20 percent of your customers. What are some of the criteria to help you determine who gets called on and when?


- How many gross profit and commission dollars does the customer represent?
- What is the customer's desire?
- What are the customer's needs? Do you do their inventory and ordering?
- Is there a transition going on in the customer's practice, in which case you need to solidify your position there?
- Is the customer key to other business you have or want?


There are obviously many other pieces to the equation, some of which are specific either to the customer or your territory, or even the actions of competitors.


Now take your information and knowledge and make a new schedule. The standard in the industry- set long before I came along- has been a two-week cycle. But more and more often we see a combination of schedules. Some accounts are visited weekly; others every other week, some every three weeks, and a few monthly, Then there's the occasional ''visit only when I call you'' account.


If you haven't already done so, list your current schedule and then re-map it. The advantage of this annual review is that you can take into account customers who are new; or who have grown a lot. You can cut back on those who don't need to see you, and you can re-route to use your time better. In addition:




- Reduce travel time.
- Place as many calls as close together as you can.
- Avoid criss-crossing the territory.
- Try to make sure at the end of the day that you are headed toward home or your base of operations if you are using hotels for overnights.




Time becomes more and more critical each year as the industry changes, and you need to either protect or increase your income.




Time Really Is Money
How do you determine the value of a customer? There are many criteria, but here are some simple calculations that may help you. In an earlier article, I wrote about cost- per- patient visit. What is the cost for you to visit a customer? What should it be?


First, determine which criteria to use. I will use annual gross profit for the territory, then average monthly total gross profit for the customer, the commissions generated (I am using a 25 percent commission rate; you should adjust it for your own plans. Twenty to 25 percent seems fairly standard in the industry). I am using 2,000 work hours, assuming two weeks vacation per year. Again, you can change this to however many hours you actually work or spend in front of customers.






















































Territory Sales$1.2 million
Gross profit30 percent
Gross profit/year$400,000
Commissions$100,000
Hourly (using 2,000 hours)$50/hr





Let's review this. The total territory is $1.2 million; it generates $400,000 GP ($1.2 x 30 percent or 0.3). The commission earned is $100,000 ($400K x 25 percent or 0.25). Divide the $100,000 in commission dollars and you are earning $50 per hour in commissions.


Now, think how much you want to earn per year. Let's assume you want to earn $130,000 a year. That means that you need to up your hourly commission rate to $65. How do you do it?


Before we move on, look back to the first section. If you add 15 minutes of unnecessary drive time, then you are using up what could be $12.01 in commissions. What does that add up to per year? You do the math.


Obviously in sales and commissions, there is no true hourly rate. Still, this gives you a rule of thumb, a benchmark by which you look at your time. Let's take Jones Doe Medical Group. They do $96,000 a year at 24 percent GP.

































































































Customer Sales$96,000/year
Gross profit24 percent
Gross profit/year$23,040
Commission/year$5,760
  
Customer Sales$12,000/year
Gross profit33 percent
Gross profit/year$4,000
Commission/year$1,000





How often do you see them? How much time do you spend there? Is there extra commute time required?


If you are worth $50 per hour, how many hours should you spend there? If you simply multiply $50 x 50 weeks (1 hour a week), you get $2,500. A half hour a week is $1,250.


The next customer does $12,000 annually at 33 percent, for a gross profit of $4,000 and a commission of $1,000 per year. At an hour a week your commission time spent is still $2,500.


Again, this is not an absolute rule, but a rule of thumb, a way to see if your time spent is worth the commissions earned. I do not recommend ignoring customers! But think about your schedule and make those visits routine so you have the customer's trust. Base the amount of time you spend with customers on some sense of the revenue they generate.




Ahhh, the Rub
It sounds too simple, right? It is! If it were that simple, companies would not need sales professionals. But this is only a thumbnail review. What happens to the customer who is buying $1,000 a year, but whose potential is $12,000? Customers like that are why it is important to do more than one territory analysis. You need to look at what your customers are doing, tighten your travel as much as possible to allow more time for cold calls, visit potential customers who might grow, and sometimes drop customers from routine calls.


The great thing about sales is that it really is like running your own company. And just, as if when running a company, you need to satisfy different constituencies- your customers, yourself, and either your boss or stockholders. You are in charge of the game and you control the joystick. You need to take the steps that move you to the next level.


Where Does Your Money Grow?
Usually by the first of the year you have received a budget or quota from your employer. (Yes I know-- budgets are inherently unfair). But even without a budget, the top reps already have a plan on how they are going to increase sales. If a rep says he is going to increase sales 10 percent, that is not a plan; that is a number. The rep has to know the plan to get there. It generally has three major components:
- Growth in existing accounts (increased penetration).
- Equipment and new product sales.
- New customers.


Taking each of the above growth categories, let's create a form and see what you might do in planning for this year, and the years ahead. (See above.)
Will you reach all of the goals and plans? I hope so, but probably not. Still, your chances of success are greater if you are proactive. There will also be some of those lucky ones--the unexpected call from a non-customer who says they remember how many times you were there and tried to help and they are finally fed up with their current supplier. Then there is the customer who is going through a rep change from a competitor, and is suddenly open to listening to you, or the new doctor to whom someone refers you for a set-up.


The old 80/20 rule. Think about it. Eighty percent of sales come from 20 percent of reps too. If you work and plan, you can move up in that percentile. As the industry changes, it is more important than ever to take charge and make things happen.
-------- The one who makes the future is you.





About the Author....
Wayne Care
recently joined Quality America, Inc. as Vice President of Sales and Marketing. Quality America, based in Asheville, NC, publishes OSHA Safety Manuals, an OSHA newsletter and an entertaining OSHA retraining video. All are available through distributors. Care has 30 years experience in the medical distribution field with McKesson Medical Group, Foster Medical Supply, Bischoff's Surgical Supply and American Hospital Supply.