Measuring Up: How Much Should a Salesperson or Project Manager Sell?
Frequently, contractors will ask how much volume
should a salesperson or project manager be able to sell. This is a very
difficult question to answer because there are so many variables.
Frequently, contractors will ask how much volume should a salesperson or project manager be able to sell. This is a very difficult question to answer because there are so many variables. How large are the jobs? Does the salesperson also manage the jobs he or she sells? Is it commercial or residential? What percentage of the jobs are repeat and referral? How difficult are the jobs to estimate? Has there been a recent storm? These are just a few of the questions that need to be addressed.
Let’s start by looking at the time management aspect of sales. One common trait of successful people is they get done what is important. For a salesperson, the most important task to manage is how much face time they spend with customers. Some organizations think a good residential salesperson will sell $600,000 and others $1.5 million, so opinions vary. Personally, I think 600 K is probably too low and a million probably too high. Suppose your average job size was $6,000 and a residential salesperson saw 10 jobs a week, which would equate to 500 jobs per year. Selling 20 percent of those jobs would equal 100 jobs for $600,000 in sales. Selling 40 percent would equal 1.2 million in sales. So what percentage should a good salesperson sell - 20 percent, 30 percent, 40 percent? There is no magic number, but it is very difficult to make the numbers work unless a residential salesperson sells at least 30 percent of the jobs they estimate. Some studies show that one out of five customers obtains only one price. So if a salesperson does not sell at least 20 percent, his or her sales performance is so bad that customers are compelled to seek other quotes.
Commercial contractors frequently confuse low-price estimating with selling. New construction can be particularly misleading. If an estimator is the “favored son” with five or six general contractors, closing ratios could look high when in reality the estimator is doing very little selling. With new construction volumes shrinking and competing bids so low, many subcontractors are finding their sales effort consists of simply being the lowest number. New construction sales have always been cyclical, and every time we experience a recession the margins drop a little lower. Currently, many jobs are going for less than hard costs. Organizations have to be particularly careful of pushing estimators for volume in such a low-margin environment. My customers inform me that on an ongoing basis competitors who should know better are taking jobs well below their hard costs. Pressuring your estimator to get more work can bring horrendous losses.
Commercial re-roofing sales can also be misleading. Developing re-roof sales takes time, whereas bidding new construction or a residential re-roof has instant gratification. It may take several months before a recently hired re-roof salesperson sells his or her first job. Commercial sales are about how the customer buys things and building relationships. The more profit potential a customer has, the more time it will take to get your foot in the door. Even if the new salesperson was a good hire, it may take them six months to a year to produce meaningful results. The trick is to know who is worth that investment.
Strategy and management philosophy also play a role in how much a salesperson can sell. Some organizations want salespeople to manage jobs and others do not. Obviously, not having to manage jobs gives the salesperson more sales time, but it does create other problems. If a salesperson has no management responsibilities, he or she can become sloppy with job details. Having someone else run the job also leaves room for communication and service issues. By not visiting jobs, salespeople can also miss valuable referral opportunities.
Shrinking margins and lower overheads can also force salespeople to play more of a customer service role. Many distributors have fallen into this trap. Companies have tried to service more and more sales with less overhead and less margin. Sales reps frequently play the role of customer service rep by delivering material, taking care of order process, etc. Of course, the rep can hide such behavior with the philosophy that he has to keep his customers happy. The flip side of this story is when faced with seeing customers who do not like them reps can take the easy way out with their buddies and existing customers.
Sales cost will vary as job sizes vary. That is why selling repairs and maintenance can be challenging. It probably takes just as much sales time to sell at $1,000 repair as a $10,000 roof replacement. This is one reason why gross margins for repairs must be higher than install work. Suppose a salesperson’s time is worth $50 an hour. If a repair bid takes two hours to visit, sell and write up, that is $100 of sales cost. If you sell 50 percent of the repairs you look at, that makes your average repair sales cost $200 ($100 cost for the job you won and $100 for the job you lost). If your average repair was $600, then your sales expense is 33 percent of the selling price, which is way too high. That is why if repairs that are not done time and material must have the sales expense built into the repair estimate.
As you can see, how much a salesperson should sell is not an easy answer. It’s much like the famous answer J. D. Salinger gave when asked how long a man’s legs should be. He simply replied, “Long enough to touch the ground."
Frequently, contractors will ask how much volume should a salesperson or project manager be able to sell. This is a very difficult question to answer because there are so many variables. How large are the jobs? Does the salesperson also manage the jobs he or she sells? Is it commercial or residential? What percentage of the jobs are repeat and referral? How difficult are the jobs to estimate? Has there been a recent storm? These are just a few of the questions that need to be addressed.
Let’s start by looking at the time management aspect of sales. One common trait of successful people is they get done what is important. For a salesperson, the most important task to manage is how much face time they spend with customers. Some organizations think a good residential salesperson will sell $600,000 and others $1.5 million, so opinions vary. Personally, I think 600 K is probably too low and a million probably too high. Suppose your average job size was $6,000 and a residential salesperson saw 10 jobs a week, which would equate to 500 jobs per year. Selling 20 percent of those jobs would equal 100 jobs for $600,000 in sales. Selling 40 percent would equal 1.2 million in sales. So what percentage should a good salesperson sell - 20 percent, 30 percent, 40 percent? There is no magic number, but it is very difficult to make the numbers work unless a residential salesperson sells at least 30 percent of the jobs they estimate. Some studies show that one out of five customers obtains only one price. So if a salesperson does not sell at least 20 percent, his or her sales performance is so bad that customers are compelled to seek other quotes.
Commercial contractors frequently confuse low-price estimating with selling. New construction can be particularly misleading. If an estimator is the “favored son” with five or six general contractors, closing ratios could look high when in reality the estimator is doing very little selling. With new construction volumes shrinking and competing bids so low, many subcontractors are finding their sales effort consists of simply being the lowest number. New construction sales have always been cyclical, and every time we experience a recession the margins drop a little lower. Currently, many jobs are going for less than hard costs. Organizations have to be particularly careful of pushing estimators for volume in such a low-margin environment. My customers inform me that on an ongoing basis competitors who should know better are taking jobs well below their hard costs. Pressuring your estimator to get more work can bring horrendous losses.
Commercial re-roofing sales can also be misleading. Developing re-roof sales takes time, whereas bidding new construction or a residential re-roof has instant gratification. It may take several months before a recently hired re-roof salesperson sells his or her first job. Commercial sales are about how the customer buys things and building relationships. The more profit potential a customer has, the more time it will take to get your foot in the door. Even if the new salesperson was a good hire, it may take them six months to a year to produce meaningful results. The trick is to know who is worth that investment.
Strategy and management philosophy also play a role in how much a salesperson can sell. Some organizations want salespeople to manage jobs and others do not. Obviously, not having to manage jobs gives the salesperson more sales time, but it does create other problems. If a salesperson has no management responsibilities, he or she can become sloppy with job details. Having someone else run the job also leaves room for communication and service issues. By not visiting jobs, salespeople can also miss valuable referral opportunities.
Shrinking margins and lower overheads can also force salespeople to play more of a customer service role. Many distributors have fallen into this trap. Companies have tried to service more and more sales with less overhead and less margin. Sales reps frequently play the role of customer service rep by delivering material, taking care of order process, etc. Of course, the rep can hide such behavior with the philosophy that he has to keep his customers happy. The flip side of this story is when faced with seeing customers who do not like them reps can take the easy way out with their buddies and existing customers.
Sales cost will vary as job sizes vary. That is why selling repairs and maintenance can be challenging. It probably takes just as much sales time to sell at $1,000 repair as a $10,000 roof replacement. This is one reason why gross margins for repairs must be higher than install work. Suppose a salesperson’s time is worth $50 an hour. If a repair bid takes two hours to visit, sell and write up, that is $100 of sales cost. If you sell 50 percent of the repairs you look at, that makes your average repair sales cost $200 ($100 cost for the job you won and $100 for the job you lost). If your average repair was $600, then your sales expense is 33 percent of the selling price, which is way too high. That is why if repairs that are not done time and material must have the sales expense built into the repair estimate.
As you can see, how much a salesperson should sell is not an easy answer. It’s much like the famous answer J. D. Salinger gave when asked how long a man’s legs should be. He simply replied, “Long enough to touch the ground."
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