And Skyrocket Your Profits!
I have this white paper I give to clients (and you, if you ask) about How to Hire Sales Superstars. In it, I list the fifteen or so things you must absolutely do if you want to hire only A+ sales people. It covers things like asking for proof of income from applicants (especially if on commission!), doing real world sales simulations, and about a dozen other things to virtually guarantee that you are getting a star who consistently makes six figures in sales.
Could you do better if all of your sales people were earning $100k+? What would that look like for your organization?
Let’s run the numbers.
In my experience, usually 10%-20% of a team is producing 80%-90% of the profit for a company. On a typical team of ten, there are one or two reps who are responsible for 50% of the topline revenue. But an overwhelming 80%-90% percentage of the profit. This is important.
Here is a real-life case study:
At a company that was doing $8MM/yr., there were 12 reps. Let’s break down what they each earned for the company.
The superstar brought in $1.8MM – Base salary of $36K + $54k (3% commission) + $45k bonus (2.5%) based on margin – He rarely cut prices so the margin for both him and the company were higher.
Total compensation = $135,000. Great salary for Florida!
There was another superstar who brought in $1MM – Base salary of $36k + $30k commission +25k bonus.
Total compensation = $91,000. Not too shabby.
The other ten reps averaged $520k per year in sales.
Or on average, a salary of about $40k which includes base ($24k) and commission ($16k). Roughly.
So the two top reps brought in $2.8MM for a cost of $226K (8.1% gross).
The bottom ten reps brought in $5.2MM for a cost of $400K (7.7% gross).
From this, it would look like there’s actually a disadvantage to hiring sales superstars as the cost of having a rag tag crew of average account execs costs less.
But when you dig deeper you will see that the margin on the two top reps was 23% while the bottom ten was about 15%.
That means that the top two reps brought $644K worth of profit to the company. While the bottom ten brought in $780K.
This is in a market that’s deep and wide. There’s plenty of business to be had. The top two reps had been consistent for several years. The bottom often got replaced and usually didn’t last a year. Sound familiar?
What about the hundreds of thousands of dollars in lost potential and sunk costs from the average reps?
How many good leads did they fumble?
How many clients are lost forever because of an average sales rep’s middling skills?
How much did it cost to hire and train a middling rep?
When you add all of this up, even the average profit of $78k/yr. per rep probably shrinks by 50% or more.
This company tried all types of training, cajoling, threatening, investing, workshopping, strategizing and pleading with sales staff to get them up to $650k or $750k in commissions.
But I told them, wait a minute. Listen. Stop everything.
What if every rep was as good as the average super star at the company?
What would that look like?
12 reps bring in $1.4MM each. Company top line $16.8MM with a cost of $924,000 and $3,864,000 in profit.
Double the top line revenue and almost 3x the profit!
And you can best believe that the energy, enthusiasm and positivity in the company would be through the roof!!!
How can you take your company to the same heights? How do you attract these superstars to your firm?
Well, let’s first examine who comprises the top echelon of sales at most organizations. Specifically, we will answer the following two questions.
1. Why do superstars at most companies make so much money?
2. How can you create an atmosphere where everyone is a superstar?
I will delineate the average companies, which comprise 90% of small businesses out there and the 10% who really have top shelf operations and a competitive advantage. By the way, the 90% of companies I call “average” are still good companies, with good products and above average staff. Here, we aren’t going to discuss below average companies who are hanging on by a thread.
The truth about these average, albeit profitable companies: There is only room for perhaps one or two superstars per small ($3MM – $20MM) company.
Let’s answer the cold hard truth about most superstars at these firms.
Sorry. They are not superstars.
Yup. Hate to break it to you but so often these “superstars” are actually either one or a combination of the following:
1. The owner who knows the product better than anyone and has been building a great book of business for ten+ years. This may be the biggest problem for any firm. The owner thinks that someone can just “model” what he does and build a sizable business in a very short period of time. Sorry. If it took you ten years to build a business, why do you think a new rep can do it in six months?
2. A family member or close friend who has either been with the company forever or gets all the great accounts from the owner.
3. A rep who brought over a big book of business from another company – as in, they kind of “stole” all the juicy accounts from one firm who has built that business up for many, many years.
4. A rep who was also there since close to the beginning and probably has a deep relationship with either a cultural, ethnic or religious group, or some sort of affiliation with a great vertical market.
The problem with these types of “superstars” is that they give hope to the new rep, distort the vision of the owners, and ultimately fail to help build a really great company.
Maybe you will see your organization in one of these stories or recognize why you “failed” at a sales job where the cards were stacked against you from the beginning.
In my 25 years of consulting, here are a few of these examples from companies I’ve worked with:
A student travel company where there truly seemed to be one of the largest revolving doors I have ever seen. The company admitted that as far as customer service, they were at best a C+. It was a tough business and operations were not their forte.
For the third year in a row (when I was there) the two company owners had hired about twenty reps to help them sell vacation packages for students nationwide. The two owners had been in this business since college, so they knew the college market like the back of their hands and could count on a bevy of old accounts from dozens of colleges to fill their coffers. They also had a truly superstar rep who was also the sales director. He had been with them for about seven years when it was only the three of them and lo and behold, he knew the Greek and student groups who already were open to helping him co-market these trips. He had picked off the low hanging fruit years before.
New reps coming into a territory had to face the reality of not having access to the best accounts at each campus and instead trying to get into the places that have been called on dozens of times already. This was not communicated to the rep when they were hired. Long story, short, the twenty reps lasted less than six months. Then the owners played a song called Here We Go Again and went out to look for new reps for the next school year.
A successful commercial broker was part of a group at a very large real estate firm in New York City. He was part of a team with roughly thirty reps on it, both commercial and residential brokers. He happened to have built a solid book of business over ten years and didn’t complain. This group was famous for landing eight figure listings for incredible apartments in Manhattan. They were in magazines, online and on TV. You can imagine the new reps had pie in the sky expectations when they joined this “elite” team.
Little did they know that the VP in charge of this team was the daughter-in-law of the company president. She and her cousin got all of the seven and eight figure listings that unbeknownst to the reps, were handed to them by the company president who was part of a billion dollar firm. Yes. The VP and her cousin could make six figures from one deal. One deal!!! And they were making dozens of deals a year. Believe me, the other reps could only drool and try desperately not to sling too much evil eye towards these two ladies who drove Range Rovers and wore $150,000 Patel Phillipe watches.
I worked with a terrific group of people at a digital agency. For more than a decade a husband and wife team, who were lovely, by the way, had slowly but surely built a great reputation with their own Brazilian community in South Florida. The Brazilians were a small, tightly knit group of mostly recent immigrants who were starting businesses in the US. They all needed digital products like websites, social media management, online advertising management, brochures, logos, etc. Business was great. They thought they had a great little agency.
They started hiring reps to help them build a book of business with the rest of the South Florida business community and beyond. But it was an utter failure. The market for digital agencies is flooded with many great firms. Then there are the thousands of freelancers who know design or web production and work from their home. It’s a tough market.
This agency was lucky enough to be there when the flood of new immigrants landed on the shores of Florida. They were one of them. And over a decade, grew with them. They knew the language, they understood their business customs, and heck, knew a lot of them through connections back home or through local social events. It was much different for their new reps. The owners had no clue how to compete with the other thousand or so agencies who marketed to the same list that their own reps marketed to. They never really had to differentiate themselves before or push too hard. They were one of the few firms who knew Portuguese, connected with their native people, etc.
And this is so dangerous to a new rep. She is thinking, “wow, this firm has really got it together. I’m going to make so much money here.” Good luck. You might as well learn WordPress and start your own firm. You would make more money.
Let’s recap that these are profitable companies where there are a few people earning six figures. But the path to earn six figures for the rest of the staff is almost non-existent.
That’s why they have a consistent revolving door.
On to the big question:
How can you create an atmosphere where everyone is a superstar?
Or put another way, how do you attract true superstars to your team?
Well gee, maybe you actually need to create a superstar firm.
Or….What we in marketing call pre-eminence or best of breed.
Whatever you call it, know that you are creating the #1 company in your market.
Why be a good or great company when you can shoot to be the best?
To do this, you will need to make a real investment and create a competitive advantage.
A competitive advantage can be anything. But it’s something that sets you apart from the rest of the competition. And it doesn’t have to be an exclusive product or anything like that. It can be in your operations – in the way you run your business.
“That’s great, Andy, but this will cost a boat-load of money.”
It sure will. But isn’t it already costing you a lot more to attract average sales reps?
Do the math outlined at the beginning of this article. Then ask yourself if it’s financially worthwhile to create a company where:
1. There is a good chance that professional sales people can earn $100K or more.
2. Where you will attract the best people in your market to sell for you because you simply are the best place to work.
If you do the math I outlined and come up with a number like $1,500,000, take that number and ask how much of it would you be willing to spend to create a true winning culture, a culture of preeminence?
Is it worth investing $750,000 to double your money?
If it is, then . . .
So how do you create a Best of Breed company?
1. Know that prospecting is hard. It takes a lot of work.
Do you know the cost of prospecting in your company? As in, what is the dollar amount and time amount that sales people spend knocking on doors?
Could you instead outsource prospecting to a 3rd party or hire prospecting staff?
Could you automate prospecting with advertising?
I can’t think of anything more powerful to attract sales people than real and regular warm/hot leads.
2. Create products where the commission to reps is big enough so that they can be proud of their paycheck even with one or two sales a month.
3. Create a program where you amply reward experienced reps for joining your company. One company I knew paid $5,000 for each qualified lead an experienced rep added to their database from their book of business. They recruited three top shelf sales people within one month.
A few years later, the owner of the firm told me it was the best investment he ever made.
4. How can you brand your firm to become well known? Sure, it takes money to hire social media gurus and publicity experts, but where do the best want to work? Typically, at a name. Branded companies have social capital beyond their financial capital. Employees know that they can take their experience at a brand and leverage it into meetings with new contacts as well as, other opportunities for work.
5. Look how law firms or medical groups create partnership tracks and profit-sharing opportunities for their staff. Can you model that? The opportunity to own a piece of something is mighty enticing. It also increases the likelihood of someone sticking around.
I can come up with twenty more ideas on how you can create a competitive advantage and Attract the Best. Likewise, we can come up with a strategy for the sales process that will create a proven, doable path for any above average sales professional to make six figures or more. More so, turnaround will fall, productivity will go up, and enjoyment at your business will be through the roof!
The only decision for you is, are you going to keep doing the same thing you’ve been doing for so long, or create the #1 company in your market?
What are you waiting for?
[Andrew Grinbaum teaches business communication as a professor, consults with companies on marketing & sales strategy, and leads memorable workshops and trainings for companies around the globe. Read his white papers at – www.sales-professors.com]