Question: Sales opportunities are opening up ”“ more than we”™ve seen in a long time. My fear is we”™re not prepared to handle all of what we”™re getting an opportunity to bid on now. How can I best manage the risk and keep my salespeople focused?
Thoughts of the day: It is sales”™ responsibility to make the right sale, not just any sale, in order to boost margin, ease production stresses and ensure timely cash flow. It”™s always good to have more opportunity than you think you can handle. The big question is what”™s going to turn into business and what isn”™t?
When markets are scaling up is when a company is likely to face its biggest sales risks. Cash flow is likely to dry up as the company boosts production in advance of collecting payments for new sales yet to be delivered. Switching emphasis from one product or service to another can be risky: The company has to have the right materials and workforce in place in order to deliver. Costly mistakes can result when switching production. Big-volume customers may negotiate for discounts that the company can”™t afford to hand out.
The company needs to be fully prepared for a surge in sales. That includes getting the mix of business right and making the best use of resources the company has on hand. It means having a plan the company can afford to implement to get additional production resources in place. Reserve funds are needed to get through the upsurge as the company waits to receive payments for goods and services received. That demand often comes as the company recovers from a low-income cycle that drained reserves.
One recent survey noted a gap when assessing confidence in the sales forecast. Sales, corporate management and marketing tended to believe in the sales forecast. Operations and finance tended to be skeptical. All agreed that a more accurate picture would increase revenue and profits.
It”™s not enough to just forecast revenue. Sales has to become more accurate at forecasting what type of revenue. Sales also has to do a better job of predicting when risks to achieving a specific forecast are likely. Operations depends on accurate sales forecasts to buy the products it needs and hire the staff required. Last-minute shifts from one type of sale to another can disrupt production and result in lower profit if parts are not used or skilled labor is in place for the wrong product or service. Finance needs time to line up reserve funds ”“ it can take weeks or months to get an additional credit facility in place.
Sales has to develop discipline around the opportunities it”™s going after. Most salespeople understand they”™re not going to close everything they bid on. What many sales people don”™t get is the company may do better by walking away from some opportunities, even if they seem easier to close.
A good sales team will talk to hundreds of prospects, focus on those that want what the company can deliver and know what to walk away from because it will be problematic. To make those decisions, sales needs to be in constant communication with operations and finance regarding what will be easier and harder to handle.
The sales organization spends most of its time focused on the external. What do customers want? Who will buy?
Sales also has to be focused internally. Sales, operations and finance have to work hand in hand to comb through the raw materials and finished goods available for sale, and to understand the workforce skills most ready to deploy. Knowing which customers to prioritize because they pay well, and which to minimize because they are risky, is essential. Knowing how to price an offer to a customer taking those variables into account is even more critical.
Sales management is the conduit between internal resources and external opportunity. The sales team can increase the company”™s profits by knowing what the company is best able to produce and adjusting proposal pricing to account for risks and costs related to shifts in production and customers.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at 877-238-3535. Do you have a question for Andi? Send it via email to AskAndi@strategyleaders. Visit AskAndi.com for an entire library of Ask Andi articles.
