THE CLIENT: Manufacturing Company
A $15M printing company retained us to better understand why their sales department was not delivering additional needed revenue. Of their revenue, 70% came from one single account handled directly by the owner.
Thus, only $4.5M was created and managed by six salespeople. While the company was quite profitable, they were eager to find improvements.
- Outside of the “motherlode” account, there were 725 other accounts that sales handled; each salesperson was being paid to handle an average of 120 clients each.
- The average size of a client outside the prime account was $6,206. However, the median size of these clients was $1,212, meaning 362 of those clients were earning sales commission, and they were all losing the company money based on fully loaded company operating expenses.
- There were no assigned territories, separation of market segments, or sales policies and strategy to direct the sales force to capture bigger and more profitable accounts.
- The sales manager was poorly trained and only equipped to “manage” and “drive” to specific behaviors and objectives. (We often see this in privately held companies, where the sales star was promoted, but not educated or trained for a managerial role.)
- There was no pricing policy. Therefore, every quote had to be given and/or approved by HQ. This was a waste of time that cost them clients.
- We found that 53% of all the company’s administrative efforts were expended on customers that were losing the company money. (At the time we were engaged, senior leadership was considering additional headcount to manage the paperwork.)
- Approximately 37% of their production was losing them money.
- Creation of the company’s strategic sales plan with clearly defined objectives.
- Send the sales manager back to school to understand the differences between sales and sales management.
- Creation of a structured pricing policy so the field sales staff could quote on site and ensure company profitability.
- Adjust pricing so that unprofitable accounts would either become profitable…or go away. (What could be better than turning over your “losers” to less sophisticated competitors?)
- Restructure the sales department around market segments and targeted companies.
- Change the commission plan to reward sales for profitable clients, not just revenue.
- Conduct two strategic selling seminars to equip salespeople to better understand clients’ needs beyond price. (Value-based selling.)
THE RESULTS: ONE YEAR LATER
- EBITDA jumped a full 6 points on revenue growth of 5%.
- Median revenue for the prior “losers” doubled and total customers dropped by 22%. No administrative headcount was needed and capacity utilization dropped to 86%. (Targeting higher-value clients meant that investing in expansion wasn’t necessary.)
- The retrained and reeducated sales manager turned over half (3) of his sales force and brought in fresh, better-trained salespeople. (The sales manager is also working toward an MBA.)
- The average revenue size of all new clients doubled that of pre-diagnostic work.
- The projected return on investment for our work over a two-year period is planned to be over 300%!