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FROM: JUL-AUG 2009 ISSUE | BY MARK WARDELL
Several of my business clients experience dramatic swings in their monthly revenues. Do you have any recommendations that might help them develop more predictable sales cycles?
It’s one of the biggest frustrations in business. One month you’re busier than you’ve ever been, and the next month you’re wondering how you’ll make payroll. Your clients are riding what I call the “sales rollercoaster.” And it’s more common than many people realize.
As ironic as it may sound, sales fluctuations are more typically the result of a weak infrastructure than anything else. As long as the production side of the business is able to keep up with sales and as long as sales are able to produce enough work to maintain a positive cash-flow, things are fine.
But if things become unbalanced, companies can enter a vicious cycle that swings from survival mode to utter chaos and back again. There often appears to be no escape. In other words, your clients are either desperately in need of sales or they are scrambling to get the orders out the door on time. One begets the other.
So while it may seem counterintuitive, most companies don’t have trouble with their sales because their techniques are flawed. Most companies have trouble with their sales because they lack the discipline of proper internal controls.
So how can your clients achieve a Zen-like sales state in their businesses?
At Wardell, we help our clients solve this problem using a simple, yet powerful, forward-looking system. These are the basics:
- On a spreadsheet (or sales-tracking software), track the quantity and dollar-value of all warm leads or sales quotes, including those from regular customers.
- Next, estimate the closing date for each potential sale, for both new and existing accounts.
- And finally, compare those numbers to the actual results.
Before long, patterns will emerge. Your clients will begin to be able to anticipate roughly how many of their prospects are likely to turn into clients and when, before those sales actually occur. It will also give them an estimate of the potential dollar value of those sales.
They can then use this information to manage their business more effectively. For example, suppose they learn that they convert an average of 50 per cent of their leads into sales and that an average sale takes 45 days to close.
Armed with an accurate estimate of the sales coming their way, they can either refocus their sales efforts for an upcoming month, or prepare themselves for a busier month.
The disciplined implementation of a sales tracking system has a positive influence on all aspects of a business. For example a predictable sales-flow can help a manufacturer more accurately estimate production needs, thereby reducing inventory and improving cash-flow. Or a wholesaler may be better equipped to manage buying volumes throughout the year, and so forth.
By bringing a forward-looking perspective to their sales, and by applying a steadfast discipline to the process, your clients will be able to get off of the sales rollercoaster they are riding and build much more sustainable businesses.
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