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Sales Ratio - reducing the number of calls required to make sales

by Adam Basheer, on 03-May-2018 12:41:07

Some time ago I was speaking to a managed service provider who had a sales call to sales rate of 10:1. That is, for every 10 initial meetings they had with a new prospect they achieved one sale. I had to ask myself “what is this costing them?” and “what would happen if they were able to reduce this sales ratio substantially?”

According to HubSpot (an inbound marketing and sales platform) the average sales ratio across all industries is more than 5:1 (check out your industry average here). If we could bring this down to 3:1 or even 2:1, what would the result be?

To understand how large the result could be, and therefore whether it is worth pursuing, we need to consider two perspectives; that which your accountant might have versus that which a sales manager might have.

sales calculator image

 

 

Download Sales Calculator HERE

 

1. accountant's perspective

From a purely financial perspective there are two possible results we could consider.

  1. Do we need the number of sales staff we currently have and if not, how much would it save us not to have them?
  2. How would it increase sales?

I have produced a calculator for you to consider your own application download here. Variables we need to consider are:

  1. The number of sales calls we can make in a week, month and year
  2. The price of our product/service
  3. Number of sales staff we have
  4. How much each sales person costs us
  5. The sales ratio
I am assuming we have face to face sales calls with new prospects and that each representative can have eight of these per week. We are selling a product worth $10k. To start we have five sales people who are each costing us $100k per year. Holding everything else equal and reducing the sales ratio from 5:1 through 3:1 results in an increase revenue by over $2m. So, it looks like this is well worth pursuing. Of course, if your sales people cost more, like $250K -$500k per year, then you may find reducing the number of sales people highly appropriate. (Do your own calculation with this calculator here).


2. sales manager's perspective

From a sales manager’s perspective, if we can reduce the number of first meetings we could potentially reduce total staff level. And, if your sales people cost you a tidy sum, not just in salary but in cars, travel, equipment and the like, then this could be worth doing. Though it is most likely more than reducing salary. Many sales departments have one or two top performers one or two OK performers and one or two also rans. What would happen if you could pump all the real potential leads through the two top performing sales people? What would that do to your closing rate and overall revenue?

The accountant might like the fact that the sales department is not costing so much but the sales manager might have less people who are higher performers to manage. Doing the calculations (here) will enable you to understand how much more efficient your sales might be. This could be the difference between just breaking even and really having a great profit level.

If you combine reducing your sales ratio with a sales sequencing tool (like that in HubSpot here) then each sales person with be able to deal with more potential leads at a time. This will again increase efficiency and effectiveness.

how to reduce your sales ratio?

Pre-qualification of leads, getting leads to identify themselves at the right time (that is, when they are ready to buy) nurturing leads through the lead funnel through marketing automation and educating, using specific targeted content all form part of a system known as Inbound Marketing. The strategic use of Inbound Marketing is specifically designed to reduce the sales ratio and automate the process of providing good, pre-qualified leads. 

Using your website effectively can get more people to contact you by including some significant calls to action (CTAs) and some downloads which could be of interest to your customers. An example of how this might work is included on the Fit 4 Market website and on one of our client's websites here. 

This type of interaction works:

  • 24 hours a day, 7 days a week
  • For any geographic location

Advantage for sales include:

  • Turning your website into a true lead gathering mechanism
  • Reducing the time from lead to sale

At the same time, you will:

  • Increase awareness in the market
  • Increase your overall marketing effectiveness

 

Download your Sales Calculator here

Fit 4 Market are marketing consultants operating in Adelaide, Melbourne, Sydney, Brisbane and Perth.


 

Topics:Sales MethodologySales Strategies

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