Sales Focus - The $2,000 Cup of Coffee
My friend and client Bob Scherer took an exercise I had given to his sales team one step further and it's absolutely brilliant. After reviewing one of our sales modules on "The Rules for a Proactive Day" I sent Bob a worksheet to help each sales person on his team understand the true value of their time. It's pretty straight forward. Just take your income last year divided by 2,080 and you will get your earning rate per hour.
So if one of your sales people made $100,000 in income last year their earning rate per hour was $48.07. $100,000/2,080 = $48.07. Of course this assumes your sales people only work a 40 hour week and in our experience most successful sales people usually work more than that, but that's a topic for another day.
The idea behind this exercise is to generate a productive conversation during a sales meeting to help your sales people understand that:
- Not all sales appointments are created equally;
- Time is scarce;
- Time is money, and;
- Time is a resource that cannot be replaced.
Look at a sales person's calendar and ask, "Was the cup of coffee meeting with Sue Smith really worth $50?", and then follow up with a question like, "If you had to pay me $50 to go to that meeting, would you still go?" Typically the discussion that follows has distinct and positive results. First, it brings this issue into focus with a living example. In addition, it helps your sales team understand the importance of proactive planning and how to best manage their calendars. And it leads to making smarter decisions about which prospects a sales person should invest their time with.
We've been doing this exercise with our clients with great results for years and years, but Bob wasn't satisfied. He took it one step further. Instead of calculating the value of a sales person's time based on their earnings from the prior year, he looked at it from the perspective of what do they need to quote per hour to hit their sales plan. This extra step created even more focus and clarity.
We've since done this exercise with other clients and the results have been eye-opening. For example, some of the people on the sales teams we work with need to quote on average $2,000 per hour to reach their sales goal. That's quite a bit more than $50 per hour. Keep in mind, that's an average target per hour - the reality is they may go a whole day without a quote and then have a $10,000 opportunity. The other thing to keep in mind is as we work with sales teams on planning a proactive day, we plan five (5) hours per day so these averages are based on that number. This time management approach builds in time for interruptions, got-a-minute meetings, returning voice and e-mails, sales meetings, and so on.
How does this impact your sales managers and how they monitor the proactive planning their sales people do? Let's say you have a sales rep who wants to go to Cleveland to see a prospect. It's a good meeting with strong potential. And it's a full day out of the office. If the answer to the question "Is this a $10k opportunity?" is anything but a resounding "Yes!" then your sales manager needs to raise expectations. Who else can the sales rep meet with while they're there? Could they have their initial discovery conversation on the phone instead of face-to-face to make sure there is a good fit?
What kind of decisions would your sales team make if they understood the true value of their time and how much they needed to quote per hour to hit their plan? Is the "cup of coffee" meeting really worth $2,000 (or whatever the opportunity cost per hour is for your sales people)? We can send you a free spreadsheet and meeting discussion guide so you can do this exercise at your next sales meeting.