Issue #80

The $2.2M Mistake Hiding in Their Strategy

A prospect called me in to discuss a new warehouse. Sales were increasing, and they needed more space to handle the demand, a great problem to have, or so it seemed.

When I analysed their demand over time, I saw that the increases had happened mostly at month-end.

The rest of the month, they had more than enough space, staff, equipment, and time to process nearly double what they were doing.

I pointed this out, and they shrugged. "Well, what can we do about that? Customers order when they order."

Except they don’t.

Any good salesperson knows how to manage customer orders to maximize their bonus, pushing and pulling orders around month / quarter / year end.

Nick, my contact, knew their sales team did this, but still, the penny didn’t drop.

When I suggested they try flattening the order flow before spending millions on a new facility, his response was, "It can't be done. No one messes with sales, it's the CEO's pet department."

At lease the CEO knew where his bread was buttered.

Price's Law

Time to tell them about Price’s Law, I figured. It states that the square root of the number of people in a process produces 50% of its output.

In their case, with 50 salespeople, about seven reps were generating half of all orders.

The next six reps accounted for the next 25%, meaning 13 people drove 75% of their total volume.

The remaining 37 reps handled just 25%.

"So," I said, "if you bonus those top 13 reps on spreading orders throughout the month, you could save millions.

Offer them an extra 1-2% to place orders when the warehouse needs them, rather than at month-end."

It got even better.

The bottom 37 reps clearly weren’t influenced much by bonuses. So, cutting their bonuses wouldn’t impact results, and if they left, they wouldn’t be hard to replace.

Sound harsh?

It’s just business, it's about rewarding performance and getting the right people in your teams.

In the end, the top reps liked their new deal so much they grew sales way over target. All of them managed to move their orders to better days.

A couple of real under performers moved on, but most of the middle range guys didn't notice any change in their earnings. They liked the predictability of a set salary.

And, of course, $2.2M in avoided warehouse build costs and all the disruption involved.

There was a further $100K in operational savings because the amount of overtime at month end dropped and the delivery fleet fill rate shot up.

And for me? I went from "Supply Chain Bloke" to board advisor on operational efficiency.

This opened the door to a $10M+ deal a year later with their European parent company.

In enterprise sales, your customer is not buying what you sell, they are buying what you can do for them.

Warehouse space is a commodity, but business efficiency is a hard earned skill, so I sold that instead.

​

Find out all about how you can use you knowledge to boost your selling technique and smash your quota in this totally free video taken from my excellent course.

If you are ready to take a step up in your sales career I can help - you can get my foundations course here or drop me a line to discuss personal or team based projects to increase your revenue.