Have You Ever Computed The Cost Of Your Lost Sales?

Tim Connor
 


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My 30 plus year research of – the ratio of clients sales efforts to sales income, regardless of industry, organization size, individual sales experience and market conditions shows that the average salesperson has a - 1 to 4 or 5 - closing ratio on new prospects (depending on the average volume of the sale, the strength and presence of the competition, the qualification of the prospect and the tenure of the salesperson). If you are doing better than that – congratulations – if not please read on.

Ten’s of thousands of ineffective sales calls are made every day by well meaning but poorly trained or motivated salespeople. One of the common reasons why salespeople do not close more sales is the inability to effectively disarm sales resistance in advance or overcome sales objections during the sales process. In other words, they are ultimately selling and trying to close to a poor prospect.

The extrapolated cost of lost revenue in a year of these lost sales is staggering to say the least. I have developed a simple formula that helps you determine how much actual revenue you are losing or how much your sales group is losing in a year. I recommend you compute this number only if you are a hardy soul and on some kind of high blood pressure medicine.

1. Subtract the number of closed sales from the total number of presentations given to good prospects in a week by you or one of your average salespeople.

2. Now multiply the remaining number (lost sales) by your average sales revenue per closed customer. Granted this number may vary, but it will give you a good indicator. If you don’t know the average income per customer – determine that first. This will give you the lost total revenue for yourself or an average sales rep in a week.

3. If you are a sales manager or executive: now multiply that number times the total number of sales reps in your sales force. This will give you the total of lost revenue for the week by your combined sales group.

4. Now multiply this number times 52 and bingo you’ve got the magic number of your lost revenue or the lost revenue of your sales team in a year.

Here is an example for a typical salesperson:

-15 appointments per week, 3 – 4 sales, 9 no sales.
-Average income per sale - $1000.
-Lost revenue by this rep in one week - $9,000.
-As a manager, if you have 10 reps that’s $90,000 in lost revenue in one week.
-Times 52 weeks – that’s $4,680,000 in lost revenue in one year

We only used $1000. for an average sale. You can imagine what the number would be if your average sale was much higher!

I understand that:

-every product/service has a different sales cycle
-every product/service has more or less competition
-every organization has more or less corporate resources required for support and sales costs
-that every sales rep has a unique territory
-that every sales rep has different levels of competence

But, the point remains, even if you used better than average numbers and favorable sales conditions, I guarantee your revenues per week and year or the revenues of your salespeople could be much - much higher.

Learning to effectively handle sales resistance is one of the best ways to improve your sales results. Naturally, it is important to be trying to close a good prospect rather than a poor one, but we have covered the prospecting and qualification issue in a previous chapter.

Keep in mind that the frequency, number and type of sales objections is an excellent clue that will help you determine whether you have a good prospect or a bad one.

Tim Connor, CSP is an internationally renowned sales, relationship, management and leadership speaker, trainer and best selling author. Since 1981 he has given over 3500 presentations in 21 countries on a variety of sales, management and relationship topics. He is the best selling author of over 60 books including; He can be reached at tim@timconnor.com , 704-895-1230 or visit his website at http://www.timconnor.com

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