10,000 CEOs later and not one knows what their “Cost per Sales Hour” is. The same CEO’s know the cost of producing a product to the thousands place, the cost of capital to a 1/16th of a percent and exactly what they pay their attorney per hour.
The single largest expense most companies have is “Revenue Generation”. Sales, marketing, customer experience, product development and delivery as well as the cost of missing their forecasts.
When the cost of “Revenue Generation” is so large, it makes sense to be very accurate about what it costs and how to keep getting more value for each dollar invested.
One of the simplest parts of “Revenue Generation” to master is the “Cost per Sales Hour”. This can be measured and improved when selling requires humans or when it is an online process with no humans.
Today we will explore the “Cost per Sales Hour” when selling requires humans.
To master this there are only 4 things required:
1) What are the basic costs of a selling person? Lay out the base pay, commission or bonus, Travel and Entertainment budget, etc. The last thing is the quota forecast.
2) Next, since we will be measuring “sales hour” cost, we must define exactly what is and isn’t sales so we are focused on measuring the right things. In general, the sales person who meets or exceeds their quota in both gross and net sales doesn’t get fired. Other activities often considered part of selling like prospecting, cold calling, customer support, doing RFPs, developing strategy – don’t secure someone’s job. If over a period these activities don’t deliver quota there will be no job.
Selling is defined as moving a DEAL forward to a YES or NO and there better be enough YES outcomes. This is what we will measure.
3) Know what sales is – the question is how many hours in a week does someone Move a DEAL forward? Most sales persons move DEALs forward one or two hours per week. The great sales teams move a deal forward 10 to 12 hours per week.
4) Now we know that sales is moving a DEAL forward and most sales persons do it one or two hours a week, so we can do the math and divide the cost of the sales person into the number of hours they sell in a year.
Most SMBs (Small – Medium Businesses) will find their “Cost per Sales Hour” hour is between $1500 and $4500 per hour. Worse is that the sales person who sells between one and two hours per week may have to sell $10,000.00 to $20,000 every hour they are moving DEALs forward to hit quota. Very few situations result in sales persons selling that much in products and services per hour.
If that level of selling per hour is not realistic the sales person will fail, the forecast will be missed and the company will have trouble surviving let alone thriving.
The “Cost per Sales Hour” is one of those “Revenue Generation” continuous improvement opportunities. Often a sales person and a whole sales team can quickly be made two to four times more efficient with the application of “Revenue Science™”.
Take the four steps. Learn your “Cost per Sales Hour” and then start to apply “Revenue Science™” to drop the “Cost per Sales Hour” which will release the topline for rapid sales and profitable revenue growth.