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Investment First, Results Second (A Note to Sales Leaders)

There is a never-ending demand to increase revenue, to increase profitability, and to grow the business. These outcomes are governed by natural laws, and no matter how much sales leaders, sales managers, or entrepreneurs wish it to be otherwise, the investment in sales comes first, the results come second.

Cutting Our Way To Growth

I am acquainted with one CEO who has recently decided that to grow the business, he needed to reduce his spending on the sales force, cut their commission-only compensation plan in half, and refuse to pay for reimbursements for mileage and expenses unless the sales call was an actual presentation.

Even though these ideas seem to defy logic, the decisions are, in his mind, completely rationale. First, he has limited profit with which to invest in a sales force, so he reduced the size of the sales force. Second, he needs to retain cash, so he cut the compensation plan in half; now, he is retaining more of the profit for the business.

Finally, he had a sales consultant tell him that his salespeople should only spend his time with qualified prospects, and that the qualification can occur before his salespeople ever sit down face-to-face with their potential clients. The consultant told him he was wasting his money allowing the salespeople to complete a needs analysis sales call, and that they only need to be face-to-face to present. So, no reimbursements.

So, how’s that working out, you might ask? Well, he has taken to screaming and cursing at his remaining salespeople as a way to “motivate” them to do better. And motivate them he has! They are updating their resumes—even though they strongly believe in the product.

This is anything but a serious plan for sales growth. There isn’t a way to cut your way to growth.

Double the Quota, Double the Results

Here is another real life example. This business owner wants massive growth. He wants something far, far greater than his industry’s average growth rate; he wants double or triple that rate and a massively increased market share. The answer in his minds is easy: we’ll double our sales force’s quota.

It sounds crazy, but you can see his logic. Some of his salespeople are easily doubling their quota. These salespeople are working hard. If the rest of the lot would work as hard, they could do a whole lot better, too. There are plenty of opportunities in the market, they just need to hustle and capture more of them. By doubling the quota, he doubles new revenue generation, right?

Except, it doesn’t work that way. The drag on growth may come from any number of real problems. The sales force could be too small for the number of existing opportunities. The salespeople may lack leadership and an effective process. The company may suffer from poor hiring.

If you have only 20% of people making quota, raising the quota is not the answer. The answer is something else.

You Can’t Break Natural Laws

Gravity is a law that is very difficult to break. And similar laws apply to generating sales growth.

The investment in sales precedes the desired results.

It never works any other way. You can’t force growth by cutting your sales expenses—especially when you destroy the culture, morale, and esprit de corps in the process. You can’t force growth by demanding it and doubling quotas.

Instead, you have to invest in growth. You have to invest in being properly staffed to reach your goals. You have to have the right salespeople in place. You have to have the right leadership and management structure, which is another significant investment. You have to make investments in coaching, training, development and time.

Without these investments, real sales growth isn’t possible. It’s a natural law that investments come first, and returns come second.

Questions

Why do the ideas like a smaller investment producing a greater return resonate with sales manager, sales leaders, and entrepreneurs?

Is it possible that those who produce greater results are also making greater investments in the results that they desire?

What impact do cutting staff, cutting pay, and cutting reimbursements have on the sales force? These may control costs and increase the profitability of the business but do they ever produce growth?

If you can’t afford the investments, is growth the right strategy? If it is, what needs to change to achieve growth?

What impact does doubling the quota on non-quota producing salespeople produce?


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Comments

comments

  • http://adamoneill.net Adam

    WOW, you really have me shaking my head on this one. As you said it seems to defy logic. However, I have never been on the other side of the fence so maybe it does make sense to them.

    But if lack of money is the issue then cutting 50% of your revenue generating machine doesn’t seem like logic to me. As you mentioned you need to invest to get better returns on your $$$$ !

    I think you get what you pay for. Cutting the team and their compensation is going to demotivate current talent and inhibit the ability to attract the talent needed to get the job done once these people are gone.

    • http://www.thesalesblog.com S. Anthony Iannarino

      The right answers are always the difficult answers and the one’s that seem to come with the most constraints. Everyone knows that the natural law exists, we just don’t always want to have to obey the natural laws.

    • http://www.thesalesblog.com S. Anthony Iannarino

      The right answers are always the difficult answers and the one’s that seem to come with the most constraints. Everyone knows that the natural law exists, we just don’t always want to have to obey the natural laws.

  • Craig Dagnese

    This is great stuff, and I will be using this blog as a reference doc for building my sales team.  I have been currently asked to build a sales team, however I am currently negotiating what type of payment plan I will have to offer.  My company was originally asking for me to hire for a sales position that was commission only and I have been trying to state my case as to why this is a terrible idea.  I have shared that this would result in me training young college graduates for 1-3 months , to only have them quite because they make no money, and the company wasting months of training to be no better than when we started.  Actually worse because I would not be selling as much for the company while I was training.  I have strongly recommended that rather than try to hire several sales rookies with a commission only payment structure, give me a reasonable base + comm structure and allow me to attract a quality sales professional to help me build our team.  

  • Lukasz

    Very good points Anthony. Even though it’s all illogical, it happens too many times. Trying to drive results by increasing pressure. The only result is the best people from the sales force leaving.