How much business is really out there? Who are your customers? Who should be your customers? What is your current market share? What should it be? Are you achieving your full potential? How can you get to the next level? Who is your best sales performer, understanding that unit sales are only part of the story? Who needs more direct supervision? Less? Who needs personal counseling and/or coaching? What type? What actions do you need to take today to move beyond the status quo?
Dave Mills, president of Twenty First-Century Marketing in Peoria, Illinois, says that these are age-old problems and questions that desperately need some new-age solutions and answers.
In his presentation at the National Trailer Dealers Association convention, “Maximizing Sales Effectiveness: The ONCLOSEGROSS Quantification Method,” Mills said that being a professional sales trainer has many rewards. But he said the biggest single frustration for him always was in trying to determine what impact he truly made. Did positive results take place? Did sales actually improve? Profits? How much? There simply was never a fair, accurate, non-emotional way to “quantify” sales performance and evaluate the result of training.
And then he coined and first used the word ONCLOSEGROSS as the title and topic of a management seminar conducted during an Associated Equipment Distributors (AED) convention.
“The word ONCLOSEGROSS was created to help managers and their salespeople understand, remember, and strive for what I discovered and call the three key performance indicators (KPI) in the sales department,” he said. “These must be managed and steadily improved to achieve above-average sales performance, growth, success, and profitability.”
What does the word mean?
“Be ON every deal possible, CLOSE every deal possible, and GROSS — don't leave any dollars on the table,” he said. “The word communicated what was intended. It was understandable, the message was memorable, it was practical, it was down-to-earth, it was basic, it was fundamental. More importantly, the results are quantifiable. The numbers generated become the basis for benchmarking and goal-setting, plus they assist in identifying the individual and specific actions required to make improvements and monitor results.”
Four proven principles
He said there are four proven management and motivational principles underlying the use of the ONCLOSEGROSS method for quantifying and improving sales performance:
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Motivation, more specifically, self-motivation is the foundation for sales success.
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When performance is measured, performance improves.
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When performance is reported, the rate of improvement accelerates.
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People respect what the boss inspects.
“Here's one example of people respecting what the boss inspects,” he said. “Early in my career, I was blessed with a manager who understood and practiced this principle better than anyone I have seen. As a territory salesman, we had very specific sales activity and sales production goals. Each salesman had a designated time to meet with the manager on Friday. The week's results through Thursday, with running totals, were on a wall chart behind his desk for me and all the other salesmen to see. When the numbers were on target or above, the meeting was brief and ended with, ‘Have a nice weekend.’ When the numbers were below expected, the response was, ‘Come in and close the door.’ It didn't take any of us very long to figure out which response we liked the best, and the sales team's performance proved it.”
He said the ON portion of the formula is the cornerstone.
“The best sales rep in the world cannot close and make money on a deal and opportunity they have not identified,” he said. “A little simple arithmetic here will illustrate. Let's assume 10 opportunities were available in a market where you had a product to offer. If your average closing ratio is 30% and you knew about all the deals and worked them, you produced three sales. What if you only knew about four? One, maybe two sales.
“This will really drive the ON idea home: Assuming a 50% closing ratio, a company, branch, or salesperson with a 15% market share is only ON about one-third of the business available. From the manager's perspective, is the territory too large and/or not being worked properly? Average customer size, urban, suburban or rural areas, driving time, and driving conditions must be considered. Individual ON ratios, compared to others within the company and the company average, are the best available indicators of the right territory size and prospecting ability. Every great sales rep will fight to be on every deal in their territory. A 70% ON ratio should be considered minimum acceptable performance. Smaller territories and fewer customers should be a minimum of 80%.”
Mills said after 30 years of working with salespeople and their managers, he has never found anybody who has real, documented closing- percentage numbers to share. In sales seminars, he ask salespeople to write down their closing ratio on a piece of paper. The majority say it is 50%. Or higher.
“My reply is, ‘It might be, but I bet you are not counting them all,’ ” he said. “Most people get a little red and grin. I have never had anyone show me any evidence I was wrong. These are all good people and they work hard. They simply do not keep score. I had a dealer principal tell me once. ‘I think I am afraid of the answer. If I knew, I would have to do something about it.’ Here I can't resist bringing in the old adage, ‘If you can't measure it, you can't manage it.’ Closing ratios must be accurately measured before they can be improved.”
Go beyond the obvious
How can closing ratios be improved? He said it goes beyond simply improving closing skills. The ON ratio must be improved. He said being ON a deal early gives the sales rep a competitive edge for four reasons:
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They may be able to sneak in and out without letting competition know anything is happening. He calls this the “Stealth” close.
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They will have more time to learn the customer's needs and to work the deal properly.
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They will have a chance to write and/or influence the specs.
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They can seek management assistance earlier in the deal.
“Want some proof?” he said. “How successful have you been when a rep brings you a deal where the figures have to be worked up tonight because the decision is being made tomorrow? Add in the fact they are not sure who is going to be in the meeting, and the value of being on a deal first or very early becomes way more obvious and helps demonstrate how important being ON deals early really is.”
He said the second-greatest opportunity for improving closing ratios is becoming more skilled in the use of two of the most basic and fundamental selling skills: asking the “right” questions and listening.
“Based on experience and learning from others, I am convinced closing the sale is easy and the natural result of doing everything else even close to right,” he said. “You have to get up to bat first and then touch all the bases to score. The minimum acceptable goal for ‘true’ closing ratios should be 50% or higher.”
He said dealers everywhere are seeing their margins drop. How can the erosion be stopped?
“A large amount of my thinking time and training time has been devoted to price and profit issues,” he said. “Hang on. Here is some new-age thinking. I am now convinced gross profit is a state of mind. What do I mean by state of mind? I've observed about two out of 10 salespeople have absolutely no trouble with profit at all. They make the deals and they make the money. They believe in themselves and what they sell. They truly believe they are an asset to their customers and they expect something in return.
“If you have any of these profit generators, step back, get out of the way and let them do their thing. If you don't have any or enough of these profit producers, go get your commission sheets. Make a list of your salespeople and write their GP numbers below their name. Now scan and determine the high and low for each individual. There should be a substantial spread between the two on the same type of product. If the spread is there, this means your sales rep is asking for gross profit but taking a skinnier deal, if need be. You may think you are controlling the margins but you cannot be out there on every deal. You can also not be in every sales rep's head. Knowing when to price, how to price, and how to negotiate are skills that can be learned. This is one place professionally conducted, third-party training can really help.
“Now look for pricing patterns. The odds are you will see one or more salespeople that price and sell everything at or near a certain profit figure or percentage. This supports my belief gross profit is an attitude. When investigating the cause of these pricing patterns, salespeople have told me things like, ‘That is all I can make in my territory’ or ‘I don't want to gouge my customer.’ One really good one I heard was, ‘I add the same gross so I know what my commission will be.’ Attitude or not? Now scan all your numbers. What is the company high and low? What is the company average? What should it be?
“Small improvements in margins make big improvements in gross profit dollars. Determine what your average gross-profit percentage is now and begin working it up incrementally, with each salesperson and one deal at a time. It works. A penny here, a dollar there, $450 there, and pretty soon you are talking about a lot of money.”
What is the cumulative effect of ONCLOSEGROSS?
Mills said it is amazing how much impact relatively small improvements in each of the three key result areas will have on the bottom line.
“Establish specific profit objectives based on your needs and requirements,” he said. “Communicate your goals and make sure they are totally understood. Be sure each of your sales people knows their numbers and how they compare to others. Good salespeople love internal competition. Keep these principles in mind. Use them on a daily and monthly basis. They work.”