Consider these 10 factors when deciding if its time for your dealership to expand its salesforce.
Are you missing out on possible sales? It looks like the demand for farm equipment is growing again. It’s time to capitalize on this and grow your business with a solid sales plan in place. Let me guess, your plate is full because of all the other things you need to do in the everyday operations of your business? Too much to do and not enough time to do it, right? You have good, reliable products that customer’s need and will use, and you know there is demand for it. Let’s face it, if you aren’t selling it to the customers, your competition will.
Is it time to add a member to your sales team to grow your business? Are you ready for it? But wait, that means you need to look after someone else. For a lot of smaller dealerships, that is exactly what it is — a babysitting service — and the person in charge thinks it is just easier to do it themselves. Not only that, the last thing they need is more overhead that is not contributing toward the bottom line.
Here’s the problem. This kind of thinking hinders the growth, profitability and, in some instances, the long-term viability of your dealership. Owners and managers are often overwhelmed with the day-to-day duties of the operation. The addition of someone in sales, especially if they are the first or second person in that department, is a distraction and hindrance.
Most owners and managers are not prepared for this next move because there are so many other things to consider, let alone managing another person. One of the biggest problems I come across is there is no plan in place.
Adding another salesperson takes strategic planning and hiring the right person. You want the person in that position to make a decent living and the dealership more money, right? Not only that, you want a self-starter with the right attitude and someone you don’t have to give a weekly hug. You need the right person who realizes they need to roll up their own sleeves and get to work. The real world doesn’t hand out participation medals. You need to make the right moves, and if you don’t, the chances of success are low. Planning takes time, and execution is important. Do it right the first time. Let’s consider some practical next steps to consider when making this move.
Non-Negotiable Sales Duties
- Have your salespeople come up with an “UNCOMMON PROPOSITION.” What sets them apart from everyone else that is out there selling “stuff”? I read a study recently that says a salesperson has less than 90 seconds to create confidence with a potential customer. This customer decides in 90 seconds, two things: Can I trust this person, and can I respect them? If the salesperson cannot do this, I strongly believe that it will be 10x harder to sell to them. Practice this in sales meetings.
- How many customers should they see each week? Make sure your person is not just driving up and down the road and just dropping in. There needs to be a plan. I tell salespeople that you need to have at least 50% of your time, prospecting new and existing customers who have not done business with the dealerships in the last 12 months – in other words, COLD CALLING. Our customers are bombarded by people selling them “stuff.” Make sure they have a VALID BUSINESS REASON (VBR). It is not easy to see for a newbie salesperson. If they are not doing business with you, they are doing business with someone else. Two to three sales calls per day on average, more if you are new; this is the minimum. The salesperson needs to always be on the lookout for selling opportunities and capitalize on them with a VBR.
- Selling appointments. Have at least one each day and you will always have business. What this means is, have an appointment with a customer where you know and he knows you are there to do business. If one party does not, then you are wasting time. Get your salesperson to this point in his career and support him.
- What is the schedule for being on the road meeting customers, doing equipment demos, and being in the office? You want this person to be recognized and visible. What about community events like fundraisers, auctions, etc.? Do you want them to be part of that? (The right answer is yes!)
- What is their proper conduct when representing the company? Inappropriate conduct reflects badly on the salesperson and the employer.
- Understand Margin vs. Mark Up. Mark up by IAU’s definition is the percentage of an item’s wholesale cost including overhead expenses it includes in the retail cost to make a profit. These expenses include materials, cost of production, materials, manufacturing costs and labor, utilities, rent, advertising, packaging, shipping and payroll expenses. Margin is profitability before subtracting operational expenses. The difference between the sale price and the cost of the item(s) sold. The higher your gross profit margin is the fewer restrictions a business has with tight operating expense. Salesmen do not know what their overhead is because everything they sell is negotiable. The easiest way to calculate it is: cost of goods sold (including freight, PDI, parts, shop, etc.) divided by the difference of 100-margin you want to achieve.
- $100,000 cost divided by .88 (1.0-.12%)= $113,636.36
- How many sales are they to accomplish? I am going to suggest something totally different here. Most sales managers have a compiled monthly, year-to-date or rolling average. Here is what I see as a more successful method. Focus on the quantity of sales, rather than gross sales dollars. Calculate out some KPIs that are tangible. Here is what I suggest doing:
- Work out what your average sale per contract was in the last 12 month rolling average. Go back as far as you can — 1, 2 or even 5 years. For example if your existing salesperson’s average is $65,000 per contract and he did 42 in the last year, the total sales should have been $2,730,000.
- Set out the next year’s budget. He needs to do 51 sales, an increase of 9. 9 x $65,000 = $585,000.00.
- Break this out into weekly, monthly or quarterly goals. It is easy to bring out this topic in a sales meeting. We need 2 more sales this week, or 5 more this month. This strategy can take the concentration off the high dollar sales that most salespeople chase after and will help them look at the customers’ other needs.
- Work on how many sales per week, month, quarter and year they need to accomplish. If you see the average gross sales of a contract fall, then you increase the number of “sales” the team needs to accomplish. The question to ask in meetings is, what do we need to do to close another 2 deals this week? Another idea is, perhaps if the dealership or manufacturer has a push on a certain model of tractor, tell the team we need 3 sales this month for 250 horsepower FWA tractors.
- You as a manager will still need to control the margin, trade values, etc., based on what it takes to operate. This puts a different focus on the team. Know what your needs are.
1. Do Some Research. Find out how much you are losing by not having an additional person selling equipment for you. Find out what the sales are in your territory, and what your market share is. Look at market share history, and do some research on UCC filings from your area. If you don’t know where to look, have a meeting with your manufacturer’s rep. The rep will help you understand what the market share is and how much room there is to grow it. Is there room? Remember, market share is important to the dealership too. This is future business!
2. Pen to Paper. Figure out what not adding a salesperson is costing you. Now that you understand the market share, and you know where the sales are happening, calculate what the dealership is missing out on in terms of profit and sales. Owners need to get excited after they see what the bottom line is of increased sales. Here is a basic calculation to use, to figure out what the additional salesperson would add to your dealership bottom line. Build a budget for the added overhead and revenue from the plan. Does it make sense financially? Is the pay structure competitive? There are many different types of compensation plans. Most small dealerships do not want to make accountants of salespeople. Some pay on a percentage of profit and some sale people will scrutinize every deal and question parts and service costs. I suggest an easier method and pay based on a structure like this: Cash Difference of 1% on new and 2% of used.
Glossary: Margin vs. Mark Up
Margin: Profitability before subtracting operational expenses. The difference between the sale price and the cost of the item(s) sold. The higher your gross profit margin is the fewer restrictions a business has with tight operating expense. Cost of goods sold.
Mark Up: The percentage of an item’s wholesale cost including overhead expenses it includes in the retail cost to make a profit. These expenses include materials, cost of production, materials, manufacturing costs and labor, utilities, rent, advertising, packaging, shipping and payroll expenses.
3. Territories. When a small dealership adds a salesperson, they tell salespeople to go sell wherever they want to. Make sure there is an area of prime responsibility (APR). They need to be focused in an area, otherwise there may be a tendency to spend too much windshield time, driving across the territory to be effective. Consider the market, and help them be successful.
4. What the Job Needs & Who to Hire. Some dealerships are ill prepared when it comes to the addition of another team member. Owners need to realize the value of planning. The rule of thumb is that every 1 hour of planning, saves 12 hours of execution. When looking for another person to add to sales, you need to decide what you need for skills? Entry level or senior? Do they have the right attitude? Are they coachable? Do you know how to coach them? It is common to bring in a salesperson and have them set up their own office and computer. Please don’t do that!! Make sure it is already set up for them on day one. It will help them feel more comfortable, and starts them off right. A new position is overwhelming enough. Do they have a desk to work at, or do they work remotely? What about a vehicle, fuel, and insurance? Are you providing one, or giving a vehicle allowance for that person to operate their own? Do you need another computer and cell phone? Is everything set up in terms of access to online tools and programs, or are they going to fumble around until they figure out what they are doing? Make sure you are organized in advance of their first day.
5. The Job. Do you know what you want this new hire to do? For that matter, if you have existing salespeople, do they know their duties? I meet with many dealerships, and when I ask them what their salespeople need to do everyday to be successful in the position, most say “sell.” More than 75% of the dealerships I work with do not have anything documented, or if they do it is out of date. It really does not matter what size they are. I am not talking about a job description. I am talking about “JOB DUTIES.” What are the non-negotiables for this position? This is what they must accomplish daily, weekly, monthly. You need to put down successful behaviors. See “Non-Negotiable Sales Duties” to the left.
6. Customer Relationship. I always ask groups I train the following: When does a relationship with a customer begin? About 90% of the time I get the answer “when we first meet.” Sound familiar? Is this the right answer? Read the question again. A relationship with a customer starts only after one thing happens — when they trust the salesperson with their money! It is after they bought something, not before. Until then, all they have is a friendship. Make sure that a salesperson understands this clearly. This is a business relationship.
Questions to Ask in Closing a Sale
Here are examples of questions to ask during trial closes:
- Is having a tractor that doesn’t break down important to you? Why?
- Is covering more acres quickly with a self-propelled sprayer rather than a pull-type important for fungicide control? Why?
If a customer answers no to a question, all he is really telling you is let the negotiations begin. In other wards, Mr. Machinery Sales Person, if you answer all my objections, you will give me a reason to buy. Teach them how to ask the why questions. By doing this, they can stay in better control of the deal and close more sales.
Trying to decide if you should add a salesperson is never easy. The decision is usually made very quickly without much thought. I know, I have done it and I set up the hire for failure even before they started in the position. I did not have the plan in place for the new salesperson. They floundered because I failed in my role as a business owner and sales manager. Give your new hire a firm foundation to succeed on, and you won’t be sorry.
7. Trades. Make sure that the salespeople buy the unit – not trade. Remember: bought right, sold right. This industry has a history of not doing that. Trades are deemed to be necessary in this industry, but we are still plagued by them. It ties up cashflow and usually they sit on the yard way too long. Salespeople need to have at least 3- 4 places of where the trade can go. Have them ask the right questions when they take a trade: 1) Who would buy the unit? 2) Why would they want it? 3) How much would the prospect pay for it? How good would it be if you as a dealer-principal would know that a trade is sold before you take it, or if there were actual interested parties? What if you knew what you could sell it for, rather than find out you over paid? If your salesperson cannot answer those 3 questions – you better evaluate your system. I have seen dealerships increase their equipment turn from 1.25 to as high as 6 within 18 months by implementing this method.
8. Sales Meetings. Have regular sales meetings. I can’t tell you how important this is. THESE ARE NON-NEGOTIABLE! I have been to so many organizations where the sales managers have the best intentions of having meetings regularly and don’t. It doesn’t seem to matter how big or how small the organization is. One large dealership with 25 salespeople that I was visiting had not had a regular sales meeting in 5 months. The team was frustrated with the managers. The sales managers kept telling me that something kept coming up or that a salesperson couldn’t be there for one reason or another. I understand seasonal demands and needs to be adjusted accordingly. Don’t have a meeting just to have a meeting (I have been in dealerships like that too). Make them meaningful and productive. The team needs to be kept up to date of what affects them in the dealership. Talk about deals on the go and upcoming schedules.
“All salespeople need to be making 2-3 sales calls per day on average, more if you are new. This is the minimum…”
9. Mentoring & Training. Find out what makes your salespeople tick – or doesn’t. The #1 job of the sales manager is to mentor your team. Keep your eyes open. What are they doing right? What do they need to do better? I do sales boot camps for dealerships, and before the first hour is up I can pretty much tell how this person sells, what they struggle with and what stops them from being the best they can be in this exciting career. There may be a few things managers need to ask when they observe the actions of a salesperson. Are they afraid to ask for a deal? Will they cold call? Will they challenge a customer when they come up with an objection or turn and run? What about use of the telephone, or are they more comfortable with texts? There are a total of 16 documented struggles (fears) a salesperson can have. Most are easily overcome with guidance. We do not have enough room in this article to go over them. Keep your eyes open and listen with your ears. Keep track of the reasons why they don’t get deals, or the excuses that are made for one month. Whatever excuse comes up most, then figure out how to address it and help them through it. This is the other interesting observation – I can also tell if these traits originate with the sales manager. Here is an example: if a sales manager is uncomfortable with driving into a prospect’s drive that they don’t know, then that salesperson (even if the salesperson is good at doing it) will migrate to the trait of the sales manager. This is the new normal.
10. Ask for the Sale. The number one reason I see (and statistics prove it), that salespeople don’t sell is that they are afraid to ask for the sale. Common sense, right? Unfortunately, it is not all that common. The real reason is that they don’t ask for the sale is because they don’t want to be pushy. Customers expect sales people to ask! Why else are they talking? Sales managers expect salesmen to ask, right? Not only is it their job, but their income depends on it. Work with salesmen to do “trial” closes. Help them learn how to ask question that get yes answers. Once they answer yes, ask the customer why. They will tell you exactly why they are looking.