Real Profits – Accountability
In sales organizations, every sales rep is responsible for generating a specific amount of revenue per cubicle or workstation. These are called sales quotas. The reason why quotas are in place is simple; each cubicle has operating costs and the company must see profits. Cubicles, however, are fairly inexpensive to operate, but in the contracting industry, the operating costs for each service truck are enormous. The rising cost of auto insurance alone is crippling many companies.
In sales, each cubicle is considered a separate profit center; likewise, each service truck should also be considered one. Of the thousands of contractors we’ve talked to, only a handful ran their companies in this manner; that’s primarily because those companies employed financial controllers. One controller I spoke with said, “If you don’t know how much each truck is generating, you have no control of your company and you’re operating in the dark. When I came to this company, I employed accountability standards and we quickly doubled our profits. Setting a tracking system in place is simple, it’s not rocket science.”
Tracking systems can be as simple as using a self-made Excel spreadsheet or logging numbers in a ledger. Anyone can do it. I’ve run sales floors with over 100 agents where an hourly tracking system was in place. The hourly count was to track the effectiveness of radio ads. Therefore, both sales numbers and ad sources were recorded. Whether you have five trucks or 50, daily tallies only take a few minutes to log.
The simplest approach to setting up your tracking system is to first identify your operating costs. Since your trucks are the income generators for your company, divide the operating costs by the number of trucks. This number is what each truck must generate to break even. Since each service call order is recorded on paper, each technician’s sales can be tracked and recorded. Create a benchmark from your previous quarter’s numbers. You can go farther back if you wish, but you need to start somewhere, and if your time is limited, one quarter will give you enough useful data.
When a company operates with low profit margins, as many service providers do, by implementing a tracking system, you gain control over your profits and create financial security. Many owners, when they learn how each truck has performed, are shocked at the numbers. They generally find a few trucks generating honorable profits, some are breaking even, and others cost the company money. Owners generally know who the breadwinners are, but when real numbers are revealed, sometimes it’s a devastating reality blow.
Once you’ve set your tracking system in place, what’s next? Accountability. This, however, is a delicate issue. Scolding technicians for low numbers won’t generate increased performance, rewards will. Sales organizations pay commissions or bonuses to motivate employees. More and more contractors are doing the same and are seeing great results. Next, let’s kick it up a notch by introducing a new twist. One thing you will find in every sales room is a sales tally board. It can be a dry erase board or a blackboard, but this is where the sales volumes, for each agent, are written for all to see. Does this create peer pressure? You bet it does! The competitive tension is high. You’ll find the few technicians at the top will start hustling for top billing and the ones dragging their feet will realize just how poorly they’ve been performing.
Putting up a board can also be a sensitive issue because employees may feel they are being reprimanded. When you introduce a sales board, have a special reason for doing it … create a contest. If you have a small organization, award one prize. For larger firms, offer first, second, and third place prizes. If you can afford it, offer a vacation trip, if not, a special dinner package. TVs, DVD players, and gift certificates all make great giveaways. Run the contest over a one- or two-month period depending upon your sales volumes.
Once the contest is done and over with, you don’t want the energy and excitement levels to dwindle. That’s when you should consider implementing a bonus structure, provided you don’t already have one in place. Just as sales organizations do, award specific bonus amounts for levels of revenue generated. These numbers will vary from company to company depending upon the size of the organization and number of customers. If you already offer bonuses, and you’ve seen marked improvements after implementing the tracking system and sales board, consider revising your bonus structure. You may want to add larger bonuses or higher tiers.
In addition to bonuses, also consider creating a “wall of fame.” This means every month the highest producer is awarded two things – a bonus check, usually $50-100, and his name on a plaque. People love seeing their name in “lights” … in this case brass. Employee recognition is a powerful motivator; some enjoy it more than the money! These plaques have twelve small brass plates for engraving the top producer for each month. In addition to the yearly plaque, some companies give their employees a smaller plaque to hang in their work area; this, however, is entirely up to you.
When it comes to profitability, motivated employees can bring companies to the next level. A company is only as successful as the people within it.
Randall Murphy is an author/professional recruiter and founder of Apex Training, which specializes in recruitment, sales, and CSR training. For more information, visit www.apextraining.org
Publication date: 10/17/2005