Guest post Monday and I’m pleased to have Ashraf Osman, president of Systems Management Consulting International. He echoes many of the principles I regularly talk about. Your sales motivation and sales success can only benefit from this wisdom:
Many sales reps have their heart set on the value of the contracts they sign.
They sign a $100,000 contract and feel great – celebrations are in order, everybody congratulates the hero and he moves on to the next deal.
That is great in a perfect world, but in a competitive world where customers want everything for as little as possible, our “hero” has to build a healthy sale from the beginning and not resort to burning his/her prices to close the business.
Sales rep who do this usually focus their mind on the revenue and try to ignore the profitability of the deal by telling themselves that this is a one-time burning of the prices and they will make it up in a future deal.
The reality is that this future deal never comes and once you start burning your prices, you will inevitably continue to do so.
Customers are not opportunistic or manipulative; they want the best deal for their company and so do you.
What you need is to educate them and build together a healthy sale where each party gets what it deserves.
Customers do not know the cost structure of your company. They do not know the cost of doing business, and terms like SG&A are gibberish to them – and possibly to you!
Do you know what SG&A is? It means “Sales, General & Admin” expenses, which may climb up to 14% in some companies. As a great entrepreneurial sales rep, you should know this figure when you price you goods/services.
The key to fruitful business is to teach your customers from the beginning what they do not know and bring them up to the level of valuing your price even if it is higher than your competition. You want them to know you are in business to stay – you are not a hit-and-run person/company.
In services industry the deal contains:
1) Fixed cost elements like the machines, SW, material, etc., that you buy at fixed cost.
2) Subcontracted cost like the cost of subcontractors’ resources working for you during the project duration.
3) The cost of your resources working for X number of days or weeks.
Your target is to maximize your profitability by:
a) Negotiating your cost and margin for cost elements #1 and #2.
b) Making sure you know the real cost of your resources to properly price them.
c) Making sure you are covered by Change Management mechanism to protect you against scope creeps and slips.
Great sales reps think like business owners. They are not attracted by the revenue figures only, but worry about the health of the whole deal (revenue, profit, payment, collection, reference-ability, and repeat business).
Great sales reps are self-employed to solve customers’ problems by motivating them to invest in their products/services.
Does that describe you?