- I told you previously that my first sales manager
cut right to the chase when he said
my primary objective was to hit the revenue number.
He then paused and said,
and don't overspend while you're doing it.
The aspect of expense tracking
and how it links with performance, management
and measurement, is something that is
so critical for sales organizations.
You can be the best sales team around
with outstanding revenue results,
but if it's not being done profitably,
then it's really meaningless.
Since my first manager was so firm on this
I inherited that approach with the sales teams
I've managed through the years.
I want sales people focused on customers
and closing business.
Not being expense control experts.
Each of the account representatives
have budgets for various line items,
and frankly, I want every dollar spent.
However, not knowing where the money is going
or being unaware of the amount used year to date,
then I have an issue.
There are a number of expense items that sales people
and managers need to monitor.
The whole process starts right with the finance department.
Whether you're given a final number,
or have to build it up yourself,
it's important to have someone from finance as a close ally.
If they're aware of your business opportunities
and obstacles, they can be a great help
if you need extra money
or be understanding should cuts need to be made.
Here are the key line items
where expense management is measured.
These are important to keep in mind
when developing expense targets.
Travel and entertainment.
It's an area where you have to stick
within the guidelines of the company,
ensure that it's being used appropriately
and spend time with each sales person
so they're clear about your personal philosophy of its use.
Marketing and promotion.
Depends on the company, whether these funds,
including cooperative advertising,
are kept in the sales or marketing departments.
I always want sales people to promote
aggressively, yet intelligently.
I think it's a great measurement barometer.
Sales meetings.
Such a big expense, yet I feel the dividens of training,
product and service education, along with teamwork
and comradery, make this a tough item to ever cut.
However, the cost can get large,
so careful review is critical.
Training.
The funds are either in the sales department
or human resources department.
It's a valuable investment in your team.
Technology.
Another case of no matter where the funds are kept,
salespeople need new and working efficiently tech tools.
Salary and benefits.
Salary, plus benefits comes to about 130, 135% of base.
Obviously this is the biggest
expense item for the sales department,
and staying on top of it goes without saying.
Sales to cost ratio.
All of the line items lead to a total expense number.
And when divided by revenue,
gives us the best measurement tool,
the sales to cost ratio.
For example, expenses of a hundred thousand dollars,
divided by sales of one million,
equals a ration of 10%.
This is where being on the same page
with management and finance is so important.
You can even do this by channel or market
to analyze the ratio even deeper.
Obviously, some channels are more costly than others,
but will help you make investment decisions.
The management of expenses is as important
as attaining our revenue goals.
It's just a heck of a lot less glamorous.
However, the performance management
of where out dollars are being spent,
and keeping the cost to sales ration as low as possible,
is what separates the successful sales organization
from the unprofitable one.