Are Your Salespeople Worth Their Salt?

While this article is being addressed to sales managers, it’s really intended for salespeople. It’s just that I know salespeople won’t read it so I’m hoping some sales managers will read it to them (or at least send it to them in the hope that it will get read).

With that in mind, I’m actually writing this to both sales managers and their salespeople.

The term being “worth your salt” comes from medieval times when the Romans served out rations of salt and other necessities to their soldiers and civil servants. These rations were called by the general name of salt (sal), and when money was substituted for these rations, the stipend went by the name of sal-arium, which is probably where the word salary comes from.

Thus “not being worth your salt” means “not worth your wages” or “not worth what I’m paying you.”

Earning Their Keep
A lot of salespeople feel they are doing okay if their gross sales cover their direct costs. Not so! Nothing could be further from the truth.

A salesperson is worth his salt when he brings in enough revenue through his sales efforts to not only cover his costs but also make an appropriate contribution to the company’s bottom line. The question is, What is an appropriate contribution? Read on.

Some salespeople forget that they are the primary source for the income that a company needs to pay not only the salespeople but also all the rest of the employees. The salespeople also provide the income that is needed to pay to keep the lights on, heat/cool the facilities, keep vehicles on the road, advertising, raw material, production equipment, repairs, etc.

There is an old saying that goes like this, “Nothing happens until someone sells something.” It’s not so much a matter of nothing happens until someone sells something. All kinds of things can happen, bankruptcy being one of them!

Knowing If You’re Worth Your Salt
Just how is a salesperson supposed to know if he’s worth his salt? Here’s a simple rule: If you’re not bringing in at least four times your income in profit, you’re not worth your salt. Five or more is a lot better.

The operative word here is profit, not sales. You may bring in a million dollars in sales but if what you’re selling only has a 10% gross margin, your contribution to the company’s bottom line is only $100,000.

Let’s look at it from a different angle.

Let’s assume you want to earn $100,000 and what you’re selling has a 10% gross margin. In this case you better be making a minimum of $4,000,000 in gross sales, which produces a gross margin of $400,000, if you want to be worth your salt and make the appropriate contribution to the company’s bottom line.

If these are shocking numbers to you, watch out! Your job may be in jeopardy because companies can’t afford to keep salespeople who aren’t carrying their share of the load.

Gross Sales vs Gross Margin
Some companies don’t like to share their gross margin information with the troops. Instead, they will convert the information I outlined above into gross sales. Now the gross sales number becomes the sales goal. Frankly, it’s a lot easier to do it this way because salespeople think in terms of sales, not margins.

Know Your Numbers
One way to earn your keep and be worth your salt is to know what your numbers are and to stop giving away money when you don’t have to.

In my experience, many salespeople are too fast to discount and don’t seem to appreciate that when they give away a dollar, they give away a dollar of profit, not cost.

Let’s see why this is important.

Let’s assume you’re selling a $100 item that has a 25% profit margin and you decide to give away 10% to get the sale. So, if the item sells for $100, you’ll make $25 profit if you don’t discount. If you give the customer a 10% discount, you now have a $90 sale.

Unfortunately, your cost on the item is still $75 so now you’ve made $15 instead of $25. In other words, you just gave away $10 of your $25 dollar profit or 40% of your margin.

Whenever you discount, you give away a portion of the profit the company needs to pay your (and other’s) salaries, etc.

You earn your keep by not just bringing in money into the company; you earn it by bringing in profits.

The Bottom Line
The best salespeople understand the business of business and appreciate that their job isn’t to make sales; it’s to make money, for their companies and themselves.

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