By Frank Hurtte
Last week, I had the opportunity to meet a real live elephant hunter. No, not the African safari kind; this elephant hunter was of the sales variety. After years of bouncing from manufacturer to distributor and back, he called me to network for his next opportunity. During the normal introductory niceties (contrary to my wife’s opinion, I am a nice guy,) he boasted about a dozen or so really big deals he had singlehandedly managed during his two-decade career. Make no mistake, this made an impressive list. I was buying into his story, hook, line and sinker. Until we reached the point where I asked him why he was looking for a new opportunity.
He was currently “between jobs.” With his impressive list of accomplishments, I had to wonder how a rain-maker of this magnitude could be out of work. Common sense concludes that very few companies willingly separate ways with a pro who really brings home the bacon. Scratching my head in wonderment, I asked him why he was sacked at his former employer. The answer was shocking. He said, “my last couple of deals didn’t fall and my business dropped off substantially.”
For distributors in his industry, business can be divided into “project” business and flow business. Even during the darkest hours of the Great Recession, the flow business for most customers continued to roll in. The ratio for a healthy end-user customer looks something like 70 percent flow and 30 percent project. Things look slightly different for OEM customers, but even there, most have some flow business remaining.
About 15 minutes into the conversation, I explained my thoughts on flow business and asked if I was missing something. After a long pause, I heard a reluctant story of no time to build a solid foundation of long-term repeat business. This guy prided himself on bringing every resource possible toward capturing the big deal. Pursuing what he termed as “piddle” routine stuff was better left for those small-minded types who couldn’t hunt the elephants.
The truth about our kind of selling
One of the issues I have with many of the generic off-the-shelf sales training courses comes from the backgrounds of the instructor. Many industries thrive on “one time” sales. The sale is an event rather than a process. For distributors, it works differently. Our sales strategy is a continuous string of discovering customer needs, proposing a solution, assisting with implementation of the solution and repeating the process. Over the years, we develop customer trust, build loyalty and grow our flow. We strive for what some call “customer wallet share.” When things go well, our ongoing actions entice the customer to purchase more from us because they know we desire the orders.
Capturing projects has a place in our world, but only after we have built a solid groundwork of customer knowledge, relationship and trust. Chasing projects which just happen to float across our desks is often an exercise in futility. We waste our time and resources developing complex quotes for business with little chance of success. Further, negotiation experts like Anthony Perzow of SPASigma indicate some of our quotations are simply used as rabbits to drive down the price of the guy the customer really wants to buy from. The rabbit has zero chance of closing the order. And, in a day when most distributors are fighting to channel resources, time spins down the drain.
What should we be doing?
Targeting the right customer list for our efforts makes sense. Building a relationship and trust takes time. If we spend our time on customers with little potential, the payoff never comes.
Asking the right questions and gathering customer data pays off as well. Nothing accentuates our relationship with a customer like understanding their business. The more we know about the customer’s unique situation, the better our chances of providing valuable solutions. Understanding our competitors on an account by account basis helps us better position ourselves. We must recognize why the customer buys from others. This is especially critical in a world where customers often split their business between several competitive distributors. Harnessing the efforts of our supply partners helps build our portfolio of business and protects a distributor from cross-channel conflict competition. But, all of these take time and we’ve got to make sure the effort is worth the effort.
Opportunity tracking is a must-have skill
My elephant hunting friend was partially right in that he saw and measured business potential, but he lacked perspective. He saw one opportunity but failed to recognize all the opportunities. He failed to understand the concept of old-fashioned funnel management. Rather than develop a number of potential deals with the reasonable expectation of some being canceled, postponed or lost to competitors, he hung his future on a handful of major deals.
With this conversation rattling in my mind, I broached the subject with a couple dozen distributor salespeople. Not a scientifically conducted poll, but based on my results, less than a quarter diligently track sales opportunities. Some didn’t see value in the exercise, others admitted they sometimes provided opportunity-like data to their managers, and at least 30 percent didn’t really know what we were talking about.
To bring everyone along, let’s talk about tracking potential business in your territory. An opportunity is a piece of potential business. It could come in the way of a project, as in Acme Manufacturing plans to rebuild their widget line replacing existing motors with new high efficiency motors and drives. This one is likely to come in the way of one very large order. (This would make my elephant hunting pal’s heart go pitter patter.) On the OEM side, an opportunity might involve replacing a single sensor on a production machine. With this, the opportunity comes via a series of orders over the course of the next several years. Cumulatively, this may create tens of thousands of dollars. The situation in MRO markets is similar to the OEM world. Work hard to get the customer’s replacement fuse business and orders flow for a very long time. Here, only estimates apply. The customer typically uses $5,000 to $6,000 in fuses per year and our estimate is based on customer data or comparisons to other facilities of similar size.
Which opportunities should be tracked?
A good many sellers struggle to answer the question. Questions like how big, chances of closing the order and how far into the future arise. The following are some rules of thumb:
• Potential order volume greater than one percent of your projected sales should be logged. For rookies with a territory producing only a half million dollars, this would be $500. For an experienced guy with a territory pushing a couple million, this equates to $2,000.
• Opportunities at targeted accounts or those involving a new product launch should be logged if they are over $500. By their very nature, it’s important to keep closer track of this potential business.
• All potential business should be logged, even those with lower chances of conversion. This allows a salesperson to track competitive business and position for future orders even if the original order is lost.
• Sales opportunities should be logged as soon as they become visible. Often times, early awareness allows time to buttress your position with the customer.
Once the list is created, it should be reviewed regularly. I typically recommend monthly review. During each iteration of going back over the list, the salesperson can contemplate new information which provides an occasion to better plan strategy. Further, the review is a good time to remove business which has been canceled by the customer or lost to a competitor.
What is a healthy amount of logged opportunities?
In the case of our elephant hunting pal, his opportunities equaled his projected sales target. When one of the pieces of his potential business headed to the elephant graveyard, he was toast. Clearly, you need to identify more potential business than your sales goal. The question is: How much more?
Without sounding glib, the answer depends. Let me illustrate. If you are a well thought of and well respected salesperson with extensive application skills and deep customer relationships, you might be able to achieve your sales goals by identifying future prospects of two times your goal. On the other hand, if you are the new guy just breaking into your territory, the multiple needs to be set closer to five or six times your sales goal. It also depends on your company’s position. If your team happens to be the high market share, “go to guys” for your types of products, your need for a large bank of opportunities is diminished.
Working the opportunities
It’s our job to capture as much business as possible, but the proper focus is important. Many sellers make the mistake of gauging opportunities on size alone. While size matters, this is a critical error. Proper opportunity focus comes at the confluence of these points:
1) What are the realistic chances of success? It’s better to have 10 opportunities of $10,000 each with an 80 percent chance of success than one mega deal worth $100,000 with a 20 percent chance of success.
2) Does the business fall into my company’s strategic direction? If the business you have identified is part of the future direction of your company, it makes sense to invest more time and energy into converting it to an order. Conversely, if the business falls outside of your wheelhouse, one would wonder if you are going to create the right customer experience. Does it make sense to get the order but alienate the customer by way of shoddy service?
3) If successful, will our company make money? Strange that we should even need to add this to the mix, but often salespeople chase business which produces nothing for their parent organization.
4) Does this opportunity come from an existing customer? It’s five times easier to sell to and do business with an existing customer. My guess is many of these will be pushed to the front by our first question.
5) Does capturing this order open the door to future business? Playing to the future is important. Opening doors for more and possibly easier business is a thing of beauty.
6) Do I have time to position myself to get the order(s)? If you are just discovering opportunities a week or so ahead of the proposal date, there is a chance you have a problem in your sales process.
A parting thought . . .
Understanding the opportunities in your territory drives your sales process. Not enough opportunities typically translates into a need for more calls. Not enough high probability opportunities probably indicates you aren’t building customer relationships. Not enough closed opportunities could be a problem in the way you present your solutions. Make no mistake, without a rigorous process for tracking, you will never identify the problem. In the end, you might end up like our legendary pachyderm pursuer.
Finally, what happened to my newly found elephant hunting friend? I am not sure any of this advice sunk in. His last words were something to the effect of, “When the economy picks up, the big orders will come back and I will be there.” I only hope he has enough money to tide him over until those days arrive.
Straight talk, common sense and powerful interactions all describe Frank Hurtte. Frank speaks and consults on the new reality facing distribution. He blogs on “The Distributor Channel” at http://thedistributorchannel.blogspot.com. Contact River Heights Consulting at firstname.lastname@example.org or via phone at (563) 514-1104.
This article originally appeared in the Sept./Oct. 2016 issue of Industrial Supply magazine. Copyright 2016, Direct Business Media.