14 Ways To Reduce Your Company’s Cost Of Sales
The cost of sales is one of the most important financial metrics when it comes to business. What’s the key to keeping sales costs low? You’re about to find out. Here are fourteen ways to keep your company’s cost of sales in line:
1) Begin by evaluating your current base of customers.
This is one of the most important things you can do. Why? Because it’s cheaper to mine existing customers than it is to find new ones. Executives often place too much of an emphasis on getting new accounts. But the strongest and least expensive action is to run to your current customers. They’re more likely to do business with you soon than a brand-new acquisition.
2) Ensure your sales reps are following up with their leads.
A strong majority of leads and prospects go cold within two business days. That’s why your reps need to get on the phones and get to work fast. Otherwise, your business risks getting left in the dust. A recent sales poll discovered that one out of four leads were never pursued. Get this- many of them never received ONE call. Behavior like this is unacceptable. It has to change fast. One key action for that change? Management must oversee the leads and sales processes on a daily basis.
That’s why you must…
3) Conduct analysis and check out sales metrics.
Metrics can make the difference between a great quarter and a poor one. If you’re not collecting data from your sales team every single day, you need to start now. But having data does nothing if you don’t look through it. You’ve got to figure out which methods are leading to certain outcomes. This is when you should consider hiring a sales consultant. It’s when you feel your metrics and actions are in place but the results aren’t there. Oftentimes, an outside perspective’s needed to take a sales team to the next level.
You should influence the sales manager’s understanding of which metrics matter. Sales managers often lose sight of which metrics are worth keeping track of. If this is you, don’t beat yourself up over it. But take action fast.
Here’s an example of wasting time on a metric. Billions in the Bank used to have a client that focused on the total numbers of deals in the pipeline. This was the person’s go-to measurement of sales progress. We were able to change his way of thinking. We showed him that pipeline velocity was a way better metric. Nowadays, his sales managers evaluates pipeline velocity every day. It’s a great method for estimating monthly and quarterly outcomes.
It’s often difficult to know which data is worth focusing on. The advanced software of modern times only adds to the confusion. There’s no excuse for a pipeline not running well. So, here’s another thing for management to do. Only provide your salespeople with tools that they 110% need. Get rid of all distractions that they don’t need. This will assist them in doing what they need to do.
4) Figure out how much to spend on acquiring new customers.
Here’s how you set the budget for your sales team. You begin by figuring out the current actual cost to find new customers. Next, you calculate the average customer lifetime value. How do you get the lifetime value?
Step one: You multiply the duration of loyalty by the frequency of buying.
Step two: You multiply that total by the gross profit figure.
Being aware of the average cost to convert each new customer is important. The main reason? It helps put you on track for configuring the right acquisition budget. It also relates to profit numbers and ROI when it comes to sales expenditures.
5) Use top-rated sales tools.
Sales tools will save your company both money and time. They can sometimes be a lot more effective than sending reps out to prospect. It’s worth investing in notification services. These cut out some expenses and make the reps’ time management more efficient. Most salespeople should spend a significant amount of time researching prospects. This will reduce your cost of sale and boost ROI. Try to find new top-rated prospecting tools. They must be able to grow the database with targeted leads. If you don’t have one now, it might be worth getting a marketing-automation system. You might also be in need of a customer-relationship management program.
6) No more brochures.
The 1990s called. They want their brochures back. In the modern world, marketing is all about educating people. It’s never about the actual product or service. So, save money by not sending out worthless marketing materials. Have your marketing department focus on providing online educational content.
7) Do research before determining your sales and marketing budgets.
You’ve got to gather plenty of data. If you don’t, your budgets will be unrealistic. You can’t only rely on single cost dimensions. You also can’t play guessing-games. Budgets have to include more than the percentage of revenue and cost of sales. Some strategists recommend relying on the following three factors:
-customer lifetime value
* This should is a reflection of your business’ historical data. It should include both forecasted and past ROI.
8) Virtual meetings should be step one in your sales process.
Time is the most precious commodity on the planet. And your customers are no exception to this notion. It often takes reps ten to fifteen contracts to get meetings with decision makers. That’s why your sales budget should reduce travel and focus more on virtual meetings. It’s a lot easier for decision makers to use Skype or FaceTime for ten minutes than it is for them to drive to meetings. Webinars apply to this step as well.
9) Don’t allow your reps isn’t to write off prospects so fast.
It’s estimated that three out of ten non-purchasers will be ready to buy in only six to nine months. Your salespeople should keep this in mind every day. Otherwise, you’re not protecting your investment in lead generation. Don’t allow cold leads to get away so fast. It’s as simple as that. Plus, it’s cheaper than focusing too much on finding new leads.
10) Be an expert in your industry.
Your company has the potential to become more respected. All it takes is positioning your staff to be experts and problem-solvers. You’ll make more revenue when more customers turn to your company for help. This is why producing webinars, blogs, and podcasts is necessary.
11) Have your sales team and marketing team collaborate.
Marketing must play a major role in your sales strategy. They should play a crucial role when it comes to nurturing leads. A good marketing team knows how to generate and qualify leads. They should do so before the prospect is in the hands of a salesperson. But be smart. This doesn’t mean you should expect sales due to your marketing team browsing LinkedIn. You’ve got to sit down with upper management and put hours of thought into lead generation tactics. Here are some customer-finding tactics that are more effective than using social media:
12) Consider hiring a sales coach or consultant.
Once again, having an intelligent outsider step in to help can do wonders for a company. A consultant is often the missing link that’s needed to make businesses thrive. Don’t let pride get in the way. Hiring a consultant is by no means a reflection that you’re not good at your job. It’s a method that can help your sales manager fix problems fast.
13) LAST RESORT: Do away with salary for your salespeople. Make the switch to 100% commission.
Let’s be clear. You should only consider doing this if your company is desperate. Why? Well, eliminating base salary is going to make your salespeople very angry. To lessen their anger, you’d have to increase the commission rates by significant numbers. This would allow your reps to make more money than they currently are. But they’d have to sell, sell, sell. Again, only go this route if your company is facing a great deal of financial hardship. You’ll risk some of your salespeople quitting when you inform them of this change in policy. It would be a shame for your top-sellers to walk out the door and never come back.
14) LAST RESORT II: Consider making salary cuts across the board.
Again, only do this when your company is desperate. There’s an unwritten rule in business to “always go up but never go down.” It’s better to get rid of individual employees than it is to cut everyone’s salary. So, only do this if you’re not comfortable getting rid of anyone.
Reducing the cost of sales is never easy. You’ve got to be willing to put the time and effort into doing it. But never rush into decisions. Take your time and consider using some of the suggestions in this article. Please feel free to contact Billions in the Bank at any time with your sales questions. Our mission is to help sales teams succeed.