WHEN planning for sales for my own and my consulting clients’ businesses, I typically use the 5-Way Sales Leverage Chart.
(The figures here refer to annualised figures, i.e. for one year)
From Figure 1, it is clear that there are only three things that you can work on in your sales planning — your prospects, customers and sales. Notice that these are things that follow the equal signs in the formula. They are the result of something else in the formula, that is, a result of something. Thus they cannot be changed.
Only the variable factors are changeable. From the formula, there are only five variables — the target market, marketing conversion, selling conversion, number of transactions and average dollar sale.
So how do you change these variables to build up your business?
Let’s look at an example. See Figure 2 where the formula is reworked to build the business.
Inputting a 10 per cent increase in each of the variables, observe how the numbers look now. Notice that for just a 10 per cent increase in each of the five variables, there is a whopping 61.05 per cent increase in sales. There is a huge multiplier or leverage effect.
So, if you were to increase each of the variables by more than 10 per cent, you’ll get much more, even doubling or trebling of your sales (see Figure 3).
The beauty is that the business formula works in whatever business you’re in. You can even use the formula for just a department or a division of your business. A client whom I coach used this for his team of salesmen. He simply consolidates all the 5-way charts of the entire sales team to arrive at the total company’s sales budget.
Apart from numbers, you need to look at the systems and people issues in your business. Systems are what make your sales work. If you don’t have a good delivery system, how are you going to handle the surge in orders?
Systems are classified in four areas — people and education, delivery and distribution, finance and testing or measuring, and systems and technology. Also, look at your sales management and leadership. How are you going to be an effective sales manager and sales leader? Are you going to work just as a salesman or are you a true sales manager or entrepreneur?