In order to bring in new business should I institute quotas for my sales reps?

 

Sales mentor Pat Cavanaugh responds to the following question posted on the Sales discussion board by an inc.com member:
I run a small magazine and the bulk of the sales have been handled by one person to this point -- my daughter, who also doubles as operations manager (light duties, she spends most of her time selling). However, the company needs a boost in revenues and I'm going to have to do two things eventually:

1. Split up the prime accounts. (She's got almost all of the good ones, which makes it hard to hire and keep a good second rep.)

We pay standard 15% commission on sales, with 2.5 to 5% bonus for achieving specific levels, which are not too high. She has reached them almost with every issue. She is comfortable with her income and has told me that she has no interest in actively pursuing new business. However, I've got to find a way to tie her compensation to overall results, put in a quota, or something.

2. The quota. I am contemplating adding a requirement that she and any new rep must add a certain number of new clients each month in order to qualify for the bonuses. Even one or two new businesses each month would give us what we need - over the course of the year, a 15-20% increase.

Any ideas, comments? Thanks.

Pat Cavanaugh's response:I think you're very perceptive in identifying the need for a quota in terms of new business in order for your sales reps to qualify for bonuses. I see too many organizations that are satisfied with maintaining current accounts and not making the effort and sacrifices needed to attract new clients.

You can structure a two-tier bonus system for new sales revenue and for sales appointments or sales calls.

The key to measuring new business success is to set specific goals for each sales rep depending on skill and experience. Work backwards. If your goal is to have two new clients each month, how many appointments do you think each sales rep will need in order to get that business, based on their typical closing percentages? How many calls will he or she have to make to potential new clients in order to get an appointment? Maybe you don't have these numbers now. But you have to intuitively come up with some figures as a starting point, then keep records so you have this data in the future. Your reps need to start submitting weekly call sheets and appointment schedules so you can monitor this activity.

This will allow you to objectively measure performance in three key areas of sales: the phone call, the appointment and the sale. Each requires a very different skill set in order to be successful.

Sales prospecting is often an overlooked art, but it is essential in identifying potential new business. It becomes more important if reps are required to make a certain number of calls to new prospects per week. Identify the kinds of clients that currently advertise in your magazine, and then go out and identify all the businesses in your area that are in identical or similar industries.

I'm a firm believer that bonuses should be awarded for superior performance, not average performance. However, it sounds as if you're awarding bonuses for performance that is more "average" than superior. If someone is reaching a certain bonus level without a superior effort, what is the motivation for that rep to take his or her effort to another level?

Finally, I also believe that prime accounts should be awarded to sales reps based on their performance, not on seniority or the fact they have managed those accounts in the past.

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