Add It Up: What Your Sales Really Cost
Insanity, it is said, is doing the same thing repeatedly and expecting different results. So if you want to change some of your results for next year, the question is: “What are you going to change?”
To know what you’re going to change, you have to know what’s been working and what hasn’t been. I like to consider these things based upon the simple idea of yield: How much did I get returned to me based upon what I put in?
In sales, the inputs are time and money; the outputs are measured in the size and number of new accounts, as well as the revenue growth from current accounts.
What’s the scorecard look like? Here’s your Scorecard. Click to download this and follow along. It is an interactive sheet that you can use to calculate your cost of selling and cost of leads in 2011.
The tool is fairly self-explanatory, but here are a couple of points:
- How much time did you spend? Estimate the number of hours spent in total by you and support staff to perform the function. For example, “Social Media” includes how much time you spent posting, blogging, networking, participating and so on across the various platforms–LinkedIn, Facebook, Twitter or others. If you were supported in these activities by marketing or IT, make an estimate as to the number of hours they invested.
- Estimate an hour’s cost. Although I like precision in these types of calculations, not everyone reading this article has the time, accounting systems or interest in getting to the last dollar. That’s fine. Make an estimate of what a person’s time is worth to the company as it relates to what that person would be producing investing that time in something else. This is often referred to as “opportunity cost” rather than just a straight salary calculation. In many businesses, a round number is sufficient–anywhere from $50 to $250 an hour.
- Don’t get bogged down in details. Set a limit of an hour or two to work on this; approximation is fine. To get your numbers for the entire year, take an average month and multiply by 12, or take an average week and multiple by 50. This is meant to give you an overall picture, not a to-the-penny amount.
- Calculate hard costs. These include subscription fees, outside contractors, travel and entertainment expense, attendance and participation fees and so on. When you look at a category like trade shows, this number can get pretty hefty.
The point of the exercise is to be brutally honest with yourself so that you can improve in your planning in 2012.
Too often we participate in trade shows because we always have. We tell ourselves that updating our Facebook status is contributing to lead generation.
But without calculating your return, you will produce the same results next year as you did this year. That’s fine if you were thrilled to the point of giddy with 2011. If, however, you are someone seeking continuous improvement, then this is worth the effort.