If we all did the things we are capable of doing, we would literally astound ourselves.
– Thomas Edison
Recently a technology company contacted me. About a year ago they decided to employ two sales managers to free up the time of the Founder and CEO to focus on other aspects of the business and to further grow the business. The CEO contacted me because they had seen a minimal uplift in sales, just enough to cover the salaries and on-costs of their new sales managers. The CEO was frustrated that the results weren’t stronger. He didn’t think the sales managers were driven enough to get out there and win new business. The sales managers were more focused on account management of existing customers, which had resulted in incremental sales increase only. However, the gross margin was being eroded so profit was being impacted. The CEO was in a dilemma about how to move forward in a way that he could grow the business.
At some point to grow your business, as the CEO, you need to invest in hiring people dedicated to bringing in new business that will increase the revenue of the business. This is most often done by employing a sales representative/business development manager, or in the case of a not-for-profit organisation, a fundraiser. This person’s sole purpose is to increase the revenue of the business.
However, I often hear that this arrangement fails. In my experience of working with hundreds of different businesses this is due to three main reasons: wrong person for the job, unclear expectations, and insufficient rewards to drive performance. Let’s look at each of these in turn.
1. Wrong Person for the Job
Too often CEOs focus on recruiting someone for the job who is not driven sufficiently by winning new business. Whether you are selling a product or service, your BDM needs to be a highly driven and competitive person who is motivated by kicking goals. They cannot be someone who is just good at managing relationships. All too often CEOs recruit someone who is a nice person, good with people, but is not sufficiently driven to close a deal. They need to have demonstrated this ability before.
The other reason that CEOs often recruit the wrong person for the BDM position is that they select someone who knows their product extremely well, a product expert. Technology companies often fall into this trap, thinking that their product is so complicated that they need a product expert to be able to sell it. Huge mistake. A product expert and a BDM are two different beasts. The BDM will focus on understanding customer problems and pitching to that. A product expert will focus on the technical detail of the product’s engineering, which will not win you new business. A great BDM will learn enough about the technical components of the product to answer any initial questions for a prospective customer, but call on the product expert when required.
2. Unclear Expectations
Great BDMs are driven to achieve goals but they need to know what those goals are. On commencement of employment you need to sit with your BDM and clearly articulate their goals. How much? Who? Where? By When?
One excellent starting point is a list of all potential customers categorised by prioritisation. Once your new employee understands the product, your sales process, and pricing strategy they are ready to get to work. Saying that, they will likely need coaching around how you pitch your products to potential customers. This is best done through a buddy system of I-do-you-watch, you-do-I-watch, you-do. You need to have clearly documented your product/service and sales process.
You must have systems in place to monitor their performance. This can be achieved through a customer relationship manager (CRM) system. In this system the business development manager is able to record all their activity against set goals.
This is the point where the success or not of the BDM is most vulnerable. You need to hold the business development manager accountable. A sales professional who is left to their own devices is likely to lose momentum and not achieve goals. Ensure you have regular chats with your business development manager and systems in place to track performance.
3. Insufficient rewards to drive performance
A typical business development manager is highly driven by rewards. You need a robust incentive/commission/bonus program in place to drive performance. This most often means paying a mediocre base salary, providing tools of trade to do the job, a fantastic workplace culture, a winning product/service, and highly incentivising your BDM to achieve big results.
It surprises me how often CEOs are resistant to offering high levels of incentives. If these people achieve the right targets then it makes a significant difference to the prosperity of your business. Why wouldn’t you do it? However, I cannot stress enough how important it is to get the terms of your incentive scheme right.
I was called in to help a company in the building industry that had incentivised their business development manager so highly (and poorly) that he was receiving more money than the CEO and CFO combined who were also the founders of this 100-person business. The impact was that to avoid a drawn out legal battle, the company exited the business development manager from the business followed by a hefty payout. More than 20% of the workforce had to be made redundant due to the lack of income for the business as a result of the business development manager’s actions.
Another company I advised was a roof restoration company which was paying commission on the sales of each restoration order before the job was completed and the customer had made payment. This meant that too often the company was making a loss on the job because the job was costing more than quoted. If for some reason a customer didn’t pay their account in full or on time, the company was still having to pay their business development manager because of poor wording of the incentive scheme.
Important tips for your incentive scheme:
* based on profit result not revenue
* subject to the customer having paid their account
* subject to individual performance and behavioural standards being met
* subject to the company achieving its budget
* no incentive payable until financial reporting has been completed to ensure payment is based on accurate information
* longer term is better for retention of employees. Paying quarterly or annually rather than monthly is optimal
In the case of the technology company, eventually the CEO had to start doing some business development work again to help grow the business and cover the increased costs of employing sales managers. We assessed the sales managers and found that their interests and capabilities were more around account management than selling. We established KPIs for each sales manager and established reporting systems to monitor their progress and results. The CEO looked at the pricing strategy and authority levels to ensure the gross margin was not being eroded. One of the sales managers resigned because they didn’t want to focus on bringing in new business, and the other sales manager stayed and prospered through attending a sales training program and receiving coaching from the CEO. The increase in revenue reflected the improved capability and profit focus of the sales manager.
TOP 3 TIPS to motivate your BDM
The only way to grow your business is to:
1. recruit people who have the ability and desire to sell
2. set them clear profit-focused KPIs and monitor them daily
3. incentivise them to achieve amazing results.
Written by Claire Harrison, Managing Director, Harrison Human Resources, and Author of The CEO Secret Guide to managing and motivating employees.
For more information about how to manage and motivate your sales team please contact Harrison Human Resources on 1300 544 803.