Our stock phrase is Revenue is Vanity, Profit is Sanity & Cash is King.
We know there can be good revenue and not so good, or bad revenue.
GOOD revenue has the characteristics:
- Sold and delivered CONSISTENTLY
- Has the required profit margins
- Converted to CASH in less than 60 days
We can extend this understanding to distinguishes a salesperson from a GREAT salesperson. A great salesperson delivers GOOD REVENUE as the majority of his or her revenue.
In each flooring business we have touched, there is a core of HIGH PERFORMING Salespeople.
- What is good revenue
- How to say no (to bad revenue)
The following matrix helps us understand our revenue types which we can use to guide our salesforce:
On the left we have the obvious distinction between good and bad revenue. The top of the matrix is the big differentiator. Distinguishing between Core business and New business opportunities.
Segment 1 My Portfolio, is the engine that continues to deliver.
Great companies and great salespeople have a well-developed portfolio.
As a company we want to grow this segment. Great portfolio revenue can be seeded in segment 3.
Segment 3 – Portfolio builder
Powerful portfolios are created by using bad revenue wisely.
We need to build new customers. This often happens through some form of “seeding”. We identify some possible targets and we may invest via lower prices to get an entry. Our bidding activity here is very different to segment 1. In segment 3 we have very different win rates, and we spend a lot more resources to obtain our revenue.
The experienced salesperson knows how to manage the bad revenue to ultimately transform it into good revenue. They know when to continue and when to say NO.
Segment 2 – Ideal Customers -The Purple Patch
This segment ONLY EXISTS when you have a strong segment 1.
This portfolio will give you “unicorns”. Super profit jobs that happen every now and then. The secret is that the better you manage your core business the more purple patch opportunities you will get.
Your strong segment 1 portfolio has built trust and loyalty. You become the first port of call when your customer is in a bind.
Segment 4 – Quote and Hope – the danger zone
Here is the blind spot. The not-so-good salespeople are wanting to hit home runs. The bigger the job the better the home run.
The problem is opportunistic home runs do not come for free!!
They have low conversion rates, require lots of estimating support etc, etc
The dangers are
- In most cases, the salespeople don’t even realize they quote and hope or worse still believe they are quote and hope specialists
- The more we try and grow in this segment the more erratic our profit and revenue.
Ideas to takeaway:
- Stress test each salesperson. Do they have a quality portfolio (segment 1)?
- How do we create focus so we don’t allow our people to meander into quote and hope segment 4?
- How do we convert some selected Portfolio builder segment 3 revenue into good revenue?
Managing each job is an important tactic. Managing your portfolio for profit and cash is a strategy.