Jump to content

Question for Sales People


Recommended Posts

Maybe not for those in Retail (?) but please do chime in if you can help.

 

I work in a company that sells stuff and I work as a Management Accountant so I look at revenue. cost, margin and basically feedback on the profitability of the UK business.

 

 

We have several sales teams, some who are solely for leads we follow up or the smaller businesses or people who require our services off their own back. We also have bigger customers who we deal with al of the time and their accounts are managed by various people and teams. We do projects and also we are the 'go to' for several very large organisations.

 

Something we run into often, not by any means with all of the sales people but often with maybe a handful or so of the sales folk is that they don't understand the words 'revenue' and 'cost'.

 

I have tried explaining multiple times in different ways but as to date today I still get the opposite of the information I need and ask for (as do another department).

 

The ways I have explained this in the past are: (and by the way in the main the sales people mostly know any that any queried pricings do not include tax so in general we are only talking net figures here)

Revenue = sell price

Revenue = the price we are charging the customer

Cost = buy price

Cost = our buy price

Cost = the cost to us

Cost = the cost to 'the name of our company'

 

However, I know that wordings can be misconstrued in business often.

Do any sales people understand what I am asking and can you advise me on perhaps different terminology that I can use to explain the difference please?

 

If it helps, this is my breakdown:

Revenue figure minus cost figure equals margin (or profit) amount in £'s

Then margin (or profit) divided by revenue equals margin in percentage.

Link to post
Share on other sites

Maybe express Revenue as Selling Price?

 

And Cost as Production Cost or Acquisition Cost?

 

Ugh - I don't even work there and I am frustrated that there are people who don't understand basic business terms!

Link to post
Share on other sites

Work with their managers to see if you can do a training session. They should understand it as it is a major part of the business and very important!

  • Like 1
Link to post
Share on other sites
  • Author
Maybe express Revenue as Selling Price?

 

And Cost as Production Cost or Acquisition Cost?

 

Ugh - I don't even work there and I am frustrated that there are people who don't understand basic business terms!

 

Thanks! :)

 

 

Production cost and acquisition cost wouldn't kick it unfortunately.

We sell training courses so neither fit really - or at least coming from Accs I don't think they would fit.

Link to post
Share on other sites
  • Author
Work with their managers to see if you can do a training session. They should understand it as it is a major part of the business and very important!

 

One is one of the managers of a team looking after managed services.

She is very high up.

She also is one to mail you nine times rather than wait for one response to her first query.

It's actually one of her team members who myself and three other staff (including my boss the Finance Director) have spent around 9 hours getting to some point of knowing what is happening after our MD spotted something yesterday. ;(

This manager never looks at the margin etc she only cares what people tell her (from forecast figures - which do not always work out - especially if someone thinks they are making 40% when it's actually only 5%!) and only checks anything when she doesn't get her commission - but she directs her query to me when she needs to direct it to her team of 10 people - I always tell her she needs to get the team to tell her what has gone on.

She is a bit of a bully and my FD and MD know this so they both have asked me to not respond and give only one response to her. A plain flat 'speak to your team' who, of course I help with understanding their commissions.

 

 

I am damn stuck though how to explain revenue and cost!!!

It's not that hard is it? Or is it? :)

Link to post
Share on other sites
GunslingerRoland

I'd be concerned about what kind of sales people your company is hiring that don't understand these basic accounting concepts. Don't most sales people have a management degree these days?

  • Like 2
Link to post
Share on other sites
  • Author
I'd be concerned about what kind of sales people your company is hiring that don't understand these basic accounting concepts. Don't most sales people have a management degree these days?

 

No, no degrees as far as I know.

We do well (we think) for sales people but it looks like our bottom line is not as cute as our bum should be.. :laugh:

The apprentices understand revenue and cost - maybe I need to use the manager who employs them to explain in her terms. I hadn't thought of that.

Link to post
Share on other sites

Come up with a "Cost, revenue, margain percentage quiz" and encourage each team manager to go over this "quiz" with their team. It might help managers understand the importance of margins also. Only 2 questions on my quiz.

 

Question/example #1: Jane has a side business she works in her free time. Jane goes to garage sales and buys things and then resells them on ebay. Jane bought 10 things for $168.00. She sold all 10 things that week and everything sold for $327 including shipping. Jane packed everything up, went to the post office and spent 42.00.......What was Janes cost, revenue, and margain%?.......Correct answers:

Cost: $210

Revenue:$327

Profit: $117

%: 35%

 

Question/example #2: John has a side business he works in his free time. John paints houses on nights and weekends. John gives a bid to paint a 2 story house. His bid of $5000 is accepted. What would Johns cost, revenue, and margin % be......Correct answers:

Cost: ???

Revenue: $5000

Profit: ????

%: ????

 

There is no way John can know what his cost and profit would be untill he is done with the job. He may have more hours than expected, and it may take alot more paint than he thought. All John saw was that $5000....

 

My quiz may confuse these handful of team members, and managers more, I know:)

 

Best advice I would give any salesperson is to sell yourself, your company, and your product....Never sell price!!!

  • Like 1
Link to post
Share on other sites

Wow. Painful. :lmao:

 

Maybe you could change the commission structure to pay out not on revenue, but on profit margin.

 

Bet they would pick up the concepts overnight if you did that. ;)

 

Otherwise, dummy it down more, I suppose. Use longer terms such as:

 

"What the customer pays" (revenue)

"How much we pay" (cost)

 

And don't worry about enplaning margin if not necessary.

 

Realistically. in a successful organization, your sales people should be as unencumbered as possible. There should be a sales assistant to handle their expense reports, travel, etc... and that assistant could also do the numbers for you.

 

See... any time a sales person is doing anything not directly related to closing, it's bad fir the bottom line. Busy work is very costly to have sales people doing it. An assistant could do that at a fraction of the cost, supporting the whole team and be trained to do things the way you want to see them.

 

With an assistant, your sales team will be more productive, adding to your revenue. You can worry about the margins behind the scenes while they close 5 extra deals / mo.

  • Like 2
Link to post
Share on other sites

If you're selling to a wholesale reseller, you call the price you charge them "wholesale cost." The price it costs you to manufacture and prepare your product for sale is "the company's cost." The difference between those two prices is "the company's markup or margin." What your company pays just for materials is the company's wholesale cost they pay to the manufacturer but does not include the handling it takes for you to use those materials in your manufacturing. If you are selling anything retail, the ticket price is your retail price. The price a wholesaler (let's say Amazon) puts on the product they buy from you to resell is their retail price.

  • Like 1
Link to post
Share on other sites
  • Author

Thanks for the replies. :)

There's some good ideas in there that I may well use today as I have a whole bunch of other stuff I need costs for.

 

I will post back later when I have more time.

Link to post
Share on other sites

Sounds like you are stuck between a rock and a hard spot if the level of ignorance goes up into management with zero lack of desire to change it. That to me speaks more about the message, direction and managing of the top down than anything else.

 

We have store level managers who understand these terms, this is not rocket science.

  • Like 2
Link to post
Share on other sites
Jersey born raised

There are two types of people in sales, the professional and the whore. The whore only cares about closing the sale. Hey - anybody can sell a brand new Rolls Royce for a thousand dollars. The whores are very good at mixing terms and concepts to create chaos.

 

As a sales person I worked for my clients 29 days a month. I knew my clients job better then they did, and knew how to crack skulls in my plant to get it done. So why did plant personal and management put up with a guy who could be a real SOB?

 

Pay day was day 30 of the month. My clients knew the meter was running the first 29 days of month. Yes a couple of times the final invoice involved hand to hand combat with the client. In those cases my plant watched 29 days compressed into one.

Link to post
Share on other sites
  • Author

I'll respond separately as my brain cannot handle to complication of multi-quotes tonight! :laugh!

 

Come up with a "Cost, revenue, margain percentage quiz" and encourage each team manager to go over this "quiz" with their team. It might help managers understand the importance of margins also. Only 2 questions on my quiz.

 

Question/example #1: Jane has a side business she works in her free time. Jane goes to garage sales and buys things and then resells them on ebay. Jane bought 10 things for $168.00. She sold all 10 things that week and everything sold for $327 including shipping. Jane packed everything up, went to the post office and spent 42.00.......What was Janes cost, revenue, and margain%?.......Correct answers:

Cost: $210

Revenue:$327

Profit: $117

%: 35%

 

Question/example #2: John has a side business he works in his free time. John paints houses on nights and weekends. John gives a bid to paint a 2 story house. His bid of $5000 is accepted. What would Johns cost, revenue, and margin % be......Correct answers:

Cost: ???

Revenue: $5000

Profit: ????

%: ????

 

There is no way John can know what his cost and profit would be untill he is done with the job. He may have more hours than expected, and it may take alot more paint than he thought. All John saw was that $5000....

 

My quiz may confuse these handful of team members, and managers more, I know:)

 

Best advice I would give any salesperson is to sell yourself, your company, and your product....Never sell price!!!

 

I actually really like the idea of a quiz type question for when someone doesn't understand this. I can easily do this face to face or in a mail and actually I often use different scenarios to explain different things. Most recently I described something in terms of the number of eggs in a egg box and cutting the egg box down to hold a different number of eggs (yes, seriously - but the recipient totally understood so thinking outside of the (egg) box does actually work! :)

I could definitely use an example like the first one but also throw in something random like Jane also hair a haircut booked that day which cost $80 as something that is not at all related so irrelevant. The second example - whoa! Way over their heads! :D:

Thanks for this idea and I will store it for either current or future reference. :)

Link to post
Share on other sites
  • Author
Wow. Painful. :lmao:

It's laughable but seriously more than painful! Myself and two others have spent literally hours together and separately trying to fathom things out with the info we have been given.

 

 

Maybe you could change the commission structure to pay out not on revenue, but on profit margin.

Bet they would pick up the concepts overnight if you did that. ;)

Well, we have already done that as it happens! We restrict based on lowest acceptable being 25%. Some understand it, some don't. Some I think don't query it but they are on the team with the bully lady manager who - well she speaks all these 'business words and phrases' and you come out of a meeting none the wiser. She is the one I mentioned earlier who fires off several mails without waiting for a reply. To be honest there have been many times where she has mailed and I either me or the HR manager have literally replied ' I don't understand what you have written, please explain again?'.

I think she is part of the problem as it is and has been on her team where we have most problems.

There is another sales employee, different team who I explained restricted

margins with using eggs and egg boxes (as mentioned in my last post). It's taken her a year ad a half but she does understand it now - I think.

 

 

Otherwise, dummy it down more, I suppose. Use longer terms such as:

 

"What the customer pays" (revenue)

"How much we pay" (cost)

These I will definitely use - simple terms but I hadn't thought of these before - thank you!

 

-/quote]

Realistically. in a successful organization, your sales people should be as unencumbered as possible. There should be a sales assistant to handle their expense reports, travel, etc... and that assistant could also do the numbers for you.

 

See... any time a sales person is doing anything not directly related to closing, it's bad fir the bottom line. Busy work is very costly to have sales people doing it. An assistant could do that at a fraction of the cost, supporting the whole team and be trained to do things the way you want to see them.

 

With an assistant, your sales team will be more productive, adding to your revenue. You can worry about the margins behind the scenes while they close 5 extra deals / mo.

 

We do kind of have a salesperson and admin set up but we end up with a high end sales guy and a sidekick who does some sales but a lot of the admin - there is also back up on hand at all times. Plus always the option to have another department manage it as a project.

 

So, today was much simpler than I thought.

Usually I mail both guys on the team but I never get any response from the higher sales guy so I had left him out of queries the past 2 days. Today I mailed him too.

I got a quick response from the junior guy and then the senior mailed again and corrected his mistakes. This happened twice more.

I am getting the idea that the senior guy is taking some control and responsibility and hopefully leading with essentials just like this.

 

It was all sorted within less than an hour. :)

Link to post
Share on other sites
Maybe not for those in Retail (?) but please do chime in if you can help.

 

I work in a company that sells stuff and I work as a Management Accountant so I look at revenue. cost, margin and basically feedback on the profitability of the UK business.

 

 

We have several sales teams, some who are solely for leads we follow up or the smaller businesses or people who require our services off their own back. We also have bigger customers who we deal with al of the time and their accounts are managed by various people and teams. We do projects and also we are the 'go to' for several very large organisations.

 

Something we run into often, not by any means with all of the sales people but often with maybe a handful or so of the sales folk is that they don't understand the words 'revenue' and 'cost'.

 

I have tried explaining multiple times in different ways but as to date today I still get the opposite of the information I need and ask for (as do another department).

 

The ways I have explained this in the past are: (and by the way in the main the sales people mostly know any that any queried pricings do not include tax so in general we are only talking net figures here)

Revenue = sell price

Revenue = the price we are charging the customer

Cost = buy price

Cost = our buy price

Cost = the cost to us

Cost = the cost to 'the name of our company'

 

However, I know that wordings can be misconstrued in business often.

Do any sales people understand what I am asking and can you advise me on perhaps different terminology that I can use to explain the difference please?

 

If it helps, this is my breakdown:

Revenue figure minus cost figure equals margin (or profit) amount in £'s

Then margin (or profit) divided by revenue equals margin in percentage.

 

 

I'm in sales and I wouldn't understand if you explained revenue that way. I understand revenue as being the income a business has from its normal business activities, usually from its sale of goods or services to customers.

Link to post
Share on other sites
  • Author
I'm in sales and I wouldn't understand if you explained revenue that way. I understand revenue as being the income a business has from its normal business activities, usually from its sale of goods or services to customers.

 

 

Revenue is income (we always hope it is anyway and get the PO to ensure the promise of payment in good faith) but if you are in sales and not taking cost and margin into account then Houston, we have a problem.

Link to post
Share on other sites
Revenue is income (we always hope it is anyway and get the PO to ensure the promise of payment in good faith) but if you are in sales and not taking cost and margin into account then Houston, we have a problem.

 

Not sure I understand the context of what you're getting at then. I literally gave you the definition of revenue if you look it up in a business setting.

 

You said you're explaining the definition to clients as "revenue = sell price" . I'm trying to think of how you'd convey that to a customer. I.E - The revenue we're listing these items at is going to be $100".

That doesn't make sense to me.

 

"Our total revenue last year was $150,000" is how I understand it to be. Never heard of revenue being the sell price or customers cost before. Perhaps it's the UK vs US difference? Or just not following the scenerio you're encountering.

Link to post
Share on other sites
Revenue is income (we always hope it is anyway and get the PO to ensure the promise of payment in good faith) but if you are in sales and not taking cost and margin into account then Houston, we have a problem.

 

What about removing that responsibility from sales people?

 

Set required minimum margins as a business, then give the sales team a pricing "floor" which they are not allowed to be negotiated below.

 

Cost+Minimum Margin= minumim retail price to clients.

 

But sales people don't need to know any of this.

 

Just tell them they can't go below $X(or GBP).

 

Remove their ability to negotiate below a price floor without an override from you or the CEO or whoever wants to control that.

 

In many instances, this should help hold pricing higher because the sales person can just say, "sorry, management doesn't allow me to go lower than the price I've quoted you."

 

A very powerful negotiating tool for them, actually.

Edited by loveweary11
Link to post
Share on other sites
What about removing that responsibility from sales people?

 

Set required minimum margins as a business, then give the sales team a pricing "floor" which they are not allowed to be negotiated below.

 

Cost+Minimum Margin= minumim retail price to clients.

 

But sales people don't need to know any of this.

 

Just tell them they can't go below $X(or GBP).

 

Remove their ability to negotiate below a price floor without an override from you or the CEO or whoever wants to control that.

 

In many instances, this should help hold pricing higher because the sales person can just say, "sorry, management doesn't allow me to go lower than the price I've quoted you."

 

A very powerful negotiating tool for them, actually.

 

 

Usually that's given to sales people for those specific negotiating reasons. Let's say list price is $500, the sales rep had the ability to negotiate and quote anything down to $400. Anything below that needs a managers approval. Let's say they set an agreement where if the customer purchases more than $100k worth of product the manager can then approve $300-350 pricing for each.

Link to post
Share on other sites
Usually that's given to sales people for those specific negotiating reasons. Let's say list price is $500, the sales rep had the ability to negotiate and quote anything down to $400. Anything below that needs a managers approval. Let's say they set an agreement where if the customer purchases more than $100k worth of product the manager can then approve $300-350 pricing for each.

 

Exactly. Seems like Gemma's sales team doesn't have this. Like margins and overall P&L responsibility is on them.

 

Really, it shouldn't be. They should be focused on closing deals only.

 

She did mention it's a small business, so maybe at this time, the sales team is just wearing too many hats. That's also what I was thinking saying they might need a sales admin to help as well.

 

A properly run business removes all encumbrances from a sales force and keeps them focused on closing deals and pulling in commissions. I've seen a lot of businesses make mistakes, loading their sales team down with administrative tasks. It always results in lower revenue.

Edited by loveweary11
Link to post
Share on other sites
Exactly. Seems like Gemma's sales team doesn't have this. Like margins and overall P&L responsibility is on them.

 

Really, it shouldn't be. They should be focused on closing deals only.

 

She did mention it's a small business, so maybe at this time, the sales team is just wearing too many hats.

 

Yea, it seems different than anything I've dealt with and I've been in pharma and med device sales for 10 years.

 

Give them a worksheet where you outline what they can quote the customer. If a customer is new and does 0 business then reps quote them list price. Incentivize the customer to make larger purchases in order to receive discounted pricing. "If you make a $10k purchase we can offer a 10% discount". And so on and so forth with higher discounts for larger deals.

  • Like 1
Link to post
Share on other sites
Yea, it seems different than anything I've dealt with and I've been in pharma and med device sales for 10 years.

 

Give them a worksheet where you outline what they can quote the customer. If a customer is new and does 0 business then reps quote them list price. Incentivize the customer to make larger purchases in order to receive discounted pricing. "If you make a $10k purchase we can offer a 10% discount". And so on and so forth with higher discounts for larger deals.

 

And I'm coming at it from owner's perspective. If you, as a sales person, agree with me, as an owner, we HAVE to be right here! :lmao:

  • Like 1
Link to post
Share on other sites
Exactly. Seems like Gemma's sales team doesn't have this. Like margins and overall P&L responsibility is on them.

 

Really, it shouldn't be. They should be focused on closing deals only.

 

She did mention it's a small business, so maybe at this time, the sales team is just wearing too many hats. That's also what I was thinking saying they might need a sales admin to help as well.

 

A properly run business removes all encumbrances from a sales force and keeps them focused on closing deals and pulling in commissions. I've seen a lot of businesses make mistakes, loading their sales team down with administrative tasks. It always results in lower revenue.

 

Ugh... You hit the nail on the head with this. Administrative requirements are the bane of my existence. Spending multiple hours of my work week filling out a weekly calendar to submit outlining where I'm going, what my stops and plans will be is just wasting time I could be using to gain more business. Why hire someone if you need to monitor and hold their hand through each and every one of their sales calls? Seems to be the opposite of what you'd want.

 

If I hire someone, it's because trust and see that they're the kind of salesman who I won't need to coddle and check in on constantly. Here's your number... Go hit it. If you don't, then we can look at adjusting and maybe other ways to get better results. But if I've been a constant growth territory and hit my quota over and over each and every month.... Then please... Leave me alone, let me do what I do best, and just be there for support or to come in and facilitate a deal if the clients needs to see a "corporate face" get involved ya know?

 

Sry for the rant. Just went though something similar this week where I had to reschedule a customer meeting because ther was a "sales forecasting seminar" that the entire Salesforce needed to log in and listen to via webinar. Complete waste of time.

Link to post
Share on other sites
  • Author
Not sure I understand the context of what you're getting at then. I literally gave you the definition of revenue if you look it up in a business setting.

 

You said you're explaining the definition to clients as "revenue = sell price" . I'm trying to think of how you'd convey that to a customer. I.E - The revenue we're listing these items at is going to be $100".

That doesn't make sense to me.

 

"Our total revenue last year was $150,000" is how I understand it to be. Never heard of revenue being the sell price or customers cost before. Perhaps it's the UK vs US difference? Or just not following the scenerio you're encountering.

 

I'm explaining to a salesperson, not to a client.

Link to post
Share on other sites
×
×
  • Create New...