FREE eBook: LinkedIn The Sandler Way by Sales Pro, Mike Montague

LinkedIn The Sandler Way: 25 Secrets that Show Salespeople how to Leverage the World’s Largest Professional Network

Get the free PDF version of the book at the link below of the new Sandler Training and LinkedIn collaboration, LinkedIn The Sandler Way. Our own Sales Professionals USA member, Mike Montague, contributed to this book, and we are very excited to share it with you. Mike has been on the local and national Board of Directors for Sales Professionals USA as the VP of Internet Marketing, and now you can learn why!

This book contains valuable information for salespeople on how to maximize LinkedIn with 25 tips to:

• Create A Client-Attracting Profile
• Get Connected With Prospects & Clients
• Search For Quality Leads & Prospects
• Make Contact With Decision-Makers

This complimentary ebook is endorsed by LinkedIn and was created in a partnership with LinkedIn and Sandler Training to teach salespeople how to create a social selling plan to attract, find, make contact with, and close more prospects. We hope you find this information helpful, but if you need personal assistance, please contact Mike Montague to schedule a LinkedIn training session with you or your team.

Get your FREE ebook, LinkedIn The Sandler Way, now!

Cold Calling words to help get an appt

The author Sean McPheat does not subscribe to the theory of a canned "telephone sales script." 

A call needs to be PLANNED but certainly NOT CANNED.

Sales Professionals

It is not so much about the exact words you use, rather as the method, approach and the understanding you possess of what you are doing.  It's all about having a framework in place.

However, with that disclaimer firmly in place, I must say that there is one thing you can actually say that, when added to a business-to-business call, and even some consumer calls, will radically and instantly increase your effectiveness on the telephone.

 

Before I give you these couple of magic words, let me explain why they work, because actually it is this understanding and this empathy for the customer that is ultimately why this will help you be more successful.

First, understand that customers want to know that they are important. 

They want to be important to you and your company and they want VIP treatment.  Every customer and potential customer has an inner desire, perhaps need, to know that you and your company deeply values them and their business.

The second thing to understand is that the best way to help the customer feel important is for YOU to be someone important.  The more of an important person you are and you are in your company, the more important the customer will feel.

Imagine calling a software vendor to possibly purchase a Microsoft software application and the sales assistant handling your call, says, "Hold on a moment."  Then a voice comes on the line and says,

"This is Bill Gates, and I thought it best that I handle YOUR call myself." 

You would have to be impressed! 

The main problem that occurs when you come across as a run of the mill, everyday, low level telemarketer, is that it makes the customer feel like they are not very important. 

That they are just another number.

I mean, if you are one of the least essential people in your company; if you are on the bottom of the organizational chart and you are handling their account, then just how much does your company value the customer?

You must project the image as a very important person in

your company and in your industry.   Now, as sales

professional, we know that the sales person indeed IS the most important person in the company, but the customer dose not usually feel that way. 

So, the question is how can you present an image as being the "BIG DOG" without misrepresenting your position or true occupation? 

If you can project the image of "Bill Gates," within the first few seconds of the cold call, your customer will feel important, and the more important the customer feels, the more it will dramatically and instantly increase the likelihood that they do business with you. 

So, with that explanation let me give you a phrase that will do this very effectively. 

         

"I thought I'd call you personally." 

That's it. 

Just add this line to your introduction. 

"I thought I'd call you personally," with a little bit of emphasis on the word personally. 

It might look like this:

"Yes, Mr. Prospect. Steven Mills with ABC Software. 

Mr. Prospect, I thought I would call you personally. 

You see, with the latest computer virus attack, many mid-sized corporations...." 

You will be shocked and amazed at what this does.

First it gives the immediate impression that you may have a slew of people or subordinates who usually make these calls for you.  And if you think about it, that is actually the case all around the word today. 

Businesses have largely taken to outsourcing their cold calling or more aptly put, they have taken to "down sourcing" their cold calling; assigning the duty to low level telemarketers or telemarketing firms, many in countries where English is a second or third language. 

It is very likely that the customer gets calls from someone OTHER than the principal. 

But not this time!  NO!

         

This customer is too important for you and your company to allow any one other than the main head honcho him or herself to make the call ----- YOU called personally!

"Yes, Lisa Johnson with ABC Widgets, and I thought I would give you a call personally Mrs. Prospect --- do you have a quick minute?" 

Call personally and watch your appointments and sales rise!

Sean

Sean McPheat

Sales Authority, Bestselling Author &

International Speaker

Managing Director - MTD Sales Training

http://www.mtdsalestraining.com

Once I read this I realized how many places that simple phrase raises both yourself and your customer.  If you are trying get an appointment or handle a customer complaint, “I thought I would personally give  you a call.”  You have interrupted a power day to handle this problem or concern.

I saw your company come up and decided to contact you personally.

Give it a try, all you can do is make two people feel like somebody

 Mel Carney

7 Proven Ways To Write Emails That Get Replies, Backed By Science

by Bernie Reeder in Work Smart

Effective email writing boils down to one thing: Mind reading. 

Really. 

Sure, we’re all different, but in many instances our brains are prone to react to psychological triggers in a similar manner. Understanding these subtleties can help you hone in on creative ways to persuade others to take a desired course of action, like reply to more of your meticulously written emails. 

Here are seven powerful psychological principles that can help you get busy people to respond to your emails, backed by template reply-rate data and examples from Yesware’s own sales team.  

1. Social Proof

Peer pressure is one of the oldest tricks in the book, and still one of the smartest. It accounts for why emails have higher open rates when sent to multiple people, and higher response rates when mentioning other stakeholders at the company. Because when it comes to making decisions –like whether or not to reply to someone’s email– we take cues from other people. 

 What it means: If your prospect sees proof that his colleagues are receptive to your ideas, he’ll be more likely to jump on the bandwagon and give you the time of day. It’s one of the reasons this prospecting template from Yesware’s Paul Hlatky has been so effective at garnering replies:

2. Provide A Reason (Because I Said So)

A study performed by Harvard social psychologist Ellen Langer found that people were more willing to comply with a request (in this instance, cut in line) when people used the word “because.” Even when the reason was seemingly nonsensical (i.e. “Can I use the copy machine first because I need to make a copy?”), nearly all (93%) people complied. 

What it means: When you ask someone to do you a favor, you’ll be more successful if you provide a reason. Because (see what I did there?) yes, in today’s world of 24-7-365 communication and mile long to-do lists, answering an email from someone you don’t know is a favor. 

3. Throw In The Frog

You’ve been going back and forth with someone for weeks now, and then suddenly, they’re MIA. No reply. Won’t return your phone calls. Nothing. What’s your next move? 

You throw in the frog. 

In an experiment by O’Quinn and Aronoff, participants were assigned to “buyer” and “seller” roles and asked to negotiate the price of a painting. Half of the sellers received instructions to use the line “my final offer is $_, …and I’ll throw in a pet frog.” This led to relaxation, smiles, and increased compliance, with buyers agreeing to pay significantly more money than when the frog joke was not used. 

What it means: When you make someone smile, they relax. Humor can help break down objections and win over an otherwise unreceptive audience.Here’s an example of how breaking the ice can earn you replies:

4. Choose Your Numbers Wisely

Let’s look at three quick tips that can increase your chances of getting your email opened and keeping their attention long enough to get a reply, all backed by science.

1.      Include digits in the subject line. Numbers written out as numerals (i.e. 33 as opposed to thirty-three) have been shown to stop wandering eyes of online readers, making it more likely that your email will get noticed in an overcrowded inbox.

2.      Use statistics and data. It makes you appear more credible.

3.      Remember: Three is the magic number. Numerous studies have proven that the brain likes to be presented with three choices, whereas four choices may trigger skepticism and anything higher than that can lead to confusion. Try breaking your email into three (short) paragraphs, offer three options for meeting times, or describe your product using three adjectives.  

5. Keep It Short & Simple

Brevity is the soul of wit. So it should come as no surprise that it’s the soul of effective emails, too. Drawing from data culled from five years of emails in an executive recruiting firm, researchers found that shorter emails result in quicker response time, leading to higher overall productivity. 

What it means: Don’t waste their time. Be considerate of your audience and use spacing, numbers, bulleted lists etc., to visually break up your message so that it’s easy to digest and take action on. MIT’s Marshall Van Alstyne argues that Twitter length  - roughly 140 characters – is ideal. Here’s what that looks like:

6. Use Their Name More Than Once

Remember that a person’s name is, to that person, the sweetest and most important sound in any language. -Dale Carnegie

Dale wasn’t kidding. “Few things light us up quite like seeing our own names in print or on the screen,” explain the folks at Copyblogger, citing recent research on brain activation. “Our names are intrinsically tied to our self-perception and make up a massive part of our identity. No surprise then, that we become more engaged and even more trusting of a message in which our name appears.”

What it means: Personalization is key. Try catching their eye by placing their name in the subject line — i.e. “Hi Jim, it’s Bernie from Yesware.” Asking for a reply that requires more than a simple yes/no? Throw in a simple “Thanks for your time, Jim” to close out your email. 

7. Be Specific 

Being vague isn’t going to help you clinch that important meeting. According to research by psychologist Robert Sutton, people are more responsive and willing to help if they’ve been given clear directions on how to contribute. Research coming out of Carnegie Mellon also found that people are more likely to respond to email requests that are easy to answer, as opposed to complex messages that require more time and mental energy to address.

What it means: Ending your emails with open ended statements — i.e. “Let me know what works best for you” or “how is your schedule this week?” — does more harm than good. Rather than take the time and energy to make the decision for both of you, they instead opt for “no decision” and you get no reply to your email.

You should end every email with a pointed call to action. Buy or not buy? Meet or not meet? Interested or hold off? Here’s an example that’s worked particularly well for our team:

o     

 

Managing Stress

Stress impacts each of our lives in so many different ways.  Often we are not even aware that we are being driven by a stressful situation.  One of the first things to do is to understand the Stress and then take steps to nullify its impact on our lives.  The article alludes to stress like a glass of water. If we hold a 10 ounce glass for  10 minutes no problem.  If we hold a 10 ounce glass of water for an hour our arm starts to get sore.  If we hold the glass for a day they will need to call the paramedics.

So it is with stress, eventually we will not be able to function if we do not get some relief.  The article suggests that you put it down occasionally and definitely not carry it  into the evening.  Put it down and if you need to pick it up tomorrowmorning.  However, when you start to understand the stress, each time you do this, you will pick up less of a burden

Mel

Managing Stress only comes after

Identifying the cause of the Stress

A young lady confidently walked around the room while explaining stress management to an audience; with a raised glass of water, and everyone knew she was going to ask the ultimate question, 'half empty or half full?'..... she fooled them all...

 "How heavy is this glass of water?" she inquired with a smile.  Answers called out ranged from 8 oz. to 20 oz.

She replied, "The absolute weight doesn't matter.

It depends on how long I hold it.

·         If I hold it for a minute, that's not a problem.

·         If I hold it for an hour, I'll have an ache in my right arm.

·          If I hold it for a day, you'll have to call an ambulance.

In each case it's the same weight, but the longer I hold it, the heavier it becomes." She continued, "And that's the way it is with stress. If we carry our burdens without setting them aside, sooner or later, as the burden becomes increasingly heavier, we won't be able to carry on."

"As with the glass of water, you have to put it down for a while and rest before holding it again.  When we're refreshed, we can carry on with the burden – because you have identified the stress, each time you put it down and pick it back up again, it will become easier with each session.  Regardless of your stress, don't carry it into the evening.  Put it down and if you have to, pick it back up tomorrow. You may also find that you do not have to pick up as much of your burden now that you have identified it and are working to better manage the stress. Whatever burdens you're carrying now, set them down for a moment. Relax and then pick them up later after you've rested. 

Life is short. Enjoy it and the now 'supposed' stress that you've set down or maybe conquered!"

Always keep your words soft and sweet

Always read stuff that makes you feel good during and after

Drive carefully... It's not only cars that can be recalled by their Maker..

If you can't be kind, at least have the decency to be vague

If you lend someone $20 and never see that person again, it was probably worth the investment.

Nobody cares if you can't dance well. Just get up and dance.

God does provide for each bird, but he does not throw it into their nest.

The second mouse gets the cheese.

When everything's coming your way, you may be on the wrong side of the pathway.

Birthdays are good for you:

·         The more you have the longer you live

·         If it was not for birthdays, one day you would be dribbling your pabulum all over your gray cardigan and not  know why

·         If it was not for birthdays, One day you would find yourself in the basement with no memory of why you are there. With Birthdays you know that you are 95 and can’t remember! 

Some mistakes are too much fun to make only once.

 We could learn a lot from crayons. Some are sharp, some are pretty and some are dull.  Some have weird names and all are different colors, but they all have to live in the same box.

 A truly happy person is one who can enjoy the scenery on a detour.

Have an awesome day

And know that someone has thought about you today.

SAVE THE EARTH….IT IS THE ONLY PLANET WITH CHOCOLATE

9 Qualities of Truly Confident People

First things first: Confidence is not bravado, or swagger, or an overt pretense of bravery. Confidence is not some bold or brash air of self-belief directed at others. Confidence is quiet: It’s a natural expression of ability, expertise, and self-regard.

I’m fortunate to know a number of truly confident people. The majority are people I’ve met through my career and who work in a variety of industries and professions. It comes as no surprise they all share a number of qualities:

1. They take a stand not because they think they are always right… but because they are not afraid to be wrong. Cocky and conceited people tend to take a position and then proclaim, bluster, and totally disregard differing opinions or points of view. They know they’re right – and they want (actually they need) you to know it too. Their behavior isn’t a sign of confidence, though; it’s the hallmark of an intellectual bully.

Truly confident people don’t mind being proven wrong. They feel that finding out what is right is a lot more important than being right. And when they’re wrong, they’re secure enough to back down graciously. Truly confident people often admit they’re wrong or don’t have all the answers; intellectual bullies never do.

2. They listen ten times more than they speak.  Bragging is a mask for insecurity. Truly confident people are quiet and unassuming. They already know what they think; they want to know what you think. So they ask open-ended questions that give other people the freedom to be thoughtful and introspective: They ask what you do, how you do it, what you like about it, what you learned from it… and what they should do if they find themselves in a similar situation.  Truly confident people realize they know a lot, but they wish they knew more… and they know the only way to learn more is to listen more.

3. They duck the spotlight so it shines on others.  Perhaps it’s true they did the bulk of the work. Perhaps they really did overcome the major obstacles. Perhaps it’s true they turned a collection of disparate individuals into an incredibly high performance team.  Truly confident people don’t care – at least they don’t show it. (Inside they’re proud, as well they should be.) Truly confident people don’t need the glory; they know what they’ve achieved.  They don’t need the validation of others, because true validation comes from within.  So they stand back and celebrate their accomplishments through others. They stand back and let others shine – a confidence boost that helps those people become truly confident, as well.

4. They freely ask for help.  Many people feel asking for help is a sign of weakness; implicit in the request is a lack of knowledge, skill, or experience.  Confident people are secure enough to admit a weakness. So they often ask others for help, not only because they are secure enough to admit they need help but also because they know that when they seek help they pay the person they ask a huge compliment.  Saying, “Can you help me?” shows tremendous respect for that individual’s expertise and judgment. Otherwise you wouldn't ask.

5. They think, “Why not me?” Many people feel they have to wait: To be promoted, to be hired, to be selected, to be chosen... like the old Hollywood cliché, to somehow be discovered.  Truly confident people know that access is almost universal. They can connect with almost anyone through social media. (Everyone you know knows someone you should know.) They know they can attract their own funding, create their own products, build their own relationships and networks, choose their own path – they can choose to follow whatever course they wish. And very quietly, without calling attention to themselves, they go out and do it.

6. They don't put down other people. Generally speaking, the people who like to gossip, who like to speak badly of others, do so because they hope by comparison to make themselves look better. The only comparison a truly confident person makes is to the person she was yesterday – and to the person she hopes to someday become.

7. They aren’t afraid to just be silly…

When you’re truly confident, you don’t mind occasionally being in a situation where you let your inhibitions go and just have fun. (And oddly enough, people tend to respect you more when you do – not less.)

8. … And they own their mistakes.  Insecurity tends to breed artificiality; confidence breeds sincerity and honesty. That’s why truly confident people admit their mistakes. They dine out on their screw-ups. They don’t mind serving as a cautionary tale. They don’t mind being a source of laughter – for others and for themselves.

When you’re truly confident, you don’t mind occasionally “looking bad.” You realize that that when you’re genuine and unpretentious, people don’t laugh at you. They laugh with you.

9. They only seek approval from the people who really matter.  You say you have 10k Twitter followers? Swell. You say that you have 20k Facebook friends? Cool. You say that you have a professional and social network of hundreds or even thousands? That’s great.  But that also pales in comparison to earning the trust and respect of the few people in your life that truly matter. When we earn their trust and respect, no matter where we go or what we try, we do it with true confidence – because we know the people who truly matter the most are truly behind us.

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Dharmesh Shah

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I thought that this article said a lot about confidence and self reliance.  The picture with the hand holding a tight rope reminds me of a lot of sales situations.  All of us are used to working without a net.  It is a little scary to think that sometimes it is an individual that is holding up one end of our tight rope.
 Keep your eye on prize Mel

3 Sales Conversation Habits That Destroy Credibility

Sales consultant and author, Nancy Bleeke, shows sales managers how to identify credibility-crushing sales conversation habits and coach their reps on how to change the conversation.

You work hard to generate leads for your sales team and establish credibility for your company, brand, and product. But do your sellers build their own personal credibility when they are in the hard-earned conversations with your buyers? Or do they unknowingly kill sales opportunities with seemingly little habits that trash their credibility?

Credibility is the quality of being believable or worthy of trust. It’s a necessity for earning the sale now more than ever.

The transparency afforded by the internet means that the reputation and actions of an individual are available to anyone who looks. Buyers can easily “Google” the seller before or after their meeting as they seek to determine whether they are credible. But what the seller does during the meeting with the buyer matters most.

There are many ways to build credibility and there are three seemingly conversational habits that will kill it.

Credibility killer habit #1: Pitching.
Unless your sellers are in front of the sharks on Shark Tank, pitching your solution “at” someone does not make a conversation and most times won’t make a sale. Bombarding buyers with data and details of why they should buy your solution without earning credibility, trust, and permission can be a killer.

What to do instead: Equip your sellers to have more than product knowledge. Train and coach them on how to explain your product or service (solution) connected to that specific person, situation, or company. Of course, to be able to do this means they need to know about that person, situation, or company first. That knowledge should be gained well before their actual conversation with them.

Buyers LOVE sellers who do their homework and don’t waste their precious time telling them things they could have easily found out on their own. Jeff Uphaus, SVP at Cbeyond echoed that sentiment at a recent fireside chat in Atlanta. As a consumer and decision maker in his company, one of his biggest pet peeves is being approached by sales people who don’t understand his pain points.

Credibility killer habit #2: Letting objections derail the conversation.
Sellers’ responses to stated concerns or objections are tell-tale signs of whether they are credible. When sellers try to talk around or avoid a concern or objection, or ‘handle’ the person or objection, the conversation changes and what might have seemed like a real sale opportunity might now be in jeopardy.
Confident and collaborative salespeople know that concerns and objections are an opportunity to keep the conversation going and the sale alive.

What to do instead: Work with the sellers to identify possible concerns and objections. Take 15 minutes during a sales meeting and have them practice their reaction and response to possible concerns or objections that can be raised. Yes they will moan and groan about ‘practicing’ but you’re the boss right?

Train and coach them to work through the concern or objection as a collaborative advisor. Here’s an easy to remember approach to working through objections and maintaining credibility in a conversation: Stop, Drop, and Roll.
• Stop Your Verbal Reaction to the Objection and take a pause
• Drop your defenses, emotions, agenda, and ego
• Roll forward with questions that seek clarity from the buyer about their objection
• Respond with RELEVANT information and suggestions

Credibility killer habit #3: Sticking to the agenda.
Yes, I said sticking to the agenda is a killer habit in sales conversations. Why? Though agendas are extremely important as a roadmap for sales conversations, if they aren’t matched with the ability to be flexible and responsive to what is happening during the conversation, they are killers.

What to do instead: Train and coach your team to prepare meeting agendas and confirm the conversation objective with the buyer at the get-go.

• Many buyers will relax and be in a more productive and collaborative mindset when they know what the meeting is about. Ensure they ask the buyer what they want to accomplish in their time together to demonstrate that the buyer’s objectives are important as well.

Help your team stop killing their credibility and sale with (easy-to-fix) poor actions and reactions. Equip them with skills to keep the sales opportunity alive by eliminating the conversational habits that blow up the sale before it gets very far.

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Come to the Thirty-Second Commercial Clinic

Laura Burmeister, Sander Training, “Creating A Killer Thirty-Second Commercial”. Come to the Thirty-Second Commercial Clinic:  The “elevator pitch” is a staple of any prospecting plan. Learn how to write and deliver an emotionally charged 30 or 60 second commercial. Your challenge is to get your prospect’s attention in 30 seconds or less, without. sounding like every other salesperson Breakfast $15 + 2nd free; meeting starts 7:20

Laura Burmeister
Associate & Certified Trainer,
Sandler Training by Effective Sales DevelopmentSandler Sales Training Kansas City
laura@effectivesales.net

Laura Burmeister is an associate at Sandler Training Kansas City, where she provides training and coaching on the behaviors, attitudes, and techniques of interpersonal communication needed to be more successful in management, sales and customer service. She is currently available for speaking engagements, keynotes, talks, and meeting facilitation.

Gross Margin, Gross Margin my sales are not creating enough Gross Margin

Each of us sales people live and die on our making our sales goals.  How many of you have ever emphasized the Gross Margin that is connected to your goal?  This article is based in reality and not on some theory from an economist.  Take some time to review and start to give Gross Margin or lack of same some thought as you trek tomorrow’s bricks.  If your management knows that GM is one of your considerations, they are more likely to give you a break when you need one to make a big or any sale.

Mel

Sales are for show, Gross margins are for dough

When I walk around conventions I generally hear conversations regarding how the business climate is going.  I hear a lot of talk about how sales are up or sales are down.  In good years, there is a bit of chest puffing and general peacock behavior. 

In the down years, there is a whole lot of blame on the economy and other external forces.  What I don’t hear is a whole lot of discussion about profit or profitability.  Sure, you might hear some comments about dwindling margins; but when was the last time you heard someone talk about success in terms of gross margin dollars?  Isn’t that what is really important?  If I can draw a correlation to a golf analogy “drive for show, putt for dough”, aren’t top line sales really just for show?  

At a very young age, working in my family distributorship, the importance of gross margin dollars was drilled into my head.  We occasionally talked about sales when it came to an extraordinary order, but the next question out of every mouth was – how did we do on it?  In other words, did we make any gross margin on it or are we nurturing our charitable side?  I think this awareness of gross margin came from an open attitude regarding financials and how income worked in the company.  When your team understands how we pay for the operation of the company, gross margin begins to take on a whole new meaning.  My brother and I spoke about this recently and he agreed.  As the president of the company, he is the only one allowed to talk about top line sales.  It only becomes relevant when speaking with banking partners, accountants or legal advisors. 

    

I am currently working with a client on changing the mindset from top line sales to gross margin dollars.  Eventually, we will drive down to net profit; but for today, we need to start with the basic concept of gross margin importance.  Part of the process had to begin with the owner.  He freely admits that he falls into the gross sales trap.  It’s a big number.  It’s fun to talk about.  It just doesn’t do him a whole lot of good.  When you want to change the mindset of the people that work with you and for you, it is important to talk the talk. 

The transformation with this client began with education.  With the help of the owner, we gathered the team and discussed how the income statement worked.  Although I had a basic income statement generated, based on actual year end numbers, we needed to make sure they understood the concept.  

When I discuss income statements in any teaching setting, I typically use the dollar bill trick to get the point across.  For those of you who haven’t seen this done, here is the quick and dirty:  Hold up a dollar and tell the group that we just sold something for a dollar and we paid the supplier 75 cents for it.  Tear off about ¾ of the bill and drop it on the floor.  By the way, if you use a larger denomination, you will really get their attention.  Holding the remaining ¼ of the bill, you explain that this represents gross margin.  At this point, I ask the group if the owner of the company gets to put the gross margin in their back pocket at the end of the month.  I usually see a shaking of the heads, but I would bet that there are a few that might believe this to be true.  Sad but true, many people that work with you and for you believe that the owner pockets the gross margin dollars every month.  Obviously, this isn’t the case.  I then start asking about the expenses that come out of the gross margin before it becomes net profit.  While they list off some items (wages, benefits, rent, utilities, etc), I am consistently ripping off bits of the bill and dropping it on the floor.  I also make comments on each of the expense items and help them come up with a few they might have overlooked.  Ultimately, you wind up with a very small chunk representing net profit.  This leads to a discussion of the importance of gross and net profit.  This demonstration is a great way to start changing the mindset.

Once the team understood how the income flowed, we talked about the income statement of the location.  We talked about how a slight improvement in gross margin would really change the net profit picture in the company.  The next step in changing the mindset was to create gross profit goals in the company.  We started with the least profitable location and developed a daily gross margin goal based on the current expenses for the location.  We bumped it up a bit in order to foster some downstream profitability.  By creating a daily gross margin goal, we provide a constant reminder of what we want to accomplish.  In this case, we came up with a goal and then created a simple feedback method designed to show the location how they were doing.  Each day, the branch manager reviews the sales report from the previous day and writes the gross margin dollar total for the day on a wall calendar in his office.  For those of you beginning to twitch in your seats, the number has no dollar designation or decimal points.  In order to tie the number in with our goal, the number is either written in black pen (for gross margin dollars exceeding the goal) or red pen (for gross margin dollars below goal).  The calendar is visible to the employees because you have to walk through the manager’s office to get to the refrigerator. It doesn’t get much simpler than this. 

One of the ways to make sure that we are driving a gross margin mentality is to insure that the sales compensation methodology supports our efforts.  What are you basing sales compensation on?  If the commission is a percentage of gross sales dollars, you are going to have a difficult time changing the mentality. 

 Although many of you have created compensation plans based on gross margin, there are still a few hold outs.  I often see this in companies where cost is not shared with the sales team.  This type of scheme can also be found in companies where deviation from established sales pricing is rare or non-existent.  I hate to say it, but both of these scenarios lead me to believe that there are some real control issues in the executive team.  When you don’t empower your people to do their job, your potential is severely retarded.  

     

When we put an emphasis on gross margin with our sales team, there may be a shift in product focus.  Hopefully, we will see a greater interest in higher profit products.  Even when a low profit product is sold, there will be more incentive to round out the sale with complimentary high margin products.  This is a swift way to emphasize margin importance to modify sales compensation.  

I recently had the opportunity to meet the CEO of Fastenal, Will Oberton.  For those of you unfamiliar with the company, they are a multi-billion dollar industrial fastener and supply distributor boasting over 20 percent net profit before taxes.  In the words of my father, that’s some pretty tall cotton.  He was speaking at an event that I was involved with and I sat in on his presentation.  He spoke about a bold program that he recently instituted with their sales compensation. 

Essentially, if a sales order posted less than 20 percent gross margin, the order was not eligible for commission.  As you can probably imagine, this caused a huge ruckus in the sales department.  Some of his regional managers were very vocal in their opposition.  Oberton held his ground.  He stated, “If the company can’t make money on the sale, why am I going to pay the sales person?”  The results worked in his favor.  By the end of the year, their overall margins had improved and some one of the most vocal opponents said that it was the best thing they had done in years.  

A gross margin mentality can also have an effect on your accounts receivable performance.  I was recently discussing the benefits of moving to a gross margin focus with a different client of mine.  He is in the plywood and shop supply business.  There had been some recent focus on driving the sheet goods product category in order to boost sales.  This is a high sales dollar, low margin category.  In the past, the perceived performance of the company was tied to top line sales.  He pointed out that this mentality was really making collections difficult.  He explained that a $2000 sheet goods sale might generate $140 in gross margin while a $300 sand paper order might generate that same $140 in gross margin.  When it came time to collect on that order, which bill is your customer more likely to pay in a timely fashion?  It sure made a lot of sense to me. 

In a recent article, Tips to Improve Gross Margins, I shared several ways to boost gross margin percentages without bringing the hammer down on your suppliers.  I was recently reminded of another way to preserve diminishing margins.  One of the regional managers in my family business used to talk about pricing strategies inside sales people could use when confronted with a price objection.  The natural reaction when discounting is to think in increments of 5 – such as 5% off or 10% off.  If you are forced into a discount, try to think in terms of a 3% discount or 7% discount.  Those additional 2 or 3 points can really add up at the end of the month.  

Once the gross margin mentality has begun to seep into the daily lexicon of your employees, you can cement the transformation by using it to measure performance.  I am a huge advocate of metrics using gross margin as a basis.  The first one that comes to mind is the gross margin dollars per head measurement.  Once a manager has established a goal, staffing decisions become easier.  The same regional manager mentioned earlier had a benchmark of $10,500 gross margin dollars per head on a monthly basis.  If the gross margin dollars began to trend up, and the per head figure was rising significantly, he knew that it was time to add a body.  If the gross margin dollars were diminishing, he knew when it was time to make cuts.

For those of you familiar with my work, you know that I am a huge advocate of GMROII or gross margin return on inventory investment.  This metric tells us how many gross margin dollars we expect to earn for every dollar invested in inventory.  By understanding where we achieve the highest returns, we can alter our sales direction.  We can also use this information to identify lines where changes in pricing and replenishment should occur.  Since gross margin dollars drive the operation, it is in our best interest to drive the highest return.  

Adopting a gross margin state of mind is not an overnight task.  It will take months of education and reform.  Old habits die hard and you will find yourself falling back on the top line sales verbiage.  Catch yourself and keep driving to change your own mentality.  Open dialogue with your team, setting short term profit goals and establishing margin based performance standards will help you make the shift.  Just remember – sales are for show, gross margins are for dough.  Good luck and I am always here to help.