The business brokers tell us that, due to the ever increasing homogeneity of companies in the same industry, and their associated difficulty in distinguishing their product or service from each other, the ratio of value to earnings is gradually diminishing. An expectation of achieving a sale price in the range 5-10 : 1 for an SME, B2B business a decade ago has reduced to 2 or even 1 : 1 in many cases latterly.
But I am reaching out to Sales Managers across B2B Australia……so what is the connection?
How many of you manage your Sales team like an asset with a RoI? Think about it. Can you definitively answer these questions and quantify and defend you answers?
- How does your current Sales team productivity compare to your peers and competitors?
- How much could you increase your Sales team productivity?
- How much return will that generate?
When one starts to run the ruler over the Sales team to manage it like an asset to yield a return, we often see that across the Australian medium sized B2B landscape a ratio of between 5 – 15 : 1 seems to be common.
But what exactly does that mean?
It SHOULD mean that for every dollar to recruit, train, equip, remunerate, incent, manage and fully mobilise the team, the margin on the revenue they are charged with the responsibility to deliver should typically fall within the range 5 – 15 : 1.
OK…….so what? Yes, you are right…..that is not a truly comparable apples for apples translation of the value to earnings multiple we normally understand when talking about RoI on an asset.
What if you took that unique ratio in your sales organisation as the benchmark for your current reality………..a benchmark for improvement of the productivity and return from your asset (Sales team)? After all, leading edge sales organisations run the Sales team optimisation “ruler” over the Sales team annually, usually as an integral component of the whole-of-company budgeting cycle.
The “to be” ratio should then be calculated on the differential increase in margin, taken purely and solely as a result of the increase in productivity resulting from the annual optimisation of the Sales team. Taken against the increase in costs at two levels………….the costs to fully mobilise, as described above PLUS the costs to actually run the optimisation exercise.
But what about the stuff in between the calculation of the “as is” RoI, in order to get to the “to be”? Click here to view the sales team optimisation equation and the relevant economic and productivity drivers , and tune in to next months bulletin for an elaboration.
Visiting The Next Level’s website can help put this discussion in perspective. Or simply send us a message via the Contact Us section and we will gladly answer any questions you may have or organise to come out and have a discussion as to what The Next Level Sales System can do for you and your business.