The number of customers you can effectively manage has a lot to do with the level of service your customers require. If you are selling wrist watches by running clever ads in a magazine, you can probably service substantially more customers than if you’re selling building materials to homebuilders. Agree?
Selling mail order watches requires a quality watch that is attractive, reliable at keeping time, and shipped promptly. Now compare what is required to sell building materials to homebuilders. You might make a list just to remind yourself how many service factors there are in our business vs. a single product mail order business.
It is difficult to predict how long our industry is going to be selling into a “blowout” housing economy, but as long as salespeople are required to be as hands-on as they are today, it is critical to have the discipline to limit their customer base to builders who have effective systems and procedures in place.
Building material salespeople cannot service homebuilders whose skill sets are limited to construction; in other words, they know how to build a house, but are dependent upon their salesperson to keep their systems and procedures organized.
If salespeople expect to optimize their sales and gross profit, they have no choice but to discriminate against builders who take advantage of their knowledge of construction, but for whatever reason don’t give them the volume they need to justify the amount of time these types of builders require.
A lot of the salespeople I have worked with over the years resist the level of discrimination required to balance the amount of time these builders demand with the gross profit the salesperson can expect from the sales they generate. It’s an old saying, but it’s also a true old saying: “Your raise becomes effective when you do.”
There are several ways to deal with this challenge without offending the customer. One of them I mentioned in a recent LBM Journal article is to analyze the grand total dollar volume each of your customers purchases from all sources, the percentage of that volume you are selling each customer, and the percentage your sales represent of each customers’ grand total purchases.
The next piece of research, that is a bit more difficult to nail down, is to estimate the amount of time you are spending servicing each current customer and the percentage of your sales each current customer represents. Where are the distortions? Which customers are receiving a much larger percentage of your time than you are receiving of their grand total purchases?
I realize that, at first glance, this approach may appear to be arrogant on the salesperson’s part; but there are just so many hours in a day and you are a businessperson who must make sure you are earning enough gross profit on each current customer to justify the time you are committing to each customer.
It’s also a good idea to ask your sales manager to look over these numbers with you and help you analyze them. He or she may see something you have overlooked. Keep in mind that you are not eliminating your relationship with some of your customers because you don’t get along with them, you are doing so to give you and your company a greater return on your investment.
It’s human nature to like some customers better than others, or to get along with some customers better than you do others. The mistake that costs you and your company money is allowing yourself to spend a larger percentage of your time with customers who are not willing to give you the dollar volume you need to justify the time you are investing in servicing their account.
Bill Lee is a respected sales and business consultant in the LBM industry. For more information, contact Bill at leeresourcesinc@gmail.com
