by Brittany Willes, writer
When it comes to sales strategy, many businesses have a goal that looks like this:
Increase sales by X amount over X time period.
Too often, this is where the strategy ends. When business is booming, lack of strategy may not have a (noticeable) effect on profits. At best, a missed opportunity will not have a lasting negative impact. At worst, a lack of planning can lead to dire circumstances.
Erie Molded Plastics (EMP) Vice President of Sales Tom Tredway and Thogus Director of Sales Brad Krupa recently shared their experiences with a lack of goal setting and how it affected their sales teams and overall businesses.
Addressing the problem
According to Tredway, “When it came to sales, everything we had been doing was a shotgun-style approach. There was a great deal of activity, but not much discipline in terms of what accounts we were taking on, how we were finding or approaching our customers, or how we were networking. But, we were content. We didn’t feel like we needed that comprehensive strategy because we felt like the good times weren’t going to end.” Then came the downturn. Between 2002 and 2006, the company lost roughly 60% of its business. EMP was hardly alone when it came to struggling with sales efficiency and declining profits. “For Thogus, we always had a growth goal, but we never looked at what sort of product mix was needed,” Krupa remarked. “I experienced first-hand the damaging effects of quoting, launching and running the wrong type of business.”
Both companies recognized the need for a deeper strategy. “We needed a destination, and we needed a roadmap to get to that destination,” said Tredway.
At Thogus, the roadmap started with data. “Instead of reinventing the wheel, we decided to use the principles of SMART Goals to ensure that we targeted the right business,” stated Krupa. SMART stands for Specific, Measurable, Achievable, Relevant and Timely. Overall, it is a relatively simple set of principles designed to help clarify ideas, focus efforts, and use time and resources productively.
Prior to adopting SMART Goals, the Thogus sales team’s process started with top-line revenue (what the goal was) and general activity goals, such as number of phone calls, number of new accounts, new programs, number of face-to-face visits, etc. However, this approach left a gaping hole in the team’s process: There was a top-line sales goal and a stream of sales activity but nothing linking the two together. “We started with a very simple question: How do we measure sales team performance?” said Krupa.
First, Krupa had to determine exactly what would be measured. “We selected a number of new programs as our primary metric, and number of RFQs and RFQ hit rates as secondary metrics,” Krupa explained. “This was the easy part. The hard part was applying SMART Goal principles to contract manufacturing: How many new programs? How many RFQs? What is an acceptable hit rate?” Thogus’ solution was to develop a SMART Goal calculator.
According to Krupa, the goal calculator is fairly simple. It uses five basic inputs: Growth goal (in terms of revenue), growth period (in terms of years), number of sales representatives selling for the business, hit rate percentage (Thogus used its historical hit rate) and – most critical – expected average revenue per new program. “When we enter these into the calculator, several goals are established,” said Krupa. Not only does the calculator establish overall goals and sales team goals, it also breaks down individual goals for each member of the sales team.
Thus, applying the principles of SMART Goals allowed the sales team to find the connections between goals and activities. “It truly made a difference in the way we approach business development,” Krupa remarked. “For Thogus, this was eye opening. Using this calculator opened our eyes to see the type of business we needed to hit our goals.”
Creating a roadmap
Of course, there is no one definitive strategic plan that will work for every business. Like people, businesses are unique in their culture and needs. While Thogus opted to employ SMART Goals, EMP opted for more of a hybrid approach: employing principles of the popular 4DX method, as well as bringing on a consultant to help create a unique strategic plan that ultimately revealed how and where the sales team needed to shift its focus.
“The strategic plan was, of course, company-wide, but sales was a key part,” explained Tredway. At the time EMP began shaping its strategic plan, the company had a stock closures division that represented a small portion of the business. Yet through the process of refining business goals and vision, it was determined that division’s packaging market needed to be the team’s focus.
Over the course of several meetings with stakeholders, a plan of action was created. The plan addressed where the company had been, where it was currently and where it needed to be in the future. For EMP, this meant an overhaul of the way sales had previously operated. More thought needed to be put into strategic direction rather than relying on pure activity. The goal now would be to make selling more efficient by engaging in specific tactics.
The overall strategy was fairly simple: Increase sales. However, to meet that goal, a series of sub-strategies was developed:
- Create a plan to stay educated on markets and trends
- Create a sales and marketing strategy for proprietary markets with goals, target industries, tactics and strategy to measure return on investment (ROI)
- Create a sales and marketing strategy for custom markets with goals, target industries, tactics and strategy to measure ROI
- Create an online strategy
“A lot of these items are relatively obvious,” Tredway stated. “But, if you don’t take the time to actually write them out, put them in the calendar and commit to spending a few hours every week on the more strategic side of sales, it’s unlikely to ever get done. The urgent needs of the moment always take precedent over the necessary.”
Finally, the sales team created a template with action items, owners, dates and status. This template would go a long way in ensuring that the necessary actions were being taken, creating a system of accountability for the sales team and ensuring direct focus to the most important tasks. It also made sure that everyone was on the same page and had the same roadmap to guide activity.
Making sure that everyone was on the same page was not the only positive result of developing a strategic plan, according to Tredway. “I felt like I had more purpose to my activity,” he said. “Additionally, I had the backing of manufacturing, purchasing and the front office to support the type of sales we were trying to create.”
Since putting together its more focused plan, EMP’s sales have increased by 85%. Furthermore, the company has been able to identify which of its customers could be considered non-strategic. This allowed EMP to decide whether to continue serving customers that were adding complexity to the operation.
Strategic planning – whether for sales, production or administrative tasks – is one of those things everyone knows they should be doing, but the very phrase elicits groaning and excuses. However, the proof is in the numbers. By developing a concrete way to approach and track sales, companies like EMP and Thogus were able to make the necessary changes needed for business to thrive.