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The financial and cultural switch from using salespeople to sell via a telephone to selling in person is massive. The time, support costs, and payback escalate and can only be justified on top ticket items (> $5,000) or high-volume sales (100 x $50 upwards). These figures are highly subjective as it depends on the sales cycle of your product and the average number of visits required to convert a customer. Table 16-2 shows an example of a firm selling a $5,000 product. Look what happens to the bottom line as selling costs vary.

Table 16-2

Bottom Line Sales

Aspect of Sales Cycle

Cost

RRP of product

$5,000

Average sales cycle of product

3 months

Average number of visits

3 (1 a month)

Cost of each visit (travel expenses, time, and so on)

$500

Cost of sale

$1,500

Salesperson's commission (30% of RRP)

$1,500

Gross profit

$2,000

So on a $5,000 sale your real profit (after production, marketing, and sales costs) may only be $2,000 (see Table 16-3). However, when you start to factor in the success rate (the number of clients you must visit to affect each successful sale) watch how evenly this profit can slide into a loss.

Table 16-3 Profit versus Loss

Success Rate

J in J

2 in 3

J in 2

J in 3

Cost of product sold

$5,000

$10,000

$5,000

$5,000

Cost of visits

$1,500

$4,500

$3,000

$4,500

Salesperson's commissions

$1,500

$3,000

$1,500

$1,500

Sales profit

$2,000

$2,500

$500

-$1,000

Average profit per sale

$2,000

$833

$250

-$333

The figures obviously vary with product and company, but when you bear in mind that a good salesperson will win about half their leads and on average about one in three or four, you may appreciate how closely you have to watch results.

For low-value sales, the figures hardly add up. It's only when you make inroads into large companies and get a taste of pulling off volume deals that salespeople stand a chance of being viable, as illustrated in Table 16-4.

Table 16-4 The Large Deal

Figure Work Behind Large Deal

Cost

Value of sale

$250,000

Average sales cycle of product

6 months

Average number of visits

12 (2 a month)

Cost of each visit (travel expenses and so on)

$500

Cost of sale

$6,000

Salesperson's commission (30% of RRP)

$60,000

Gross profit

$184,000

With large sales, a salesman may need to succeed only once in 31 times to net you a profit.

There is no rule of thumb. You have to use what facts you can establish and work out the odds for yourself. (This was discussed in Chapter 13 on pricing.)

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