Even among small companies, sales should be managed like any business function
Paul Chachko was getting worried. He had founded V12 Group in 2003 to provide direct marketing services to businesses. Four years later, Chachko was on an acquisition tear. The first merger, with Direct Marketing Associates, came in May 2007. By October, Red Bank (N.J.)-based V12 had swallowed two more companies. But V12's sales pipeline, with $25 million in potential deals, was down about 20% from the year before. Integrating all those companies had been a distraction, and the slowing economy wasn't helping. "We needed a better way to sell," says Chachko.
Chachko isn't the only one fretting about the top line. Only 29% of companies with 10 or fewer sales reps are confident of making their 2008 sales goals, according to researcher CSO Insights. Half of the small companies surveyed spend $1,500 or less annually per rep on training. But sales needs to be managed just like any other business function, says Nigel Edelshain, CEO of Montvale (N.J.)-based consulting firm Sales 2.0. "It's not black magic and backslapping," says Edelshain.
Chachko needed a well-oiled sales machine. To lead the charge, he hired Jeff Berke, a veteran of several direct marketing companies, whose fit frame and buzz cut call to mind a U.S. Marine. Berke refocused the 30-person sales team on key industries, ending V12's scattershot approach. And he put in a formal process for every step in the sales cycle. While the changes created some angst at the 92-person company and led to 13 reps leaving, V12's pipeline has rebounded nicely.
One of Berke's first findings was that V12 wasn't focusing on companies that were big users of direct marketing. Instead, salespeople often simply called on companies where they already had contacts or sold to intermediaries like ad agencies. That business was relatively easy to land, but it carried low margins. Worse, by selling to intermediaries, the salespeople weren't developing a relationship with the actual users of V12's services. Sales data were scarce, leaving managers without any good information about why deals weren't closing, for example.
Berke needed to give the team direction and help them decide which markets they should be targeting. He eliminated industries where direct marketing spending was not projected to grow at least 1% over the next several years. He knocked out those industries that earned less than $7.50 for every dollar spent on direct marketing.
Then Berke eliminated the flat 5.5% commission. Now, if reps don't hit their quota, they get 5%. If they make quota, the commission for their entire book of business jumps to 6%. It climbs from there, topping out at 10% for those who double their goal numbers.
Berke also got the reps to use sales management software from Landslide Technologies. The system lets them track everything from the first contact with a potential client through the closing. Then he outlined procedures for each step in the sales cycle.
The response was swift. "I just got e-mails from some sales managers saying: `We are dying [under all the new technology],' " says Berke. "But that's good—it means they are actually using it." The pace of deals slowed as reps got used to the software and tried to reach the more senior executives who could sign off on bigger deals. "Before, we were pounding the phones and cold-calling all day," says Adam House, V12's senior vice-president of strategic accounts. "Now it's definitely a longer [sales] process, and that's a huge change."
The new approach is paying off. As of early fall, the value of V12's pipeline stood at $43.7 million. The company has 279 deals in the works, up from fewer than 100 before the overhaul.
While all this has been tough for the sales team, those who've stuck it out are glad they did. Rep Gary Cottingham used to sign deals averaging about $1,000. Recently, he's closed several worth more than $10,000 each. "It was nerve-wracking," Cottingham says of the transition. "But I bought into this, I drank the Kool-Aid." Both he and Chachko are glad he did.
For more on sales software, go to businessweek.com/go/sb/salessoftware
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