The nice thing about working in a dealership is that just about everything that happens has a number associated with it. This allows you to measure and determine how each department or employee is performing. For example, in the service department, we look at recovery and service technician efficiency. In the parts department, we look at profit margins, fill rates, transaction times and transaction values. And in the sales department, we focus on profit margins, transaction values, closing ratios and sales funnels.
Let’s focus on the sales department and the measurements you can use to bring about big changes. To most people, the sales process seems like a complex event. In reality, however, it is fairly simple if you have some knowledge of your products, financing options and a pleasant personality. While you may not make a ton of money with just those three things, you would make a living and be like most other salespeople in your dealership. But who wants to be average when there is so much more money to be made with just a little extra effort?
When I look at the difference between salespeople that are average and those that are top producers, I see one consistent theme: Average salespeople wait for sales to happen — top producers work to make sales happen. It all goes back to the level of daily activity to which a salesperson is accountable. It’s not that top salespeople necessarily have some secret skill that average sales people don’t. Salespeople who are consistently successful commit themselves to more daily prospecting activity.
Let’s say Salesperson A and Salesperson B both close 25% of their qualified prospects and they have the exact same sales skill set. If each day, Salesperson A interacts with two more qualified prospects than Salesperson B, what would be the impact for both Salesperson A and the dealership?
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During a 5-day period, “A” would be in front of 10 more qualified people and would average 2.5 more sales. So, over a 12-month period, A would have 125 more sales than “B.” If the average value of a sale was $6,000, A would have sold $750,000 more equipment than B. If the net profit of a sale averaged 10%, that effort would have generated the dealership an additional $125,000 in net profit and netted A an additional $12,500 in commission for the year.
To make this scenario a reality, a dealership should think of a sales funnel. This means calculating how many potential customers need to be put into the funnel every month to get the number of sales we need to flow out of the funnel. To find that number, simply divide the number of sales made by the number of people a salesperson talked with.
Let’s keep it simple. If you made one sale and found that you spent time with three qualified customers to get that sale, your closing percentage would be 33%. To find those three qualified customers, however, you actually talked with six people who either stopped in, called, emailed or sent in a request from your website. You know that to get one sale, on average, you have to connect with six people in some fashion. If your average sale is $6,000 and you want to do $1,000,000 in sales, you need to make 167 sales over a 12-month period.
If you multiply 167 sales by six people over a 12-month period, you would need to have a total of 1,002 potential customers flowing through your sales funnel. That means you need to have a minimum of about 84 people moving through your sales funnel each month (1,002/12=83.5 potential customers), about 21 each week, (83.5/4 weeks) or roughly 4 per day (21/5 days). Once you know the numbers, it makes your job as a salesperson easy. Hitting sales goals becomes simply a matter of keeping your funnel full of suspects that you turn into prospects, who you then qualify and turn into sales.