You are five months into the current financial year, or depending on your reporting cycle, you could be in Q3 or Q4. The results are in, and the trend is not good – sales will not make their conservative targets, and the shortfall is rising over 10% behind. With the summer break upon us that 10%+ can explode to 30%+ for some industries in a few short months leaving the final months of the financial year struggling to deliver sufficient revenue.
Shortfalls in sales revenue go directly to the bottom line
As CEO, you are managing both the top and bottom line, and making the right adjustments to keep the bottom line healthy is your priority. You need to start managing the risk of a sales shortfall in top-line revenue before it adversely affects the bottom line.
A meeting with the sales manager and a request for scrutiny of the pipeline and customer ordering trends leaves you with the uncomfortable feeling that the risk is real. The sales manager assures you they are doing everything; the market is challenging, but next year will improve.
Your business depends on the sales force delivering results as that is your primary income stream. The business is not supplemented by other revenue streams. You contemplate the business repercussion of less revenue and the timing of when to act and how:
- The first reaction is commonly to start cutting costs. By trimming the overheads and reducing what seems to be some luxury expenditure, you can have a short term effect of keeping the bottom line healthy.
- You then review the profit and loss and look at ratios of staff costs, marketing costs, cost of sales and find some improvements that can be made without detriment to the business’s ability to produce and serve customers.
These actions will provide you with a window of opportunity to keep a healthy or reasonable bottom line, and now you then need to turn your attention back to the cause of the problem. The sales manager is responsible for delivering planned top-line revenue with a minimum profit margin. That is the mandate of all sales management roles. The business was or should have been geared to deliver under their guidance.
There can be a number of external forces that impact a company, and, in the mainstream, most of those can be overcome as there is never a smooth ride to delivering sales goals. The great sales managers are those that manage risk well.
The sales manager, and most likely, the team, are aware of the pressure and focus on their performance when the numbers are down. They subconsciously shift into gear and start selling management on the merits of how things will improve. It is also a form of personal encouragement to keep themselves motivated. They will make some minor adjustments, talk about products, pricing models, and increased interface with the top customers. But is that enough? The simple answer is NO.
The rule of thumb is that if a business is stagnant or slowing for a period of 3 months, it will take six months to recover using the product-interface solution. If the business suffered for six months, then it’s a twelve-month recovery. The timeline continues two years down takes two years to recover; if you have that luxury of time.
You need to make a decision regarding the sales manager. Does he/she stay, or do they go?
To get back into a growth phase and delivering sales revenue, requires a major intervention and often a helping hand
Can your company live without a Sales Manager?
Many CEOs step in and run the sales team when a sales manager departs unexpectedly, or a change is made from non-performance. The problem is, CEOs make poor sales managers. Not because of their talent is not good enough, but their time available to manage a sales team is very poor. The team will be responsive, giving a false sense of problem solved initially. But you are escalating the problem by giving the team less management time than the sales manager would have been giving.
Can you replace a Sales Manager?
Hiring sales managers is a risky business, and there is no quick solution to the perfect person out there in the market. There are many war stories on new hires or when sales managers are headhunted from the opposition. You meet the prospect for a short time during interviews and seem to get along and be a good fit. The sales manager is saying what you want to hear – it’s natural in interviews. Once you have worked together for a few months, the cracks start to appear, and some of those cracks become gaping chasms. You look back at the departed predecessor and start to forget their issues and convince yourself they were not that bad. Some even hiring them back starting the cycle all over again.
Hiring sales management requires careful selection and well-managed interview processes along with structured adjustment into the business for them to excel — adjustment by both the existing personnel and management (including the CEO) and the new hire.
If you’re not ready to change yourself and going the journey of onboarding a new manager that does come with a new hire, then the next option is:
Keeping the existing Sales Manager?
Keeping the incumbent will all come down to the attitude of the sales manager — not their approach to customers, but their reaction to change, improvement, and learning. When a sales manager reaches a plateau, it is due to them exhausting their knowledge and experience base. They have transferred their plateau into your sales figures. Research showed 78% of sales managers will have insufficient skills to deliver sales goals and growth consistently. Within this group, 34% refuse to change and the balance relies on CEO led changes to be implemented. Their implementation timelines extending well beyond the commercial demands of the business prolonging the down pressure of the shortfalls. Continued research shows these trends remain in sales management.
Top performing sales managers identify this early and seek external resources to assist move both themselves and their company forward. The research conducted only 7% of sales managers are in this category.
The remaining 16% of sales managers look for acceptance by the CEO for an initiative to bring new practices to the business to assist in driving growth. These initiatives are not about CRM and focused on business drivers and increased transparency to support better decision-making. They understand that scrutiny of the business finds the precise actions need to drive improvement rather than generalist approaches.
For CEOs, if your sales manager is open to change and improvement, then you need a process of guiding them, their team, and the company into new methods of operation in the sales (and marketing) business. Open to change is a demonstrated change in behaviour and not just commentary in meetings. If they are closed to change, then your only option is a replacement.
If your business is in shortfall, and you have already commenced taking to make adjustments to retain the bottom line, then it is time to be taking action. Choosing the right steps and not inadvertently creating bigger problems being the key.
We can guide you on the right decision that will work for your company in your unique situation.
You can reach out to Adele Crane to discuss your specific business situation and how you can best approach remedying your sales shortfall.
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