Removing Indirect Costs in Sales Forces
Customer service, enthusiasm, and rapid growth became a recipe for declining profits
Profits were collapsing as a company experienced growth rates exceeding 35 percent per annum year on year. The company invested heavily in its operational capacity, however, sales remained the frontier of the highly energetic customer-driven individual and it was destroying the business.
The company had been a small business for many years, focusing on product development and reliability of products in the market.
With a change of executives, new investment, and growth strategies, the business was now growing exponentially and expanding into new markets. The growth was achieved by acquiring smaller competitors, and growth rates exceeded 35 percent per annum year on year for two years. The growth was being undermined by ever-increasing costs and low productivity in the sales organisation.
Applying Lean Sales principles to the sales organisation and sales operation profit opportunities were uncovered.
The analysis demonstrated:
- Direct profit from removal of rework actions: $1,035,000 EBIT.
- Realignment of sales tasks: 7 percent EBIT or $3,622,500 profit.
- Additional savings from improved sales structure and processes could be confirmed once the project’s systems and procedures were established.