Managing a Direct Sales Function

How do I manage the sales function in my small business?

Managing the sales function requires a solid understanding of the product/service and the competitive environment, a significant amount of people managing skills and the ability to analyze the sales activities as a measure of the combined results. A key decision is whether the sales force is comprised of independent sales representatives, in-house staff or a combination of the two. (Please refer to the sales & distribution section for detailed discussions on these topics.). Additional sales management duties include: designing the sales territories, training the sales force, sales forecasting, planning and budgeting, motivating and leading, compensating and evaluating the sales force.

Designing Sales Territories

The primary consideration in designing sales territories is to ensure that the sales representation, whether in-house or independent, has the best opportunity of reaching as many potential customers in that territory over a given period of time. Even with the technological tools of fax and email, every customer requires a face-to-face visit periodically. For example, a large chain store retailer (a key account) might require a visit every 2-4 weeks, while an independent specialty store might only require a visit twice each year. An audit of each existing customer account, along with a plan for securing potential customers, will assist in designing sales territories to achieve maximum results.

Each territory needs a planned sales contact route; i.e., a structured routing system that defines the pattern the sales person will use for regular contact with each customer and potential customer in the territory. Establishing an efficient routing system for each territory ensures that each customer is contacted in the appropriate timeframe while reducing selling time and costs.

Training the Sales Force

Whether training is performed by outside consultants or in-house staff, the sales force should receive information regularly on selling skills, and knowledge of: customers, products/services, company, industry and competitors. Veteran sales professionals always indicate “selling skills” as one of the top priorities of training they require. Knowledge of customers, new products/services, company background and plans for the future, industry trends and what competitors are doing should also be imparted to the sales force periodically as information changes or new information is received.

Sales Forecasting, Planning and Budgeting

Preparing a sales forecast takes into account both controllable and uncontrollable factors. Controllable factors include company pricing, distribution channels, product information and the company’s financial capability. A review of uncontrollable factors such as the state of the economy, shifts in population and consumer tastes, competitive conditions and industry trends is also necessary to prepare the sales forecast.

The sales budget is a financial plan that defines the amount and kind of resources needed to obtain the projected sales revenues. Factors to consider when preparing the sales budget include revenues and expenses to achieve the previous year’s sales accomplishments, current goals set for each sales person and any unique marketing opportunities that might require additional resources. Obviously, the sales executive and marketing executive will work closely together in preparing the sales budget and plan and the marketing budget and plan.

Motivating and Leading the Sales Force

The only effective motivation is self-motivation. The sales manager’s task is to maintain a high level of self-motivation in the sales staff. The successful business owner recognizes and rewards the talent in his/her staff, enhances existing talent by adding additional skills training, and works around those personality traits that cannot be changed.

Effective leaders are those who develop and foster an atmosphere of respect, trust and common vision with their team. Key to accomplishing this is establishing rapport first with each individual, then leading each team member toward the company vision and goals.

Compensating the Sales Force

Independent sales representatives are usually compensated on a commission-only basis, and although this method can also be used for in-house sales staff, it is more usual to use a base salary plus incentive compensation approach for employees. In each case, the incentive must be appropriate for each individual. Most sales people are highly motivated by money, but it is not the only motivator. Sales managers must identify the prime motivating instruments for each member of the sales team and develop compensation packages designed to achieve maximum sales results.

Evaluating the Sales Force Although much emphasis is placed on productivity and attaining specific sales dollar goals, other factors to consider in evaluating sales staff include: customer relations, adherence to expense guidelines, job skills and company relations. Evaluation criteria and expectations should be discussed with each sales person and incentive compensation percentages attached to each criterion.