Overworked? Underpaid? We hear the term ‘jobcosting’ almost daily. Everyone wants and needs to know more about where we’re making money, where we’re not, and how we can improve our estimating to continue to land more work at higher profits. Jobcosting is essential to all of that.
You also have to be very concerned with sales – hitting your sales goals, doing enough volume to pay your overhead…. every day contractors are asking each other “How is your business this year?” and we all interpret it to mean the same thing… “How are sales?” You hear almost nothing however about ‘salescosting’. Salescosting, just like jobcosting, can tell you what you need to know to sell more work in less time… but you don’t hear many companies with any facts or figures on it.
Most owners/salespersons are paid a fixed salary. It might be salary plus dividends or salary plus commission, but it’s usually a straight salary. For that reason, don’t concern themselves with tracking sales effectiveness by-the-hour – because the hours don’t actually “cost” anything.
But hours are the lifeblood of your business. Whether you’re a one-man show or you run a company with a sales staff of 10, you only have so many hours a year to sell work – and if you want to be successful, you need to get the absolute most out of those hours. For a single owner/operator, managing your ‘selling’ time is mission critical. You don’t have hours in the day you can afford to waste. If you could “find” 100 hours in the year by improving the way you sell, that’s a lot of time you could dedicate to helping jobs go faster, growing the business, or taking some time at home with your family. For the bigger companies, salescosting can help keep overhead costs lower by reducing the number of sales staff you need, and by giving you a razor sharp focus where each salesperson needs to improve.
Tracking Sales Goals With Salescosting
Salescosting can be as simple or as complex as you’d like, but here’s a dead-simple system for making sure you hit your sales goals in the least number of hours necessary.
- Start by estimating the total number of hours you have available to sell work. For a large company, you might have 3 full-time sales/design staff who can each dedicate 1500 hours to selling/designing/estimating/etc. If you’re a single owner who does all the sales, you might find that you can only spend 700 hours of your year dealing with sales, and the remaining 1800 is reserved for managing work and all the other challenges that come along with the business.
- Build a simple pipeline for your sales. Don’t make it too complicated, you’ll have trouble breaking down your time(s) in too much detail. In our sample that we’re going to show, we’re going to include 4 simple ‘selling’ statuses. They will include: Customer Meetings + Site Visits, Design/Estimating/Proposal Creation, Revisions + Resubmissions and finally Negotiating + Closing. I did not include initial calls and followup calls because they are typically brief and hard to track, but if you want to track those, they are valuable.
- Now split your available ‘selling’ hours by these statuses. How many hours do you believe you should be spending on each task to deliver the results you need? For an owner who estimates they have a total of 1100 hrs per year to be ‘selling’, the results should look something like below
- Now you can track your hours to date against that and find out where you’re spending too much time. Just like jobcosting a project, only you’re ‘jobcosting’ how you sell.
- To go along with chart above, you’ll find another simple chart comes in handy the Sales Pipeline Process chart. There are many more complicated versions of this… we’re just going to keep it really simple and easy-to-use for these purposes.
- Create a sales pipeline from first call to final sale. Again, keep it simple. I’ve used New Lead, Initial Meetings + Qualification, Designs/Contracts Developed, Jobs Lost and Jobs Won.
- Next, estimate the average value of a sale and the number of “sales” (or customer jobs) that you need to sell to hit your sales goal. If my average job is $8,000, then I need to sell 125 jobs (Jobs Won) to hit my sales goal of $1 million.
- Keep moving up the chain… how many jobs should you be losing to sell 125? If you’re happy with a 50% hit rate, you’ll need to losing another 125. You’ll probably have just a few who are waiting on a decision.
- Keep moving backwards. How many designs or contracts will have to be drawn up? (Not all jobs have a design or a formal contract). How many customer meetings is it going to take you to get to that number of designs or contracts? How many new leads are you going to need to get that many customer meetings? If its your first time doing this and you don’t know… start with an educated guess. Start from there and next year will be much easier.
- Take 45 sec each day to update the counts. How many new leads did you receive that day? Did you have any meetings with new customers? Start any new designs or contracts? Did you win or lose any jobs? Those are big categories… easy to track. Shouldn’t take you longer than 45 sec to update your list.
The final result should look something like this:
In this example (above), some key problems jump off the page when we look at how much time we’re spending (the upper portion).
- Far too much time spent in customer meetings + site visits. Required Fix: Better qualification, especially over the phone before we schedule meetings.
- Way over budget on contract/drawing revisions. Required Fix: Get more information up front. Standardize customer requirements gathering for all salespersons. Limit customer choices/options.
In short, we’re spending way too much meeting and revising, and not enough time closing. I’ve got to have a more productive information gathering process.
In the lower section (above), you can also see why we’re so burnt out. This company should meet 300 customers to get enough work, but they’ve met 420 and they are still short of their sales goal. From the information above it looks like:
- We’re getting enough leads, but we’re not doing a good job pre-qualifying them before we invest time into them
- For the number of meetings, we have too few designs/contracts being developed. We met 190 customers who didn’t proceed with a contract or design. We need to weed those out before we’ve invested time (often an evening) into a site meeting with them.
- Our closing rate is a little lower than we’d like it to be… especially considering we’re ahead in designs/contracts. Again, better qualification up front may help this
- Average sale per customer is too low. It’s likely that because we’ve had a lot of meetings that went nowhere and because our closing rate is off, we’ve been taking a few jobs that are “below our ideal” to stay busy.
In short, the company above needs to work on better qualification up front. Lack of good qualification is putting our hours over budget and we’re not busy enough on the right tasks (closing work). Contrast those results with a company that looks like this:
The company above is just about right on track with leads and qualification management, but their close rate is way off and their average sale is up. This might be a case of a designer/salesperson who is consistently designing jobs over their customers’ budget… or not knowing their budget at all before investing hours in design and estimating (some, if not all of those hours, are free work!).
Well managed jobs start with a plan, they execute, then we review to see what worked and what can be done better. Even though you’re not getting paid for the hours you spend ‘selling’, those hours are the lifeblood of your business and knowing what’s working (and what’s not) will help you sell more effectively.
Whether you have powerful CRM software, or a simple spreadsheet like the above, take 5 min a week to track your sales effectiveness and see if it doesn’t improve your life and your bottom line.
To download the spreadsheet used in this article, click the button below: