The $24 Wrong Number — Calculate The True Cost of Sales

Quick!  Do you know the cost of sales at your company?

If you make sales by phone, maybe you think, “phone calls are free”.  Well, yes…and no.

Let’s get specific.  What’s the per call cost of sales by phone? Would you believe that telesales cost most companies almost $24.00 per call?  I’m not suggesting that every time you speak to someone it costs $24… Its much worse than that.   I’m saying, “Every time your sales person TOUCHES the phone it costs you $24.”  How can that be?

In the last sales organization I ran, we had a dozen people making sales calls.  These are professionals.  They know their industry and their customers.  They can talk the talk.  In short, they are GREAT sales people, and we wouldn’t hire any other kind.  But even though phone calls are free, great sales people are not free.

If each great sales person in your organization has a phone line, a computer, a desk, a salary, some insurance, and maybe even a manager (or two!), the real cost of that employee can be well over $12,000 per month. 

Now, if that same sales person takes a few minutes to prepare for each phone call, researches and rehearses a clear value proposition for the client, and correctly documents his actions in the CRM system, he will make about 25 calls a day.  Let me do the math for you…. that’s about 500 calls a month, or $24.00 each time he touches the phone.

Knowing this, are phone calls really the best way to spend $24?  Don’t forget, about 90% of phone calls are not even answered! That means the calls that are answered have to make up the difference of $240.00!

(1) Your sales people should be well prepared and well-armed to justify a $240 conversation. They should know what to say, have specific evidence and documents to back it up, and be ready to ask the right questions to move the sale along.

(2) You have to sell something that has at least $250 profit built in from the beginning!  You’ve got to cover your cost of sales pretty quickly to make this worthwhile.

(3)  If you are NOT ready to support your sales people, spend your money on something more effective. Take the first month’s $12,000 and build an amazing website.  Hire an experienced agency to re-write your brochures.  Take a video of your facility.  Build a trade-show booth.  Do whatever you can to PREPARE to have an expensive sales person representing you.

If you use the phone to make sales… you better know what its costing you!Everybody wants a sale.  But in the rush to hire a sales person, I see too many companies ill-prepared to start selling.  Take a deep breath.  Evaluate your cost of sales and the profits (or lifetime value of a customer) for what they are selling. Invest in tools to make your sales people more efficient.  In short, lay the foundation for success.

…Or Don’t. If the lifetime value of a customer is less than $240, then maybe you don’t want to use telesales.  Do the math carefully (or call a CFO to help you!) and spend your sales dollars in a more productive way.

Dedicated to your (selling) profits!  David

PS: Want to know how much you are really spending on a sales person’s time?  Check out our employee cost calculator now!

photo credit: Vincent_AF via photopin cc