Undisciplined Discounting Webcast

Do you have salespeople who seem to create their own pricing rules?  Are you missing out on margin by those who are afraid to miss out on the deal?  Strategic Pricing Associates is hosting webcast coming up on December 8th at 2:00pm Eastern to address such issues.  How to Stop Undisciplined Discounting and Track Sales Force Accountability features Sid Hendry of Gulf Controls and Dave Lienert of SPA.  It's only 60 minutes out of your day and will be well worth it!  Click HERE for more details and registration.

An Open Letter to New Salespeople

An Open Letter to New Salespeople

Maybe the word "slimy" comes to mind.

Last week I had the opportunity to interact directly with a young person thinking about a career in distributor sales.  They were put off by the image of being a “salesperson,” but because of the experience of one of their friends, they were taking a fresh look at the industry.

Their questions revolved around a handful of unknowns. 

·      Is sales a position that taints your ability to do something else later in life?

·      Do customers see salespeople as valuable or as sleaze-ball characters to be avoided?

·      What is this commission thing all about?

·      Do I need to be a natural born salesperson?

·      How hard is the job?  It seems like a lot of people “used to be salespeople but quit. 

For the benefit of everyone just starting or considering a distributor sales opportunity, allow me to answer these questions.

Does Selling have a future?

The answer is unequivocally yes.  A quick look around the executives of both distributors and their manufacturing partners points to a large percentage with selling in their resume.  Selling provides an opportunity to understand customer needs.  And without a product which fills some need or solves some problem, there can be no customers.  And without customers there can be no business.

How are salespeople seen?

The distribution industry is not a “one and done” selling process.  Salespeople develop ongoing relationships with their customers.  The very best sellers are seen as skilled problem solvers.  Often they act as an important extension of the customer’s own staff.  The attitude of the customer is often reflective of the seller’s attitude.  When a sales guy arrives prepared and armed with well thought out products/services tailored for his customer, customers respond in kind.

The commission thing…

Everyone has heard of some family acquaintance who worked on commission and went broke.  This is rarely the case in distribution.  The nature of customer buying habits and market dynamics indicates 99 percent of all selling territories produce revenue in good times and bad times.  From the worst recession to the best of times, a territory might fluctuate by 30 percent.  The secret is to live within your means, bank the upward swings and prepare for downward shifts if the economy should fall into recession.  Further, as you build customer relationships, develop your problem solving skills and increase your efficiency, the whole thing moves in the upward direction.

Natural born salesperson?

There might be such a person.  Most of the folks who claim to be “naturals” don’t stand up to the scrutiny of their description.  Looking back on experience with hundreds of experienced sellers I might have met two “naturals."  The rest have perfected their skills over time and some of the best salespeople start off conversations with, “I am not really a salesperson, I just really like to help my customers and they appreciate my efforts by directing business my way.”

How hard is the job?
I believe selling is the hardest easy job on the planet.  Here’s why I make that statement.  I like meeting interesting people.  I like seeing manufacturing facilities.  I like time spent solving problems.  If I were to wake up and discover I won a Billion Dollar lottery, I would still want to meet new people, see innovative manufacturing plants and devote time to solving problems.  All of these things are so incredibly interesting, it’s hardly like work. 

All of this brings me to a set of core beliefs I have about distributor sales.  This is the short list.

I believe….

1.   The actions of successful salespeople mostly appear different when on the outside looking in.  The projection of their personalities often overshadows the mundane stuff that makes them successful.  Keeping good records, organizing schedules and studying customers are rarely visible to anyone outside their immediate family.

2.   You don’t have to be wonderfully organized to be successful, but if you’re not, expect to work extra hours and occasionally feel stupid because you wasted hours “trying to find” something important which could have been easy to locate if you had just kept up with your notes and filing.

3.   Sales work is mostly solitary and independent of others; you might be attracted to the freedom.  But, many people working independently overestimate the number of hours they actually work.  Further, the ability to intermix personal and professional hours creates an environment where wasted time is often counted as “working hours.”

4.   Most successful sellers work more than 40 hours a week.  The really successful ones often don’t count hours of planning, preparing and learning about their products as real work time.  Working closely with these folks for over three decades, I have discovered many of them count this as “happy time” getting ready for the big game.

5.   There are no “natural born” salespeople in our industry.  Those of you who have the gift of gab, and most would say I do, may actually be at a natural disadvantage in going to the top of the sales heap (read The Challenger Sale.)  Top salespeople often tactfully challenge their customers.  Sometimes they make unpopular recommendations but work hard to provide strong justification to their recommendations.

6.   A few salespeople fall into lucky territories.  They aren’t required to learn the important activities necessary for their own success.  I see them as older, forty and fifty-somethings who have somehow been forced to change jobs…and they struggle.  If you get off to an early start because you inherited a great territory, don’t be complacent in learning important skills.

7.   The keystones of selling success are tied to product knowledge, application skills and customer knowledge.  You cannot really add value to your customers if you don’t know your products and services.  But that’s not the end of the equation.  You must know how your products might be used; including short comings and potential pitfalls.  Finally, if you don’t know your individual and specific customers including their problems, challenges and opportunities, you can never really be much more than a human search engine.  Back in the old days, human search engines were valuable.  Google took away that value.

8.   Salespeople are honest and honor their commitments.  Simple as this sounds, it goes against the human nature of some to say, “I don’t know."  Others state they will be back next Tuesday with an answer and don’t show up until Thursday.  Customers notice.  In addition, many sellers don’t really listen to their customers.  Taking notes focuses your attention.  Referring back to notes a week later to clarify a point adds to the salesperson’s credibility.

9.   Good salespeople demonstrate that lightning strikes twice (or even three times.)  And, typically when they move it is to more freedom, better money and other personal/lifestyle rewards.  It is not unusual to find this kind of person at the top of the sales heap in multiple companies.

Finally….

I believe in the distributor model.  Regardless of all the hype about Amazon taking over the world, I believe the future holds a place for sellers who bring value to their customers.  In the future, we may refer to the group as something else; perhaps solution provider will be the term of choice.  Regardless of title, the opportunities will abound. 

And, feel free to contact me if you have a career question; helping you be successful turns my crank…..

Non-Competes and Non-Disclosures

Once again, the whole topic of non-competes, non-disclosures have raised their ugly legal heads. A well-known electrical distributor recently appealed a lower court decision and the case is being revisited. Based on estimates from legal experts, the attorney costs alone are most likely pushing $25-30,000 for both sides; and this doesn’t account lost time and wasted energy.

I would like to go on record as stating I believe every distributor needs to have and enforce their non-disclosure agreement. In distribution, we don’t have patents, top secret ingredients or other trade secrets. Instead, we have customer contacts, supplier relationships, market price data, a keen understanding of the competitive lay of the land and emerging employees. Some of us invest massively in product training, sales and other job related skills. And, when an employee leaves, we must make absolutely certain that minimal information goes out the door with that former employee.

Most think of key employees leaving with their briefcases and home computers stuffed with our information; and it happens. A decade’s worth of key pricing data can easily be loaded onto a memory stick. The sales history of our top customers can be pushed up to a “cloud-based” storage site. And, it often happens.

We know of a couple of distributors who ran computer forensics on the computers of team members leaving the organization. Guess what? They discovered records

mysteriously shifted around a couple of weeks before the announced departure/termination. Clearly, this is an unethical action and potentially an illegal move. When notified, the new boss of the ex-employee had a “stern” discussion with his new guy. But, in the case of salespeople, how does one tell the difference between lucky guesses and illegal use of ill-gotten information?

Catching an ex-employee with (what one distributor calls) “stolen” information is tricky. It often requires dragging a customer into the mix. And, most distributors worry efforts invested in speaking to customers reflects poorly on the company. Further, many customers don’t understand the business ramifications of this information leaving the company. Instead, they see it as a guy trying to better is life and make his family more comfortable.

Undoubtedly, something more may be required. I see more non-compete agreements being added to distributor HR packages; and with a few caveats, I recommend the process. I see the need to protect company trade secrets. Since the distribution industry operates on razor thin margins (typically 2-4 percent,) protection is needed.

At the same time, I believe in opportunity for growth and personal financial improvement. Not every boss is a wonderful guy. As a matter of fact, I have run into some who are downright tyrants. So employees need protection built into the non-compete agreements as well.

Here are the caveats I talked about earlier. A non-compete should be null and void if any of the following come to pass:

The company sells to another person or organization
If the company gets sold, employees are not furniture thrown in as part of the deal. The new organization might ask for employees to sign a fresh new non-compete. Employees might sign it, but for a split second, everybody is a free agent. The owner of the company negotiated his/her deal, now the employees can negotiate one of their own.

The company terminates the employee
It is only fair to assume, if the employee isn’t good enough to work for the company, going to work for a competitor should be a blessing.

If the employee’s average compensation (based on a couple of years) drops by over 25 percent
This protects the employee against a boss who tries to starve them out by rearranging compensation structure, reassigning important accounts or withholding bonus participation. It is common for some year-to-year fluctuation, especially with sales and branch managers, but 25 percent covers a lot of space.

If a non-sales employee’s job is relocated further than 50 miles from their current office facility
This protects the employee if for some reason the company the company changes their location to the point the employee must relocate to maintain their position. At the same time, the company is protected if they make a move across town.

Recommendations to the distributor
If you are a distributor, I recommend a review of your current on-boarding process:
1. Do you require employees to sign a non-disclosure agreement which states what information you believe to be covered as a trade secret?

2. Do you require that company business be conducted only on company approved equipment, so you can track the flow of information?

3. Do you regularly review the agreement with existing employees? Experience dictates that many falsely believe “their contacts” are their contacts and belong to them.

4. Can you locate the original signed documents (or a digital image of the agreement) from all employees?

If you use a non-compete…5. Have you updated the agreement or had an attorney review to insure it is enforceable? Many jurisdictions (typically state-by-state) have changed their approach to non-compete agreements.

6. Are you including a discussion of the non-compete in the annual reviews of employees? Strangely, many employees “forget” the agreement or hear they are unenforceable from friend and co-workers who are not legally competent on the matter.

7. Do you have a copy of the signed agreement?

8. Are you willing to enforce the agreement? Every exiting employee must be briefed on your policy to enforce the agreement.

If you are hiring someone…
9. Ask if they have a non-compete in place? If they do, ask for a copy of the agreement and seek legal counsel to determine the scope of the agreement. It can be both expensive and distracting to hire someone and find out later their work must be limited by the agreement.

Recommendations for employees:
1. Make sure any agreement contains the provisions mentioned above. Any reasonable company will accept them as reasonable protection for you, your future career and family.

2. If and when you sign an agreement, get a copy for your own records and store in a safe place. This document is every bit as important as your home mortgage, birth certificate and passport. Don’t just stash it in your bottom drawer.

3. Remember, the contacts you make during your employment belong to your company. Many of us consider customers as our friends. If you are doing things right, they are friends. However, their business information belongs to your employer. If you leave, you must reestablish connection without the aid of all your notes from previous calls, meetings and other contacts.

Still not convinced all of this is worth your time?
For those of you who are like reading the details, this link will take you to an article in TED magazine. 

And if you crave legal jargon, this link will take you to the official court documents. 

People always ask me about salaries...

A recent article in Industrial Distribution covered a couple of points on salaries.  I thought it was worth sharing.

Grads from Texas A&M's Distribution program are getting multiple job offers and that impacts starting salaries:

Another top-notch university, Texas A&M, has an outstanding industrial distribution program and on its website points out that every student in its ID program had a job at graduation. Many of those students were offered jobs in sales engineering and sales management. The graduates received an average of three job offers, and the average starting salary was $52,000 with some receiving up to $70,000.



The article quotes the Wall Street Journal on sales compensation:

Sales reps who peddle technical and scientific products earned a median annual wage of $74,970 in 2012, more than twice the median for all workers, according to the Labor Department. A competitive hiring market for science and tech workers is part of the reason, but employers also say young workers are uninterested in sales — a field they perceive as risky and defined by competition.

Note the comments on younger workers and their perception of risk. Many of us who have worked on commission or have worked as entrepreneurs for years have a difficult time understanding this phenomenon. We must remember, college campuses are filled with urban legends of students being victims of commission schemes.


One further point. Work done by Brent Grover points to an investment of around $150,000 to bring a
salesperson up to the point of generating a profit for their company. Making a hiring mistake can be costly.

Read the full stories here:

Salespeople salaries 

$150,000 to profit generator