February 16/23, 2015; Volume 28/Number 17
By David Romano
Sales managers have to pay for themselves by selling; they can sell on the floor while they teach others at the same time.
Sound about right? If you are a believer of this technique you are in the majority. However, while training hundreds of sales managers and store owners over the years we have said sales managers are not overhead and, in fact, if they do their jobs right they are profit generators. You cannot coach and play at the same time, and having your sales manager sell to cover overhead is actually a huge growth limiter.
Have you changed your mind?
We’ve trained hundreds of managers over the years and would follow their progress, as well as that of their stores, and we knew that having a full-time, non-selling sales manager was a no-brainer. But there were two issues with our philosophy: the sample size was too small to prove our theory and one could argue that they were all successful because they received specialized training and ongoing mentoring.
With our surveys, in which several hundred flooring owners participated over a three-year period ending in 2013, we were able to validate that having a full-time, non-selling sales manager, regardless of training, did, indeed, have a positive effect on a flooring business. Results include:
- Stores that had a full-time, non-selling sales manager averaged $5,137,675 versus stores without a manager, which averaged $2,899,881. That is 77% greater sales volume.
- Sales productivity (average volume per sales associate) was $55,943 greater per sales associate when they were managed by a sales manager.
- Average days in receivable (average number of days it takes to collect money) was 7.1 fewer days for stores with a sales manager.
- Gross profit was 1.1 points higher for stores managed by a sales manager.
- On average, owners took home $23,901 more in income per year when they had sales managers running sales teams.
It is difficult for a sales manager to effectively manage more than 10 sales associates, and it does not make financial sense for a sales manager to solely manage a team of five or fewer.
Confused? Let me explain: The average annual volume for a sales associate is just over $650,000. If you have a team of five the total volume should be somewhere in the neighborhood of $3.25 million. At that point the store should be able to absorb the overhead cost of having a sales manager, and she/he will have enough work to justify the dedicated position. The manager will be effective in managing that team of five as well as an additional five. For managing 10 sales associates and beyond, providing an assistant or support staff may be a good idea.
For companies with fewer than five sales associates the best solution is to have the manager work with the sales team as well as go out and prospect new business.
If the manager works with the sales team to better handle price objections, review quotes and job cost sheets, and shop the competition to understand the competitive landscape, a 1.1% increase in gross profit is attainable.
This study proves that having a non-selling, full-time sales manager in your company will be one of the best investments you will ever make. Not only will you soar to a greater level of sales, profits and income, you may also actually find yourself with some free time to enjoy the privilege of being an entrepreneur.