A few posts back you learned a quick and easy way to calculate maximum capacity. You saw how maximum capacity is critical to planning your sales as it tells you how much is available to sell. Here we’ll discuss how you go about selling excess your capacity.
First, you only do what’s presented here if your current sales are profitable. Poor profitability and limited capacity ( less than 20% remaining) indicates a pricing or spending problem. Look at the post Avoiding Price Problems That Can Kill Your Business to find out how to deal with this situation.
Begin selling excess capacity by building your sales plan from your current capacity . This becomes your sales growth target. For example, if you have 14 additional units per month that you can deliver without adding any additional resources, the 14 becomes your sales target.
Finding What You Need in Selling Excess Capacity
Now determine how many opportunities you need to find to close that many deals and sell your excess capacity . Your Close % is needed to help you calculate this. To calculate your Close %, you need to do a better job of keeping selling data. The first number necessary is usually pretty easy, it is how many deals you close in a set period of time i.e. weekly, monthly, quarterly, or annually.
Next is the more difficult number – how many proposals or quotes did you prepare during the same period? This number is a little harder to gather as many companies don’t track the deals they don’t win. If you have a CRM sytem with an opportunity manager or a quoting system, then fining this number is not a problem. If you do not currently track this information, I suggest you take a look at our program Selling by the Numbers – Creating Predictability in Your Sales & Marketing or you can use the DE, Inc. Revenue Engine Performance Analyzer to help you with these calculations.
Calculating for Selling Excess Capacity
With these 2 numbers in hand your calculation is pretty easy:
- Close % = Number of Closed Deals / Number of Quotes
Let say that you closed 10 deals last month and put 37 quotes out to get those 10 deals. Your Close % would be as follows:
- Close % = 10 / 37
- Close % = 27%
So to get to your target of 14 you need to write 52 quotes.
- Quotes Needed = 14 / 27%
- Quotes Needed = 51.8
Where do you find these 52 opportunities to help in selling excess capacity? Start by looking to your current customers. Why? Because it is 10 time more expensive to find a new customer than to sell to existing ones. There are some great tactics for this strategy at startupnation.com. Please share any ideas or tactics you have used in the past to sell to exiting clients.
Next, you will need to sell excess capacity look to new customer acquisition. Finding new customers requires an increase to your marketing efforts. In a future posting, you will learn how to determine the marketing effort needed to find new customers and hit your target. Until then, happy selling!
Selling Excess Capacity for Your Business?
Signup for a Tuning Your Revenue Engine Performance Checkup and learn what you need to apply this powerful management model to your business. Click the button below to find out more.
Copyright ©2011, 2009 Dino Eliadis
[…] our previous post Maximize Revenue by Selling Your Excess Capacity will help you understand how to do some of these calculations. If you need more help on how to […]
[…] how profitable do you want to be? Do you have the excess capacity to sell to create this level of profitability? And, what step does it take (step 1 step 2, step 3, etc.) […]
[…] again, this is a topic of an earlier post titled Maximize Revenue by Selling Your Excess Capacity. This post will take you through the simple calculations to understand exactly what you and your […]
As an entrepreneur, I can’t stsres enough how important it is for you to have a balanced life between work & family. Way too often my family suffered because I failed to do a good job at balancing the two & as an entrepreneur, you guessed it, the business won out, almost every time. After 40 years of struggling with that, I have come to realize it was not worth it. So take it from me, you rally need to plan family time within our schedule. Not just occasionally, but daily. There’s a sayiong that comes to mind here: If you fail to plan, you plan to fail .
[…] business. Not being able to deliver is a death sentence to a small business. Read the old post Maximize Revenue by Selling Your Excess Capacity to address this potential […]
[…] Sales […]
[…] are created in. Now, you can appropriately set your sales objectives. In another post I look at the “Tuning Your Revenue Engine” sales calculations so you can calculate what it will take from sales to produce the $2.8 million of capacity available […]