A few posts back you learned a quick and easy way to calculate maximum capacity. You saw how knowing your maximum capacity was important to sales as it told you how much you had available to sell. Here we want talk about how you should go about selling excess capacity. Remember, only do what I present here if your current sales are profitable. If you have poor profitability and limited capacity ( less than 20% remaining) this 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 how much additional capacity you currently have. That becomes your sales growth target. For example, if you have 14 additional units per month that you can deliver without adding any additional resources 14 is your target.
Now determine how many opportunities that you need to find in order to close that many deals and sell excess capacity . Your Close % is needed to help you figure this out. To calculate your Close % you need to do a better job of keeping selling data. The first number 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 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. It you have an opportunity manager or a quoting system this number is not a problem at all. If you do not currently track this information I suggest that 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 can help you with these calculations
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 an existing one. 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 will require an increase to marketing. 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!
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Copyright ©2011, 2009 Dino Eliadis