Many small business owners have a very straightforward approach to sales that can be summarized in one sentence—“I need as many sales as I can get!” While it is difficult to argue with the impact such a “strategy” has on the company’s top line, to achieve the best bottom line results and solid cash flows every company needs a simple yet clear sales strategy.
The Components of an Effective Sales Strategy
- Understand the needs of the marketplace, the strengths of your company’s offering and the abilities of your competitors;
- Develop a realistic market share goal for your company to achieve;
- Stratify your current and target customers into groups based on desired characteristics;
- Develop clear responsibilities for your sales team.
Understand the needs of the marketplace, the strengths of your company’s offering and the abilities of your competitors
The first step in developing a sales strategy is to determine how well the company’s products or services are meeting the needs of the marketplace. The best strategy in the world will not be effective if the products or services being offered are not being requested by the market. Items that you will want to consider include:
- Is the market growing?
- Are competitors investing in this market?
- What technological or other advances are likely in this market in the near future?
- Is there another product or service that can be reasonably substituted for the one that you are offering?
It is also important to realistically determine the strengths of your company vis-a-vis your competitors. Once you understand the market and where it is likely going, it is important to know how well your company is positioned for the changes you see coming.
Develop a realistic market share goal for your company to achieve
Utilize the many industry data bases that are available to get a broad understanding of how big the market for your product/service is. Then determine a realistic portion of that market that you can likely capture. Understand what that market share means in terms of required human, financial and operational resources. Does the “likely captured market share” fit with the resources you are likely to be able to provide? Be sure to bring in the Sales, Operations and Finance/Accounting teams to help test the reasonableness of your assumptions.
Stratify your current and target customers into groups based on desired characteristics
Once you’ve determined the total size of the market and the portion that you will attempt to capture it is important to further stratify your customer base and the sales channels to reach them. Many companies stratify their customers into “Best”, “Good” and “Acceptable.” For a customer to be in the “Best” category, sales to them should have characteristics such as an above average margin, average to above average volumes, excellent payment terms and products/services that play into your company’s strengths. “Good” accounts have similar characteristics to “Best” accounts but to a slightly lesser degree. “Acceptable” accounts provide at least a cash break even scenario and may be necessary to fill up your production capacity. It is important to determine in advance the mix of “Best”, “Good” and “Acceptable” accounts that provides you with the best financial and operational outcome.
Develop clear responsibilities with your sales team
Small and mid-size companies frequently have a sales team that is a mix of internal and external resources. Once the strategy has been determined it is important to ensure that the team understands the strategy and the expectations that you have for them re: the implementation of that strategy.
Attempting to maximize sales, profitability and, most importantly, cash flows without a sales strategy is akin to a marksmanship approach of “ready, shoot, aim.” Without the clarity that a sales strategy can bring, it is very unlikely that a small business owner will succeed in the marketplace.