Experience has shown no matter where you set your minimum selling price, a sales representative sooner or later will ask you to lower it. The question is not whether you will be asked permission to discount; the question is when should you say yes.
One of the best examples of this is highlighted in an excellent article “Making Sales and Losing Money” by Brian Jeffrey. The article highlights a case where a sales rep, after obtaining his largest order to date, actually loses money on the sale. Not only does Brian discuss how this could easily happen, he also discusses excellent ideas on how you can prevent it from happening to you. You can read the article at http://ow.ly/27HXi and and you can browse Brian’s available Sales Management eBooks here.
The bottom line is your company’s fixed costs must be paid whether you make the sale or not. Therefore, any time a discounted selling price contributes at least one dollar towards paying your fixed costs, it is considered profitable. As long as all of your variable costs are covered, including the cost of the goods sold plus any variable sales commissions, the discounted price can be accepted.
The Minimum Selling Price Calculation Worksheet is an Automated Sales Tool available for sale in our eStore. It will will automatically calculate a product’s minimum selling price to contribute at least one dollar towards the payment of fixed costs, given the cost of goods sold and the commissions to be paid on the sale. It is one of the many automated sales tools included in my sales management training book, Action Plan For Sales Management Success.
As most managers would agree that making a sale for only a dollar is hardly worth the effort, the spreadsheet also shows how much gross profit is being made if you sell the product at a certain price. That is very handy if you or your team has a gross profit component in your compensation plans. Most importantly, you will quickly and easily have the information you need to make the right business decision.
After all, in sales, saving time is very important. In fact, many studies show that sales people only spend about 25 percent of their time selling. That means your sales people are spending only ten hours per week selling. Taking a step further, if they have a $1 million quota, each one of your sales reps is worth $2,000 per hour! To free up more time for your sales reps to spend on selling, check out the other automated sales tools created by B2B Sales Connections.
Need ideas for your sales meetings? Join our free webinar where we discuss quick and easy ways to make your sales meetings more interesting and productive. To register, visit www.b2bsalesconnections.com/webinars.php.
Webinar does fit your schedule? View the presentation video in our Download Centre at www.b2bsalesconnections.com/download_centre.php. While you are there, be sure to download a free copy of our white paper “Creating Your Unique Value Proposition”
Susan A. Enns, B2B Sales Connections