How healthy is your territory? That is a question I often ask very early in sales ride alongs. It’s not referring to whether you have a cough, are running a fever, or feel nauseous. It simply means do you know where your sales are coming from and are you top heavy or do you have a solid foundation. Do you know this for your territory? Are you aware of issues and/or ways to rectify it? Let’s discuss it further.
Consider a deeper dive quarterly analysis of your performance. What percentage of your total sales is generated by your top 10 customers? What percentage do your top 20 customers represent? How does your performance compare to the Pareto Principle? The Pareto Principle is based on studies done by Italian economist, Vilfredo Pareto, which most of us know as the 80/20 Rule. Eighty percent of your results are generated by 20% of your activities. The Pareto Principle seems like a healthy benchmark. How do your results compare? In other words, 80% of your annual volume being generated by your top 20 accounts seems healthy, where are you?
Finding that 90% of your business comes from your top 20 accounts, or 80% of your volume comes from your top 10 accounts could spell trouble. Being top heavy gives your large customers an inordinate amount of leverage and puts you in awkward positions when a price increase needs to be captured, or service issues arise. You could easily equate a customer comprising 10% to 15% of your total sales as also representing 10% to 15% of your total income. How is that going to affect you when negotiating a price increase or holding firm on a service issue? If you’re not careful, you will begin working harder for your customer than your own company whom you have a fiduciary responsibility to. 90/20, 80/10, or more than 10% of your volume in your largest account is a red flag that needs to be addressed. How do you address it?
Bringing on new accounts or working with existing accounts to increase their sales, thus adding to the overall base, and diluting the top accounts percentage is the way to go. Consistently look for opportunities to add product categories to existing accounts. They won’t buy every product you bring to them, but if done correctly, they will feel like you are always trying to help them grow their business or add another revenue stream. Although it’s not always fun, continuous prospecting is key to a healthy territory. A salesperson recently sent me an email with a question. They have a large dollar volume territory and have only lost one customer in the last five years. His question was, do you think prospecting and new account generation is important in my situation? My answer was yes, for a few reasons. One of which is you may have only lost one customer for a service issue, but what happens if a customer goes out of business, retires, gets sick, passes away, sells the business? There are a myriad of reasons why you would lose business, even if your service is impeccable. You don’t want to be in the spot of losing a customer with no real opportunities available to make up that volume, and commission dollars.
Also keep an eye on how many sales calls you make to you top 20 accounts a month. Do you notice any patterns of spending too much time on certain accounts. If so, work to find solutions to pare that down to a level that works for both of you. Remember, any time saved here provides time to prospect and identify new business opportunities.
Just like a solid foundation is critical to a well-built home, a solid account foundation is critical to a well-built sales territory. If you have a solid foundation, congratulations and keep up the good work. If you’re top heavy, what are you going to do about it? Try analyzing your performance, put together a plan and then execute it. Happy Selling!!
