Ships rise and fall with the tide. Most building material companies' fortunes do the same based on the housing market. That can lead to confusion when one uses sales to measure success. The latest ProSales 100 survey shows that the companies that primarily sold roofing showed better revenue numbers than those that relied on selling lumber. But roofing prices were fairly robust over the past few years while lumber prices plummeted. Given that factor, are the roofing-oriented building material dealers really better than the lumber-focused ones?
A great sales organization should be able to show measurable sales growth even when the tide runs against it. But the metric to use isn't sales volume. Rather, if you want a real indicator of your organization's selling skills and success, focus on "competitive sales success." You know it better as market share.
I define competitive sales success as the size of your slice of the pie relative to the competition. Here's how to figure it:
1. Count the market. Calculate the number of housing starts in the marketplace. Then estimate the volume of remodeling and restoration opportunities in your trading area.
2. Estimate 100% market volume. For each product or product category, determine the average dollar volume you get for each new home and remodeling project that you sell. Then multiply those averages times both the number of projects you do and the total number of starts and remodeling projects in your area.
3. Determine your market share by product. Divide actual sales by your estimates of what you'd make if you had 100% of the market. This is your market share.
There are abundant benefits to a market share mentality, the most important and obvious of which is an increase in sales volume above and beyond your competition. But any salesperson will gain other benefits from this new mindset.
If you count the market, you will quickly realize there are abundant sales growth opportunities. The leading LBM dealers on our ProSales 100 have only small slivers of the overall pie, thus showing that we are still a much-segmented industry. You have a lot more market share left to gain if you prospect aggressively.
One side result of your prospecting activity will be better margins. This is a natural occurrence that happens when you start to perceive the market's true abundance. When you see numerous alternative opportunities in your sales pipeline, you feel less beholden to a combative price negotiator. Additionally, your evaluation of opportunity by product segment will reveal additional ways to enhance profit margins.
Ultimately the market share mindset produces many benefits that enable you to shift your sales performance. If you would like my "Market Share Calculator Worksheet," e-mail me and I will provide the tool.
We are about to have an economy that will mask the need to improve selling skills. If you want to discover powerful methods of long-term success, stop accepting that sales ebb and flow. Start a sales campaign that strives to outperform the markets and actually beat the competition.
Rick Davis is president of Building Leaders Inc., an LBM advisory firm specializing in sales management training. He is an international speaker and author of Strategic Sales in the Building Industry, a BuilderBook publication. 773.769.4409. E-mail: [email protected]