Cost of Sales is a critical KPI, particularly when you operate on thin margins.  Influencing factors include attrition, training, travel, equipment, compensation, recruiting and administrative costs.  Some of these are generally fixed while others can vary widely.

If 100% of your salespeople consistently make their quota or budget at the desired margin, much of the concern about Cost of Sales would evaporate.

So why worry about it? I was speaking with an SVP of a brand-name company with thousands of salespeople.  He told me that most all of their sales teams have only a few (2-3) salespeople achieving quota while the rest consistently struggle.  Let's take a look at a typical sales team of 8 people.

The net gap in margin, $210,000 in this example, replicated 6 times to account for the 5 similarly performing teams in the organization, has a direct impact of $1,260,000 on the Cost of Sales.  You don’t need to be a financial wiz to see that even a small drop in margin has a significant effect on profitability.

My experience is that when salespeople consistently do the things which they don’t want to do (healthy behaviors), good things happen.  Highly-effective people do the hardest and least desirable things first, assuring greater productivity.

In this light, the SVP’s comments illustrate both a huge problem and an amazing opportunity.  Yet most senior executives assume the 80/20 rule will be true, but simply leads to more unacceptable behaviors and outcomes.

Consider what would happen if your financial people were able to account for only 92% of your money or if operations shipped only 92% of your product.  It’s virtually certain that things would change quickly.

Let's put aside the impact on profit and look only at the salespeople.  Self-limiting thinking impacts everything.  For example:

• I can’t help a prospect who's happy with their current supplier.
• The economy is hurting our business.
• It’s OK if I miss my quota as long as I come close.
• I’m not an executive.
• I wish that I didn’t have to deal with being rejected.
• People are under pressure to buy the lowest priced products.

These thoughts influence bravery, execution, adherence to sales process, motivation, outlook and most importantly whether the salesperson can execute the call strategy.

What are your salespeople thinking when management isn’t looking?  Is sales management skilled enough to address this challenge?  What don’t you know about your sales force that’s costing you 8% or more of your margin dollars?  Are you accepting the 80/20 rule, the one which says that 80% of your sales organization is underperforming?