4 Ways to Cut Cost of Sales (Without Cutting Heads)

By Tom Martin on Oct 13, 2015

Like many business projects, sales effectiveness projects are often focused on the big 3 – Increasing revenue, cutting costs and/or reducing risks. When we talk to sales leaders, the primary stated business objectives of sales transformation projects usually tie back to increasing revenue – capturing new accounts, improving up-sell and cross-sell, increasing renewal rates, increasing revenue per seller productivity.

Reducing cost of sales (COS) could also be, and should also be, considered when establishing the metrics of success in new sales effectiveness initiatives.  “Cutting costs” often triggers a Pavlovian response to thinking mostly about cutting headcount.  Here are four ideas on how to reduce your cost of sales without cutting headcount.

1. Leverage lower cost resources

2. No wasted sales calls

3. Focus on current accounts

4. Better opportunity qualification

Bonus: Consider Cost of Sales in all change initiatives 

1. Leverage lower cost resources

Review your sales process and your customer’s buying process for each of your key types of sales – ex. new logos, cross-sell/upsell, renewals.   Consider the various members of the extended customer engagement team across all of your channels and identify where you can get the biggest bang for your buck in terms of moving the sales and buying process forward.  Minimize unnecessary 4 and 6 legged sales calls.

Some firms assume the best way to reduce COS is by delaying actions by field salespeople until later in the sales process and completely eliminating multi-person sales calls.  That may work in general, but consider your own unique circumstances, as a talented solution architect deployed once early in the buying process could eliminate the need for multiple calls later in the sales cycle.

2. No wasted sales calls

Sales calls shouldn’t really be considered a success unless they move the buying process forward.   At the same time many sellers conduct sales calls where the planning on “what victory looks like” doesn’t include consideration of what actions the customer needs to take to move the buying process forward.

Think about your sales team – how many sales calls does it take for them to close an average deal?  What is the cost for an average sales call for your team?  Imagine how much faster and cheaper it would be if every sales call moved a deal forward.

3. Focus on current accounts

It is very common for sales effectiveness initiatives to focus on driving “new logos” (business from new accounts).  Without some level of new accounts, a business can’t survive.  That said, we are all familiar with the statistics on how much easier it is to sell to existing accounts compared to new accounts.

To reduce COS review your current plans for up-sell, cross-sell, customer renewals and account development.  The solution might be as simple as shifting some resources and mindsets – or possibly as complex as redesigning the go-to-market strategy and hiring people with a different set of competencies and experience.

4. Better opportunity qualification

This is often a matter of common sense that isn’t so common.  Intuitively, we all know that if we stop pursuing unwinnable or bad deals earlier in the sales cycle, we will have more time to spend winning the right deals.  Sellers winning 3 of 10 deals pursued to completion can shift to win 4 deals out of 7 (with 3 dropped quickly).

In order to do that, be sure the sales team is clear on the qualification criteria for great deals (and perfect fit accounts).  Sales managers should focus coaching efforts on qualifying out early stage prospects, rather than saving all of their coaching efforts for late stage deals.

Bonus: Consider Cost of Sales in all change initiatives

Review your sales transformation and sales effectiveness initiatives currently in progress or planned for next year.  In addition to the planned focus on increasing revenue, take the time to think through success metrics for the initiatives that can be tied to reducing your cost of sales.

For our readers – these four ideas are just a starting point.  What other approaches have you taken to reducing cost of sales?

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Tom Martin

Written by Tom Martin

Tom is a member of Symmetrics Group's Advisory Board, and brings 25 years of experience as a specialized generalist in the sales effectiveness industry, where he is sometimes referred to as “The Consultant to Consultants.” Tom is passionate about KISS (Keep it Simple for the Sellers) and focusing on the reinforcement and sustainment activities that drive sales transformations.

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