Are You Firing Blanks

Note : This article presumes your primary business purpose is to make profit.

No, this article doesn't deal with male biological issues, the 'blanks' referred to are simply unprofitable business resources. And please remember that profit is not always measured directly in dollars, time is also valuable.

A business resource can be defined as an asset that aids one's business purpose, and there are costs associated with any asset. Using accounting terminology, the Return On any Investment (ROI) should always be directly or indirectly, positive. If not, a solution may involve sourcing a less expensive alternative, updating your manufacturing techniques, revising your pricing structure, or perhaps a resource deletion.

'Deletion' does sound serious, I agree. But to persist with 'blanks' that directly oppose your primary business goal of making profit is nonsense. 'Business stupidity' may be a more appropriate term.

Two very important potential 'blank' resource groups form the crux of any business; they are your salespeople and your customers. Members of both groups are hired, and when necessary they need to be fired. The hiring/firing of employees isn't a new concept to most of us, but perhaps the hiring/firing of customers maybe something a little lateral for some readers.

In addition to the direct effect of poor performance from these two groups, the link between them is your primary marketing information source. Your customers continually provide vital clues as to the 'match/mismatch' between your Marketing Mix and their Purchasing Mix. Both groups need to perform in a variety of ways.

There are many similarities between them:

Non-performing customers and salespeople can be similarly treated according to three steps:

Hiring Salespeople :

Ignoring the flowery questions that many (especially) small business owners/managers/sales managers tend to ask applicants at interviews (yes, me too!!), you need to establish four important things:

Now get them to sign a lawyer-approved performance-based employment contract, even if they are only earning sales-based commission. Explain it well, and get a signed understanding, and a signed acceptance of all conditions. Detail specifically any clauses referring to employment termination. Ensure clauses pertaining to the use of any information are included.

All your salespeople, irrespective of their remuneration setup, cost you. Even more so should they not be performing. The question then beckons, "What are they really doing out there"? If necessary, you must be able to terminate their employment very quickly. A salesperson's job security should always be his/her sales performance.

In return for the contractual situation, if they perform as required, PAY VERY WELL. Remember (assuming you haven't got a badly designed compensation package), if they are earning lots ... so are you.

Follow the above recipe and you will only attract above average salespeople, you'll scare off the non-performers. Let applicants back themselves; their employment needs to be at their risk, not yours.

Firing Salespeople :

Any 'blanks' need to go ASAP. This is where astute sales-management is vital, or it will cost your organisation a lot more than you think. But what are those costs:

Poorly performing salespeople know they aren't achieving the expected results and are smart enough to plan for the inevitable. Albeit somewhat creatively, it's likely they will have a copy of your customer database already. Clauses against its use by any party must be in the contract signed at the time of employment.

a) Contracted Salespeople:

Talk to your identified 'blank'. The conversation regarding their performance won't come as a surprise, but your pleasantries might throw them a little. During this conversation the situation needs to be qualified, and their non-performance history fully explained. * The salesperson needs to understand that you have decided to end the relationship and why, and that it will be done as per the contract they signed. Be clinical.

At this point you have a caged animal very much on the defensive. They will promise to change, guarantee improvements, and then there are always those many external mitigating circumstances and excuses? The old cliché that a leopard doesn't change its spots certainly applies, and a probation period will simply waste time for both parties, and only waste your money. They are probably well into their new job-search process, and only want to rort out another few weeks pay.

Have a pre-paid cab arranged to take them home (assuming they use a company car), and their final pay cheque ready. Monitor the removal of personal belongings (desk/car) and escort them off the premises.

b) Non-Contracted Staff:

Help them to go ... yes! This applies to any employee, not just sales staff. In most developed countries, employee-protection legislation exists and smart employees know how to use it. Avoid possible confrontation legalities and unpleasantness by coming to a mutual agreement regarding the situation (i.e. square peg in a round hole), and then promoting their job-search efforts. **

Sure, it's a tough financial and personal pill to swallow, but the alternative often becomes a waste of time, effort and money. Allowing them to attend interviews during work time and supporting their move is a simple form of damage control. If by chance they haven't plundered your files, they possibly won't, and if negative gossip hasn't yet permeated the office, it too may not occur. They'll leave a lot sooner (cheaper for you), with far less animosity than would otherwise be the case.

Yes it's going to be expensive to replace the person, but the situation is quite possibly partly your fault! How well were they interviewed? What monitoring processes have been in place throughout their employment? How well was the job specified? How was performance measured? Were all the necessary resources supplied? Were they a square peg in a round hole from the beginning? ... You should have seen the signs.

As an employer, you should learn from these situations. Document all details and try to avoid the same issues in future.

Hiring Customers :

They're hired just the same. The costs associated with getting new business are normally measured in time value. Add a few extra people into the equation for major tender responses and the initial expense can be extremely expensive. I only hope you do enough homework (risk minimising) to warrant the gamble. It's also worth considering opportunity costs of the work those extra people haven't done.

Consider an example: (normal day-to-day business)

The cost of a salesperson on an hourly basis (include overheads) is calculated as $30. Assuming a sales hit-rate of 1:10, the average time spent losing a sale being 2 hours and the average time spent winning a sale being 7 hours, the direct cost to the company for each order from that salesperson is $700 (18 x lost-sale hours, plus 7 x won-sale hours = 25 hours x $30). Add in other assistance and it's likely that for each successful sale (tenders aside) the company has actually spent close to $1000. Often the initial purchase-order profit doesn't cover this cost.

Then there are the ongoing costs of those customers, keeping an account operating, payment terms, authorised discount levels, support labour/time, phone-calls/time etc. Although these costs may seem minor, multiply $20/year by a few hundred almost-dormant customers.

Sorry for being a little cynical, but some customers will use you as an expert they can call upon for advice and guidance. They don't intend to buy anything, but as their supposed supplier they feel they have the right to abuse the relationship in this way. Sadly, you feel obliged to assist, in the romantic notion that they will automatically purchase from you in the future.

Customers are fickle. They will also approach your competition when a major purchase is planned. There are no guarantees of your success, yet you have suffered the expense of being their free consultant.

Firing Customers:

Have you ever wondered why many large organisations stop dealing directly with their little customers? They just aren't profitable ... so they're fired, for doing absolutely nothing wrong. These non-profitable customers are very generously passed onto their agents/dealers to handle ... unprofitably ... in the hope that they might buy sometime soon. And what's more, the list is often very out-of-date. Well ... what can one say, "Thanks for the opportunity expense".

Why do smaller businesses cling to those almost-dormant 'blanks' like their business life depended on them, perhaps it does. The mistake they make is setting up accounts for them, offering them an automatic discount level, and giving them 30 days to pay. Wait until the customer earns those privileges. As a suggestion, establish the cost of invoicing, producing statements etc, it may surprise.

We've all heard of the 80:20 rule, 80% of your business from 20% of your customers. The other 80% of your customers are potential 'blanks' that are probably on the customer databases of most of your competitors, with a similar status. Perhaps 10% of those potential 'blanks' may make reasonable purchases in the medium future and if possible you need to establish which organisations they are, and maintain their status quo.

Fire the remaining 70% (approx) and make them cash-sale C.O.D. customers, who will simply receive cash receipts at the time of purchase. Until they earn the right to improved conditions, give them nothing, but be sure to explain your system to them. To become an account customer with 30-day terms they need to spend over a predetermined minimum each year. Discount levels kick in at predetermined annual purchasing levels, etc.

You do however want to keep in contact with your fired 'blanks'. A single-page quarterly email newsletter is ideal to inform people of latest developments and special deals. Ensure your emailing list is 'opt-in' only.

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Sterility aside (apologies), congratulations if you are firing business 'blanks' within your organisation. If you're not, count your losses, as they're mounting as you read.

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* The 'Business Basics' Spreadsheet Package (only $295 Aus.) available from Business Rationale includes tools that will assist. Business Basics

** Business Rationale is soon to release a new E-Book detailing Interview Techniques (both

Interviewer & Interviewee) and the Job-Search Process, including Résumé Templates and various

Analyses

About the Author

Steve Underhill (MD - Business Rationale) is a business consultant dedicated to helping SME's (Small-Medium Business Enterprises) understand more about business techniques.