Sales Management Training: The Real Cost of a Bad Hire

Lifetime Customer Value =

Average Order Value X Average Order Frequency X Customer Lifetime X Referrals.

If you AOV = £1,000 and your average customer buys 4 times per year (AOF) and he stays with you for 3 years and you generate 1 referral which you close per annum your average lifetime customer value is £12,000. OK, so your sales guy is paid a basic salary of £30,000 plus 3 months of guaranteed commission of £6,000 and he's targeted on £220,000 per year. Say he hits 40% (£88,000), if your appetite for keeping a bad performer is 9-12 months (which isn't uncommon in the UK - 3 months to ramp up, 3 months to discover he's not hitting his numbers ... but he's a nice chap .... 3 months to put him through the process of trying ot fix him and maybe another 3 to get rid ... so you can hire another dumb schlep from the company up the road where he's just been fired from!) this can cost you dear.

How many sales meetings will he have sat through where he looks like Richard Burton at the start of the month but ends up looking more like Keanu Reeves by the end? (Looks good can't act!, Sorry Keanu!) ow many people in your team... 5, 10 or more wasting 10 minutes every Monday morning listening to excuses and him blaming the market, your discounting policy, how busy he is writing proposals, your marketing collateral, your lack of help) 10 man minutes x 5 people is 50 minutes a week + your management time.

But let's face it, while he's on the turf your competition are ofcourse sat back saying "We can't sell to ABC company because Jonny Weakcloser is prospecting there" or are they clicking their heels with glee saying "Thank you for your business Mr Prospect and thanks for keeping your account with us for the next 3 years". 60% x 3 years = 180% of £220,000.

Now, let's look at referrals. If he gets 1 referral a year that converts = £12,000 LCV. But if he knew how to get 4 referrals a year (one a quarter = £48,000 per new customer)

One bad hire can cost you hundreds of thousands or millions in lost business. Heaven alone knows the impact on morale of sitting thorugh another meeting listening ot him whinge and whine about how tough the economy is and finding every reason but his own ability to blame for poor performance.

If anyone's interested to learn about how you can minimise the chances of a false positive hire, drop me a line at EVANCARMICHAEL@SALTeurope.com.

Happy recruiting!

(c)Sandler Sales Institute, 2006 Marcus Cauchi Managing Director S.A.L.T (Europe) Ltd London's First Sandler Sales Institute Mob: +44 (0)7877 616 983 Tel: 0845 458 1237 (UK Only)

London1.Sandler.com

Sales Management Training: The Real Cost of a Bad Hire - To learn more about this author, visit Marcus Cauchi's Website.

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