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The True Cost of Making Cold Calls

Sunday, February 27th, 2011

Making cold calls will typically plays some sort of role in an organization’s sales strategy.  With that being the case, it can be a productive exercise to look at what the true cost of that activity is.  The following blog drives to an estimated cost per cold call by dissecting the cost per employee per hour and then works toward the actual cost per cold calls.

Total Compensation
The majority of cost for any employee is the base compensation and benefits.  For this exercise, we will use a base salary of $50,000 per year.  We have used $20,000 per year as the total benefits as on average between 20% to 30% of an employees total compensation is comprised of benefit costs.  When we divide those annual figures by 52 weeks, and then by 40 hours per work week, we arrive at $33.65 per hour for total compensation for this sales employee.

The next largest expense when making cold calls is overhead.  This includes office space, power, IT support, hardware and software systems, insurance, administrative staff, phone, internet, etc.  Building out conservative assumptions in each of these areas, we arrived at total weekly cost of $320 per sales employee and when we divide that by 40 hours per week, we arrive at $8.00 per hour for overhead.

The next cost to factor for making cold calls is training.  For this analysis, we have used a figure of $2,000 for annual training cost, which is very conservative when you factor in all of the costs associated with delivering training.  When we divide the annual number of $2,000 by 52 weeks and then 40 hours per week, we arrive at right below $1 per hour for training per sales employee.

A cost that could easily get over looked when analyzing the cost of making cold calls is that cost for the managers that are managing the sales staff.  For this analysis, we uplifted the employee’s compensations by 25% to arrive at a manager compensation per hour and then assumed that the manager is responsible for ten cold callers.  By dividing the hourly cost of the manager by 10, we arrive at a cost of $4.21 per hour for the management of the cold caller.

Total Cost per Cold Call
When we sum up all the cost outlined, we arrive at a total cost per hour for this sales person to be $46.80.  If we then assume that this individual will make 10 cold calls per hour, we arrive at a cost of $4.68 per cold call.

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Disqualify Sales Prospects to Facilitate Sales Cycles

Friday, February 25th, 2011

When we are needing a commission and to hit quota, we are usually in a mode where we are telling sales prospects why our products are the right product for them.  But if the sales opportunity is not moving as fast as you would like, it can be powerful to do the opposite of selling and disqualify the prospect by questioning if our product is the right fit for them.

To explain how that might help, let’s take an example of a new car shopper to display how this could work.  The prospect has been looking at different cars, done the research, completed the test driving, and narrowed the choice to one car.  She has expressed interest but is hesitant to move forward to the next step in the process which is to purchase.

At this point in the sales cycle, the momentum and speed of the sales cycle has slowed so the sales person has three options:

1.    Do nothing:  The sales person could do nothing and let the prospect manage the speed and direction.  The problem with this is if the sales opportunity is not moving, by doing nothing it can stay there and this can result in more time being wasted on both sides and increase the probability of “no decision”.

2.    Push harder:  The sales person could push harder and try to sell more aggressively to the prospect.  The risk here is that, if there is internal confliction going on in the sales prospect, then by pushing harder could push them away.

3.    Disqualify:  When the sales person notices the hesitation and confliction, they can disqualify by mentioning that maybe the purchase is not right.  After this is done, if the purchase is a good fit, the sales prospect will begin to respond by selling on why it is a good fit and get through their hesitation.

As you can see from the example, disqualifying a prospect when they show resistance or hesitation can be a very powerful sales tactic.  Below are some of the key benefits from doing this at the right time in sales opportunities:

Improve Momentum
When you do disqualify a qualified prospect that has genuine interest and authority to buy,  when you push them away by disqualifying, they will typically come back by selling you on why it makes sense.  By the prospect selling you, this can take a deal that is either not moving or moving backward and create new momentum.

Uncover New Information
When a sales prospect begins to sell you on why you should not disqualify them, you will stand to uncover new customer information as they will likely communicate in their own words why it makes sense and that could uncover new details on their needs and how they stand to benefit.

Establish Credibility
By disqualifying a sales prospect, you can take a huge stride in the area of establishing credibility.  This is powerful as the typical sales person will opt to be more aggressive in a scenario where they sense hesitation.  By you disqualifying, not only do you stand out from the competition, but you also appear to be putting the interests of the prospect before your own interests of closing a deal.

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Launch Pad Solutions provides cold call training to help companies to improve sales performance.


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Use Social Proof to Establish Credibility in Sales

Wednesday, February 23rd, 2011

It is critical for you to establish credibility when dealing with sales prospects,. This is important because there are a high volume of sales people trying to get in the door and get the prospect’s attention.  If you haven’t established credibility, you will not stand out from the rest and can get denied by the “vendor filter” and one way to stand out from the rest and look credible is by using a concept of social proof.

Social proof is a method where you establish value and credibility by displaying yourself as being already associated with other people in the organization.  To display how this works, take two different men in a social setting.  One of the men is talking with many different people and groups and the other is not talking to anybody.  The first has established social proof, and the other has not.  By simply observing those two individuals, we do not know which one is better connected to the group, but our first impression and bet would be placed on the one that is talking to everybody and displaying social proof.

Social proof is a powerful thing and can help tremendously during a sales cycle. Below are some easy ways to build and create social proof.

Name Drop Internal Contacts

One tactic to establish credibility and social proof is to name drop contacts of other contacts that you have already spoken to and met with in the organization.  This is great to do when cold calling as it can lower the guard that the prospect might have as you go from an outsider trying to get in to already being inside.

Name Drop Titles
Another tactic to establish credibility is to name drop titles of individuals that you work with.  If you are trying to sell to a CFO and you mention working with other C-level executives during your messaging, then you can establish credibility as you have social proof from working mostly with executives.

Name Drop External Contacts
It can be helpful name drop external contacts companies that you work with create social proof.  Many communities and industries are fairly small in terms of people knowing each other.  If you can name drop a contact at one company that they prospect knows, that can help to establish credibility.

You can talk about your features and benefits all day, but what can really paint a picture is storytelling.  By telling a story about how your company has helped other organizations, a prospect will be more likely to begin to relate to what you are trying to tell them and this will establish credibility.

Source:  Jake Atwood, President at Ovation Sales Group & BuzzBuilder Pro

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Launch Pad Solutions, LLC helps organizations to drive sales excellence through cold call training.


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Four Reasons to Outsource Cold Calling

Sunday, February 20th, 2011

There are many companies today moving toward outsourcing of the cold calling and lead generation functions of their sales operations.  Below are four key reasons that support the decision to outsource cold calling.

1.  Decrease Labor Cost
If you take a the total cost for a sales person, then divide those costs to get to a per minute cost, then multiply by the amount of time spent making calls, then divide by the number of calls made, you will see that the cost per cold call is very high.  By shifting that part of the sales cycle to companies that perform that function on a large scale, companies are able to lower cost due to economies of scale and process efficiencies.

2.  Staffing Augmentation
Companies are also outsource the cold calling function in an effort to grow their existing staff in a quick, easy, and cost-effective way.  It is common for businesses to not have the financial resources and time needed to staff the sales department according to the desired growth plan.  To deal with this, many companies will keep their sales organization constant in terms of size but then outsource cold calling.  This helps them to quickly grow their staff and this can be scalable option that helps to close the gap on the desired growth plan.

3.  Improve Return on Investment
Experienced, full-time sales resources can be fairly expensive to a company in terms of labor cost.  To get the best bang for a company’s buck for this investment, companies look to outsource cold calling as by shifting that work load to the outsourcer, which allows the experienced staff can then focus on more strategic activities like attending meeting, giving presentations, and working on proposals.  This shift can improve the return on investment that the company is making in their existing in-house sales staff.

4.  Division of Labor / Specialization
Cold calling is just one piece of a typical sales process.  And that one piece is fairly specialized when it comes to skills, experience, and techniques.  When a company moves to outsource cold calling, their will be division of labor where a group will focus solely on that one area.  Not only is a cold calling outsourcer positioned for effectiveness in cold calling since that is all they do, but the in-house sales staff can improve their expertise and effectiveness in areas outside of cold calling by that being decreased in their workload.

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Launch Pad Solutions, LLC helps companies to improve sales through sales outsourcing services.


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Common Objections When Making Cold Calls

Saturday, February 19th, 2011

There is one thing that you can be certain of when making cold calls and that is that you will run against some sort of objections from the prospect.  Objections can be looked at as if they were mini stop signs that the prospects use them to try to end the call.  At some point on a cold call, an objection will come up and your ability to deal with it will dictate your sales effectiveness.

The good thing about objections is that you are really only likely to face a handful of different objections consistently.  If you make a list of the most common objections and  script out the responses that are most likely keep the call going, you can drastically improve your cold calling effectiveness.

Below are examples of common objections that come up on cold calls with some details on responses that can keep the conversation going.

I do not have time.
The people we sell to are typically very busy and will not be expecting our cold call.  With that being the case, we must confirm that they not in the middle of something.   If we identify that they do not have time to talk, a good response is “I can be very brief or I can call you back at another time”.

I am already using something today.
If the prospect says they are already using something similar to what you are making cold calls about, redirect the objection by asking them what they are using and how it is going.  Ask what is working well, what is not, when was the last time they looked at other options.

I do not have money.
When making cold calls, if the subject of not having money or budget comes up, you can redirect away from a purchase and move more of a discussion to where you will share information.  Examples of information you can share that might get the prospect’s information is industry trends, what their competitors are doing, how you have helped other companies, etc.

I am not interested.
When someone says they are not interested, redirect by asking questions as to what they are doing today.  This does not give fuel to their point that they don’t have interest, nor does it try to overcome by trying to get them to have interest.  It simply keeps the conversation going past the objection.

Just send me information.
If you hear this when making cold calls, you can avoid complying by telling them that you do not have enough information to know what to send and then redirect with information gathering question.

I am not looking right now.
If they are not looking now, position yourself as not trying to sell something now.  Communicate that you are simply trying to begin a discussion and open the dialogue between you and them so they can be knowledgeable when they are ready do something.

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Launch Pad Solutions, LLC helps companies with sales coaching and cold calling services.


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Questions to Ask When Qualifying Sales

Thursday, February 17th, 2011

A key way to improve our sales effectiveness is by improving our ability to qualify the opportunities that we work on.  This can have a large impact because time is limited and valuable, so we can improve our time management by working only on deals that are real in terms of interest, budget, and authority to buy.

Below are some questions that can help with qualifying sales opportunities to weed out any time deals that might result in just wasting time.

Why are you looking to make a change?
You will typically know many reasons why the prospect should would want to buy from you, but why does the prospect think they need to make a change or make a purchase?  Instead of telling them why the should change, ask them to tell you why they are looking to change in their own words and the answer will tell you a lot in terms of the quality of the opportunity.

What is the impact of doing nothing?
Every prospect that you try to sell to has the option to do nothing.  When qualifying sales, it is helpful to ask what happens if they do not make a change or purchase.  If the answer is that there is not a huge impact from staying the course, then the quality of the opportunity is less as there is not enough pain and pain is a key motivator for change.

Is there a time or event that the change has to be made by?
Identifying if there is a time or event that the purchase is has to be made by can help to qualify an opportunity.  This is referred to as a compelling event and examples are a contract expiring, a current system being discontinued, an organizational change, etc.  If there is a compelling event, you then know that the prospect is more likely to do something and you know about when they are likely to do something making the opportunity qualified.

Who else are you looking at?
When qualifying sales, it is critical to identify what other options and vendors the prospect is looking at.  Never assume that you are the only option they are considering.

How far along are you with the other vendors?
It can be helpful to identify how far along the prospect is with your competition.  If they are far along and you are coming in at the end, this opportunity is not as qualified.

How do you feel about your other options?
If you identify that the prospect is looking at other vendors, ask them how they feel about their other options.  Exploring to identify their level of interest in your competition can help while qualifying sales.

What is the decision making process?
When qualifying sales, you will want to determine the level of power that the person you are dealing with has.  One easy way to determine this without directly asking and offending anyone is to simply ask what the decision process is.  If you map that all the way out to point where a contract is signed, you will be able to identify how much power the person you are dealing with and the more power that person has, the more qualified the opportunity is.

Is the project budgeted?
It can be uncomfortable to discuss numbers early, but one easy way to do that is to ask if the project has been budgeted for.  A “no” will not necessarily disqualify, but a “yes” can help with qualify the opportunity.

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The True Cost of Sales Staff Turnover

Saturday, February 12th, 2011

In most sales organization, there is typically a revolving door of employment with sales staff constantly coming and going.  It can be debated as to what is contributing to the level of turnover, but what is not debatable is that there is a tremendous amount of cost associated with sales staff turnover.

To look at the impact of this turnover, this blog post outlines all of the costs associated with sales staff turnover.  To use an example, we will take a sales person that has fully loaded base earnings of $100,000 with on target earnings of $150,000.  When on target, the sales person brings in $1,000,000 per year in revenue for the company.

Recruiting Costs
When a sales person leaves, the job of recruiting begins.  On the low side, a recruiter will earn 20% of an applicant’s base salary.  We will use $15K as the cost of recruiting for this exercise.  Although, there is also an indirect cost from the time that management has to spending interviewing.  If we assume 20 hours spent and use the hourly rate of the position being filled, we get to total recruiting cost of around $16K to add to the cost for sales staff turnover.

Training Costs
All new sales staff will need to be trained on the products, sales processes, the company, the competition, etc. A company will typically provide a new sales person with one week of formal training on average.  But even after formal sales training will be a tremendous amount of informal training provided from peers and managers.  If we assume 20 hours of informal training, and we double that because the person providing help is taken away from their job, we get to 80 total hours of total training, which contributes $3,846 to the cost of sales staff turnover.

Opportunity Costs
The largest cost to result from sales staff turnover is in the area of opportunity cost.  This is all the business that is lost to the competition while the company is working to replace the lost sales person and train the replacement.  If this position brings in $1,000,000 on target per year, then we can assume a rate of $84K per month.  And if we assume 2 months to find a replacement, 1 month for them to start, 2 months to get up to speed, and then 4 months at 50%, we get to a total lost production of ~7 months which equals $584K of opportunity cost.

Intellectual Capital
When there is staff turnover, a tremendous amount of knowledge that walks out the door.  Not only had that staff already been through formal trainings, but they also had a tremendous amount of on-the-job training accruing everyday.  We can also add all of the knowledge that they accrued about the prospects and clients that the company does business with.  This knowledge is so valuable that it is very difficult to quantify.  And when it walks out the door, whether the knowledge is later used or not, it will likely end up at another company and that may be a competitor.

That is a quick summary of the cost of sales staff turnover.  In this example, the changing of the guard for one sales position cost the company $604K and that does not factor in intellectual capital, nor recurring revenue in future years from lost business linked to the turnover.  And the most interesting thing is that the majority of this cost will not show up on any of the company’s financial statements.

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Give Pain to Get Pain When Making Cold Calls

Monday, February 7th, 2011

When cold calling, it is critical to identify pain in order for the opportunity to be qualified.  This is because regardless of the cool things that your product can do and the relationships that you have established, if there is no pain there is no reason to change.  As a result, you will want to find pain and one effective way to find pain is to “give pain”.

Giving pain refers to sharing a story to a prospect of how someone else has experienced a challenge and exploring if they can relate and have seen anything similar.  This is a probing technique and can help the prospect to become more self-aware and share information that they might not if you ask them directly without the story of the other company.

A Brief Demonstration

An example of how this works would be to tell a prospect that a lot of your clients have complained about not being able to produce financial reports that have data from all of their international operations.   You can then go on to share the impact of this challenge and how it prohibited the companies from having visibility across the entire organization and how that impacted the quality and timeliness of decision making, which impacted the ability to manage labor costs, resulting in decreased profitability.

After you have shared pain, you can ask the prospect if that is something that they have had any similar challenges with.  From there, the prospect will then either share similar pain, will share pain in a different area, or will not admit to any pain.  When you reach this point while making cold calls, you can either drill down into pain that is shared or if there is no pain uncovered, you can continue on to give more pain from another example in another area.

Latent Pain
One of the reasons that giving pain is a powerful sales tactic to identify pain is that many prospects are not fully aware of their pain.  And when making cold calls, since you are calling them out of the blue, any pain they may have, whether they are aware of it or not, it is not the top of their mind.  When this is the case and the prospect is not actively thinking about pain in an area and trying to fix it, we call this “latent pain”.

In order to improve sales effectiveness, it can be helpful to uncover this latent pain and shine light on it.  One of the ways to accomplish this is to ask very direct questions about it.  The downside to doing this is that either the prospect can fall into denial and avoid acknowledging it or the prospect could feel attacked by the questioning and get defensive.

This is an example why giving pain to get pain can be powerful when making cold calls  as you give the prospect an example that helps them to become more aware.  You also bring it up in the context of another company so not only do they not get defensive by feeling attacked, they also can feel comforted by knowing that they are not the only company out there in that scenario.

*Source: Solution Selling Fieldbook

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Three Questions to Ask When Qualifying Sales

Sunday, February 6th, 2011

When working as a sales professional, it is critical to optimize the available time during the work week.  One of the keys to effective time management is to focus on qualifying sales opportunities so that time is only spent working on the opportunities that have the best chance of closing.

Below are three questions that should be asked when measuring how real a deal and prospect are:

1.  Why do something?

When we are to increase sales and hit our quota, it is easy to get very excited and easily jump at every deal that we encounter.  And we can find ourselves jumping through the prospect’s hoops to show them our products, give them pricing, and talk to them about how great our products.

And while we know why they should buy from us, we can easily skip right over asking the question of why should they make a change or make the purchase.  Is what you are trying to sell a “nice to have” or a “must have” to your prospect.  Answering why the prospect should do something will help you to figure this out and this will help with qualifying sales.

2.  Why now?
It is very important to identify why the prospect needs to purchase now.  If the purchase is a “must have”, that is great.  But is it a “must have” or is it a “must have right now”?  Answering this question will help you to determine the time line that the sales prospect is working against and will help you with qualifying sales.

If as part of answering this question, you identify a significant date or event that the purchase needs to be made by, then you have just uncovered a compelling event.  By there being a compelling event involved, the sales opportunity becomes much more qualified.

3.  Why buy from us?
It can be very helpful to identify why the prospect would buy from you over the competition.  If you cannot clearly answer this, then you either do not truly understand your prospect’s needs, you do not fully understand your offering and competitive differentiation, or maybe a little bit of both.

Work with the sales prospect to understand why they would want to do business with you over the competition.  If they cannot, or will not, communicate this to you, this is not a qualified opportunity.

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Keys to Building Rapport with Sales Prospects

Thursday, February 3rd, 2011

In order to be drive consistent results as sales professional, it is critical to be effective at building rapport with prospects.  Below are a few ways to be more effective in this area and this can help drive sales effectiveness:

Respect the Prospects Time
Regardless of the level you are selling at, you should always assume that the person you are selling to is very busy.  And with companies consolidating jobs, prospects now are busier than ever so the time that you need from the prospect to manage your sales process is very valuable.  As a result, in order to build rapport, it is critical to show them that you respect their time

By doing any of the below, you will easily communicate that you respect the sales prospect’s time and this can yield strong dividends in the area of rapport.

•    Ask if they have a minute, are in the middle of anything, or are available every time you call them.
•    At the beginning of every meeting, outline expectations in terms of focus and time, secure agreement. and then stick to the agreed time unless they chose to go over.
•    Build your meetings and timeline according to one that matches their availability and needs.

Seek to Understand in Order to be Understood
Seek to understand in order to be understood is a concept that Dr. Stephen Covey has written about and is focused on understanding the other person’s point of view first before trying to get them to understand you.  This can be used in any area where you are trying to build and maintain relationships but when it comes to building rapport with sales prospects, this approach can be very effective.  As a sales person, you are very interested having the prospect to understand you, what you have to offer, and why they should do business with you.

While part of understanding them comes from you learning about them by doing your research and homework, the more powerful piece of this is communicating to them that you understand them.  This can be done by make presentations more about them then about you, sharing your knowledge of them in meeting minutes, and simply sharing in conversations that you understand the challenges that they are facing.  Showing them consistently that you understand will yield strong results when building rapport.

Not too Aggressive
As a sales person, it can be a difficult balance between being too aggressive and not aggressive enough when working with sales prospects and sales opportunities.  While the right level of attention can be unclear and differ from situation to situation, what is clear is that you do not want to be too aggressive when trying to building rapport.  If you are too aggressive, you may still get the business but the prospect might not have a great level of rapport and comfort when dealing with you and this could impact referral and repeat business.

The best way to manage yourself in terms of how often to communicate and how hard to push with prospects is to get guidance directly from them as to what to do next and when.  If they say to call them back in two weeks and you call back then, then you are not being too aggressive as you are doing what they told you.  But if they say two months and you call back in three weeks, you are going to take a negative step in the area of building rapport.
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Launch Pad Solutions, LLC helps sales professionals with building rapport through sales coaching.


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