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making sales vs opening accounts

In the past 12 months i've been lookin at a few direct marketing books and the statement always comes up.

It's much cheaper to keep selling to an existing customer than to find and create a new one

Made me wonder how this applies to a career in sales. Currently I sell CCTV to small business owners, and i'm really happy how I am going by optimising my processes however .. is it fast enough? My sales average $10,000/ea

I thought about it quickly and came up with a quick three stages ease of new customer acquisition.

1. find a new customer through cold calling (takes time)
2. find a customer through a referral (less time)
3. open a new account (least time of all) - although you have to look after your customers, you are saving time by using this customer as a small chunk of your annual turnover/sales.

It is like having a business, any business, where your customer comes back to you again and again.

It costs money and time (and therfore money) to find customers.

Ideally I would see OPENING ACCOUNTS as the best way to achieve a high income.

From a scientific perspective, if i can call it that, if you keep selling by selling to customers one at a time you will certainly hit a 'wall' sooner or later no matter how efficient you are at creating new business. As presenting time, calling time, driving time, follow up time, handling objections time will all restrict how many people you can speak to.

I understand that this is all a part of the sales process but i'm beginning to wonder if it would be more practical to establish trust, credability, etc once with a customer and continue a relationship with them for years.

For example it may only take 10 hours total to become a supplier for fabric to a large furniture maker, which may equal to purchases of $200,000 per year or $1m in 5 years.

The way i'm going (selling to small business owners) i'm selling equipment that will last 5-8 years and has little guarantee of being repurchased if it is still working well for the business owner!

in 40 hours i sell = $10,000 over 5 years
in 40 hours i could sell = $1,000,000 over 5 years

the second figure could be inaccurate but the difference in revenue generated is huge.

If I look as sales as a business it just seems to it would be better to build a relationship with a customer than just to sell to them and look for someone else.

My sales manager even said it would be unlikely that earning over $100/y would be possible he didn't say why but I can imagine it's because simply at that $/sale the reps just run out hours in the day, weeks in the quarter, quarters in the year to 'do the numbers' and meet new customers.

Your thoughts please! - by luka.
Rarely does an account that buys $1,000,000 in product over 5 years cost you only 40 hours of time. You end up maintaining a relationship with the buyer, taking them to lunch, calling them, sending letters and emails as well as visiting. If you don't the competition does and you lose the account.

However, repeat business is good.

Your note about prospecting taking long and referrals being more efficient is correct. However, what most forget, which is very simple, is that pockets of influence are widened by prospecting. Meaning you get referrals to more people by creating more accounts, a direct benefit of prospecting and marketing.

The other overlooked but more advanced point on referrals is; there are some industries that do not work well for referrals. Take the business you are in, a client buys one of what you sell say every 84 months (7 years). This means - if you are in a market that replaces current technology/equipment - one in 84 referrals seeks what you offer today. And, why this is an over simplified way to make a point I am certain you can read between the lines.

There are terrific businesses where in year two you get repeats, year three you get repeats from year one and two and so on. Plus there are upsells ... but in my position here on the forum I clearly cannot say what I would recommend you look at in an open forum, for obvious reasons.

If you are rethinking the industry you are involved in, then, by all means, PM me and I will try to help you out.

Lastly, everyone in our great industry must work on themselves and their selling skills continuously if they are to truly attain their lofty goals or, put another way; to become the best they can be.

If you were or are in a position that was not as great as you might be involved in tomorrow, at least you are gaining expereince and can work on your health, attitude and sales techniques. The later you will get terrific resources on from this site. And my point is; Focus as much on you as what you do.

Best of luck. - by Gold Calling
There are terrific businesses where in year two you get repeats, year three you get repeats from year one and two and so on. Plus there are upsells ... but in my position here on the forum I clearly cannot say what I would recommend you look at in an open forum, for obvious reasons.
Can you provide a couple examples of typical businesses that fit this profile? - by SpeedRacer
Thank you for your reply Gold Calling,

I'm enjoying my job now but would rather 'create relationships/accounts' with a customer then to 'sell them something'.

As an example, I may currently I speak to 30 NEW people to get 6 appointments to make 1 sale. It might take 30 hours to do this.
I'm excited now because I am continuously looking for ways to improve my efficiency and achieve new sales targets.

However a year from now i'm almost certain that 99% of my customers will not buy again from me, unless they open an second or third business.

This means that every day is a new day. From a personal finance perspective it would mean I have no 'assets' or residual or passive income.

Im not sure if this sales position allows me to build my customer base on top of the previous year.

An example with $500,000/y in new business and 1% repeat business.
Year 1 500,000.00
Year 2 505,000.00
Year 3 510,050.00
Year 4 515,150.50
Year 5 520,302.01

An example with $500,000/y in new business and 10% repeat business.
Year 1 500,000.00
Year 2 550,000.00
Year 3 605,000.00
Year 4 665,500.00
Year 5 732,050.00

An example with $500,000/y in new business and 30% repeat business.
Year 1 500,000.00
Year 2 650,000.00
Year 3 845,000.00
Year 4 1,098,500.00
Year 5 1,428,050.00 - by luka.
Speedracer, you asked for examples of businesses where ongoing revenue is exponential.

Systems integration (technology + tech services + professional services [PS]) is a superb example. On-site full service maintenance agreements [FSMA's] were a key measure of a SMs performance. Upsell was frequently a function of evolving technologies and software advancements. Over the past couple of years, the team was generating about 3-5% GP on the hardware sale but the inclusion of FSMA's would push the margin over 10% blended. Keeping a keen eye open for PS opportunity within each account (supporting numerous projects at the client site) ... I won President's Club last year for over-performing on this key gate!

Certain software sales where the PS opportunity is high also fits the mold quite well. The ongoing annual licensing is truly a revenue stream. At one point, we had the rights to distribute testing software in development labs. The GP was in the order of 15-30% but the PS implied was great as the client would see turnover in their support staff. Or their office was too small to have FT, certified technical staff so they'd contract our people! Upsell in this arena was a function of advancements in the offering (new products, add-on's, pricing changes, etc.).

Sales of certain lead-edge technologies into industries not typically associated with hi-tech also fit the descriptor. For example, I've sold computer vision-based technologies into the global railroad community (Hungarian State RR might still be paying for their FSMA's). Upsell was a function of taking that base application into other industries (eg. steel industry).

Copier sales with implied ongoing FSMA's and supplies also fit the description. Upsell generally came from the addition of accessories and satellite units.

I hope this helps ...

Good luck & Good selling!
Pat - by OUTSource Sales
I'm sorry OUTSource I don't understand how your slightly more complex examples differ from more basic examples such a supplier of consumable goods. - by luka.
Luka, I was responding to Speedracers' question (see the first sentence of my thread) ... - by OUTSource Sales
There are many creative businesses that have repeat sales too.

From a standpoint of the sales person's income, it could be said, for instance, that once you build contacts in a community your real estate income would grow exponentially. But this is limited by time.

Full Service Maintenance Agreements (FSMAs) like Pat mentioned are lucrative but there are other businesses that have very high repeat rates. However, again, due to what I do for a living, I would not mention them here as I would not want to be blamed latter as an arm for a head hunter of steeling talent from a company.

I guess the best conclusion is to say you are right. There are industries that will increase your income greater. What you must weigh is how much of an education are you getting where you are. If your learning curve is vertical it might be worth staying a few years even though on paper there is better income growth else where. Because you can apply your new skills to future endeavors and that will pay off.

Tough call in a forum for people like Pat and myself to advise you without issues of ethics and without actually mentoring (speaking with you personally).

SPEED - you will need to PM me and we would have to talk on the phone for me to disclose any more information. Sorry but I consult with many firms and have to watch ethics as to what is disclosed in the forum. I am not intentionally baiting, I assure you. - by Gold Calling

I hope this helps ...

Good luck & Good selling!
Pat
Your examples are very helpful Pat. Thanks. thmbp2; - by SpeedRacer
Some products just don't have a great opportunity for ongoing business, but that doesn't mean it's a poor opportunity. It's just a job that requires effort be put into finding new opportunities over and over again ("hunting" rather than "farming" as they say). The level of opportunity for repeat business is only one criteria in judging a sales job. But you should definitely do whatever you can to foster repeat business for those customers who have additional needs. - by Skip Anderson
When Xerox really got behind the SPIN model, it was intended to do a number of things but, clearly, they wanted to get in front of all opportunities available in each account. (What was missing was a concurrent marketing push, though.)

SPIN = Situations, Problems, Implications, Needs-Payoff.

When you're first going thru SPIN training (especially if you've received other sales training before), you find yourself spending soooo much time asking "situation" and "problem" related questions that you get a little antsy. However, if you persist, you find a wealth of customer concerns relating to their business (not yours). Admittedly, some of these will not relate - even at a "stretch" - to your offering. But the sharp SRs will find a "nugget" for now and will file away a few gems for further research.

In the alternative, if you had gone in pitching your company's offering from the get-go, you can see that if you win (with this approach) all you can expect is that single sale. And, this would probably have been a function of you having shown-up on a day when they were making such a decision anyway! So, the decision for your offering would have been based solely on price ...

If you're talking to a CEO and you feel comfortable enough to ask, "what keeps you up at night?", you might be shocked at how much he/she shares with you (assuming you've earned the right or if the relationship is already in-place). These executive nuggets can be utilized in planning your final approach, building-on the opportunity, and ultimately closing the account.

EXAMPLE: There's nothing sweeter than closing each branch office on the hardware, supplies, and FSMAs with a quote from the CEO about his discomfort with an existing vendor's service/support history!

THE POINT: To be truly successful, you need to understand the intimate business details within each of your accounts, so, ask the questions and listen to the answers!

Good luck & Good selling!
Pat - by OUTSource Sales
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