Sales Management by Joe Capillo
To maximize revenue generation, calculate exact staffing needs so customers can be properly served.
The last four articles in this series covered in detail the sales metrics you should be capturing and how to use them to promote continuous sales improvement. Having collected this information, you are now ready to apply it so that you can ensure that you have the right number of salespeople to properly serve your customers.
Staffing is The First Step in Sales Performance Improvement
In order to begin the process of sales performance improvement, it is first necessary to make sure that your store’s sales department is adequately staffed. Virtually all stores are understaffed to some degree. The reasons for this bear explaining here because most retailers are not prepared to admit that they are understaffed, or are unwilling to make hiring additional salespeople a top priority.
How to Determine the Right Number
The first piece of data you’ll need to examine when you decide to determine optimal sales staffing levels is how many customers come in to your store by hour, day, week, month and year.
Next, you will need to find out how many shoppers can be handled according to your store’s selling system in the hours worked by salespeople. This means that you’ll have to have some quantifiable standard of service for how long it takes to wait on a customer on average. In order to arrive at this quantifiable standard, you’ll have to establish a selling system that spells out how you want customers to be served, and apply this standard universally in all customer contacts.
What is important to consider is that viewing total traffic counts to determine how many salespeople you need won’t give you the answer you really need. Customers don’t arrive in a nice, even flow. More than 50% of your total traffic probably arrives on weekend days, while the other 50% (or less) comes in during the week.
If you are going to be successful in maximizing sales revenue, you have to have a strategy to deal with the weekend issue. The primary reason many stores do not grow at the desired rate or don’t achieve their sales volume goals is that they are not adequately staffed for weekends.
Average Staffing: Let’s say we have a standard of one hour to deliver our defined selling strategy to each customer. We’ve decided that in our store, this is the amount of time it takes, on average, to serve customers. It is the average time, but we know that some contacts are much shorter while others are much longer. We’ve observed, for example, that in dealing with a living room customer on special order merchandise, we might have to spend several hours selecting items and writing the sale.
If our total store traffic for the week is 250 UPS, we’ll likely see 125 on the five weekdays (we’ll make believe they’re all equal). This means we’ll see 25 UPS per day, so we need 25 sales hours available. If everyone works 8 hour days, you can see that we need 3 salespeople to handle this traffic (25 hours / 8 = 3.13).
Here’s the trap. We know that things don’t work out this evenly, but if we ignore that one extra customer (the 25th hour) we’ll end up with 5 un-served (or under-served) customers after a week – 20 in a month and 260 in a year. If our close rate is 25%, we’ll miss 65 sales and if our average sale is, say, $1,500, we’ll lose $97,500 in sales revenue and perhaps as much as $24,375 in net profit dollars. This shows how easy it is to lose money by understaffing your store.
Weekend Staffing: We’ll see 125 Ups over 2 days or 62.5 per day. Round this number to 63.
Since we spend one hour, on average, with each customer, we will need 63 sales hours or about 8 salespeople. (63 salesperson hours &Mac184; 8 hour shift = 7.88 salespeople).
- What do we do about sick days?
- How about weekends off?
- How will we handle days off?
- What about vacations?
- What if half of our weekend customers come in between the hours of 11:00 am and 4:00 pm?
- What if evenings are our busiest weekday times?
- What if traffic begins to creep upwards?
- How do we handle special sales, holiday sales, etc?
- With only 3 people during the week, what about lunch hours & breaks?
We’ve shown above the costly effect of missing only one UP per day. What if, because of some of the issues listed above, in a week you fail to serve or under-serve 10 UPS? Given the same performance assumptions as above, in the course of a year you will miss $195,000 in sales and as much as $48,750 in net profits.
One way to solve the problem of being understaffed is to reduce your planned time-with-customer from one hour to 45 minutes. This is the approach taken by owners or managers who simply do not want to increase the number of salespeople... but it will also require a change to your selling system.
The dilemma faced by all furniture retailers is that the nature of the selling/buying process is so personal, and so unique among customers, that defining the amount of time it should take in advance, is difficult at best. This is a process that will take some time to measure.
There are systems available that will help you solve this by tracking actual time-with-customer for each customer contact. After a short time you’ll know, by salesperson and in total, what the average time-with-customer is. You’ll be able to determine who are your most effective and your least effective salespeople. But how do we measure effectiveness?
Using RPU for Staffing
Revenue Per Up or RPU (explained in detail in previous installments and posted to the article archives on furninfo.com) is calculated by dividing sales volume by UPS. It is the measure of sales revenue per customer opportunity and it’s helpful in providing one method for determining your optimum staffing level. Here’s how:
- Determine your highest RPU salesperson over 90 days. Make sure it’s a full time salesperson. Ignore part time performers for now.
- Determine the number of UPS assigned to this person.
- Divide this into the total number of UPS recorded for the period
This is the number of salespeople you have on staff.
RPU is an important management metric. It is the owner’s measure of the return on each customer asset that the investment in facilities and advertising attracts. For the sales manager it is a measure of the overall effectiveness of each member of the sales staff. RPU is a performance based measurement. Different people can get to the same number in many different ways, but fundamentally, this is a measure of skill.
UPS Assigned Evenly
When you establish an UPS system, you make a commitment to your sales staff that they will have equal opportunities because of the rotation system. What you want in return is equal sales revenue, but a look at your metric reports will clearly show that this is not the case. There is a range of performance among your salespeople for every measurement factor.
The salesperson with the highest RPU returns the most dollars of revenue per UP, but may not have the highest volume, average sale or close ratio. She will, however, be among the highest in all three factors and by making her average number of customers your staffing standard you will make clear your commitment to sales effectiveness.
Based on these calculations you will probably need to add more salespeople to the rotation. You will now be able to make your expectations clear regarding how customers are served, close rates, average sale, and revenue per UP. For some people, probably your top volume producer included, this will mean there will be fewer UPS than before, so they’ll just have to become more effective – which is exactly what you want to happen.
Dealing With Your Top Volume Producer
Many top volume producers are simply the best all-around salespeople. Their RPU, will be among the very best in your store, if not the best.
In too many instances, however, the top volume producer just runs through more customers than anyone else and runs over everyone else in the process. In low-traffic stores, these people will have high close rates, but rank low in Average Sale and they need a lot of UPS to do their business.
They don’t like to spend a lot of time with customers because that keeps them off the door. The interesting thing is that they often have great people skills, and can connect just enough to get people to buy the thing they came in for, but no additional needs are uncovered, and no “room” thinking is involved. Also, very little follow up is done because these people are too busy waiting on customers.
In high-traffic, high-volume stores, where no UPS systems are used, this approach works because of the nature of the customers’ expectations. Where a higher level of service is required to separate you from your competition and close those tougher sales, these people hold down overall volume by “blowing off” the more difficult customer who needs more service.
High volume producers are often the most resistant to change of any kind and the most negative influences on any new hires. They act as though the new person is taking food off their table or money out of their pocket, and they make this known to the new person. Because they generate a lot of sales revenue, owners want to keep these people around. In many cases these are the “survivors” who got the store to where it is. Owners feel a degree of loyalty and obligation to bend to the opinion of the top producers, and the top producers know how to hold owners hostage to this past performance.
Well, if you’re in this position, get over it!
Understanding your sales metrics can liberate you from this “hostage” situation. In the past all you had to measure was volume, but with a metrics gathering plan and system you can see the reality of performance from many different angles. When you use metrics reports properly you’ll be able to see how much sales revenue is being lost to poor performance for all salespeople – including your top producers. All you’ll have to ask yourself is, “What price am I willing to pay for past performance?”
You should not be expected to sacrifice customer service or operational profits for any reason. Your business must be strong because only profitable businesses survive in the long run, and because, in the end, it affects your quality of life as the owner.
Editor’s Note: In the December/January issue, Joe Capillo’s important series on sales metrics will explain how to lead organizational change by hiring and training the people you need to get the sales and revenue results you require. If you missed any past installments, you can find them on furninfo.com in the “sales management index” of archived articles.
Joe Capillo is a 41 year career veteran, experienced in managing and consulting with furniture retail operations. He is also a contributing editor for Furniture World Magazine. He is a contributing editor to FURNITURE WORLD and a frequent speaker at industry functions. See all of Joe’s articles on the furninfo.com website.
Read other articles by Joe Capillo