How can you grow your business from existing low spending accounts?
Words by Barry Hall
When businesses are constantly under pressure to grow turnover and profitability, it can sometimes seem an impossible task. Given all the new entrants into the marketplace not to mention all the traditional competition, it’s very clear that we have to capitalise on every opportunity at our disposal.
The wholesaling market place is more challenging than it has even been with more and more competition after their slice of the cake. Obtaining new accounts is always vitally important to a business’s long term growth but it will also remain one of the most difficult and often disliked aspects of many sales peoples role.
It is said that it costs seven times more to get business from a new account than it does to get the same amount from an existing one. Think about the process that has to be gone through before that prospect actually turns into a spending account. Cold calling, knocking on many doors, finding the right contact, breaking the relationship he has with his current supplier – and then finally (and hopefully) getting him to spend regularly is something that comes with a significant investment on the part of the individual and the business. And although this should, without doubt, form a proactive sales strategy, quite often more time is expended on finding new customers than really developing existing ones to their maximum potential.
In a lot of wholesalers the troublesome 80/20 rule is always there – 80% of business can come from 20% of customers. There are critically two sides to this argument. One compelling issue is the exposure to risk which is clearly self-evident. You are at the behest of the customer which can mean that you are only as busy as he is and, crucially, is in a far better negotiation position than you are! Ultimately, this increases pressure on margin and service especially where your other business is concerned. But the rule also means there is a huge opportunity to grow the 80%!
The estimated average monthly spend of a typical One-Man Band Electrical Contractor is said to be approx. £3000.00 per month. Based on the 80/20 rule, that could mean a growth opportunity of around £2,400 per month! But even if you look at the number of customers you have spending less than £1000.00 a month it highlights the potential growth that exists without the added costs that finding new customers can entail.
Just think if you could increase some of these accounts by £250 a month. How much impact would that have on sales and the bottom line?
Sales is still about people buying from people, we have to make all our customers feel that they are valued and that we have a real desire to make their lives easier and their businesses more profitable.
Once this is identified, it may seem to be an easy option to grow, but translating this into hard numbers has it’s challenges, not least the fact that we’re so busy keeping our twenty percent satisfied, that it doesn’t seem to be a priority or that time is soaked up by the high demands that these kinds of customers typically have.
Going around the UK, many of our customers have highlighted that they can sometimes find moving the business balance somewhat challenging so planning, structure and approach is vital to this process.
Business development of existing customers has to have to be organised to make it part of any sales person’s business plan.
We have to identify opportunities and added value through better business questioning.
We have to ascertain how the customer likes to buy from us in terms of frequency and communication.
We have to make the customer feel valued.
We have to build stronger, long-term focused relationships with customers.
And we have to agree objective base growth plans with our customers.
Training and development of sales people and Managers is essential to this. A joint partnership has to be established so that a comprehensive strategy can be implemented and acted upon. And it has to be done with not just words, but deeds.
As Albert Einstein once said that the, “definition of insanity is doing the same things over and over and expecting different results!”
Barry Hall is a Sales & Management Training Consultant with Pinnacle Solutions, a specialist training company working specifically within the electrical wholesaling and manufacturing markets.
For a no-obligation informal discussion, please call 07881 361805