Transcript – Episode 18

Fred Dunayer: Welcome to the SCORE Small Business Success Podcast, Been There, Done That. To get free mentoring services as well as to see the wide variety of resources available for small businesses, visit our website at www.score.org, or call 1-800-634-0245. Now here’s your host, Dennis Zink.

Dennis Zink:    Episode number 18: Sales. Fred Dunayer joins me today in our studio as co-host, SCORE mentor, and our audio engineer. Good morning, Fred.

Fred Dunayer: Good morning, Dennis.

Dennis Zink:    Our guest today is John Bonar. Welcome to Been There, Done That, John.

John Bonar:    Good morning, Fred. Good morning, Dennis. Glad to be here.

Dennis Zink:    John Bonar has degrees in material engineering from the University of Illinois. He has worked for Boeing, Exxon, and Carborundum company among others. Having 30 years of experience in marketing and sales positions, his job responsibilities have included sales and sales management, marketing management, business development, and product management. John’s expertise is in business strategy and planning, product definition, territory planning, key customer strategy, management of reps and distributors, and sales compensation.

John also has experience with small business as the business manager of his wife’s successful interior design business. John, what does selling entail?

John Bonar:    Selling fundamentally entails establishing a relationship and trust with you and your client or customer. Whether you’re selling airplanes or automobiles or cosmetics, or technical products as I did for most of my career, you still have to build a relationship with someone so that they really trust you when you tell them something’s going to do what it’s supposed to be doing for them.

Dennis Zink:    How do you develop that kind of relationship?

John Bonar:    That relationship is built on your bringing to the party or the table what you really need and what the client really needs to solve his problems. If you can’t do that then you can’t build any value for the client, and if you can’t build any value then you don’t have a relationship.

Dennis Zink:    A lot of times the term consultative selling is being used these days more than in the past. Could you describe what that means?

John Bonar:    To me that means problem solving. I made a very good living and my reputation with my clients by being able to solve problems for them. If you can’t solve a problem, i.e. eliminate the pain that a client is having with some issue inside his business or her business, you really aren’t going to develop a relationship or you’re not going to be consultative because they won’t really be calling you, they’ll be calling someone else.

Dennis Zink:    There are only three ways to really touch a prospect. You could talk to them by phone or Skype today, meet them face to face, or write to them. When should you use each and what works best?

John Bonar:    To me the phone is very appropriate if you want to set an appointment or if you’re possibly trying to qualify a client or a prospect for your service or your product. The written would probably be used primarily to sell to a mass market, i.e. for example, subscriptions to magazines or subscriptions to newspapers. Set appointments obviously to do that or solicit a commitment for a sale, again for a magazine or a newspaper. To me face to face is the way most things are more appropriately done, and simply that is you want to be able to look the client in the eye, see if they’re really talking back to you, are you still listening to what they’re telling you, and get a long-term commitment from them, i.e. building that relationship.

Dennis Zink:    Today with email being probably the primary way of communication in writing, do people send letters and is that an effective way to reach someone?

John Bonar:    People send letters, yes, even though it’s much more expensive. It’s also much more personable than an email. Email loses a lot of its ability to communicate an idea or your emotions or feelings, and that to me is one reason that you want to write a letter, or more importantly, go face to face with someone.

Fred Dunayer: To step back just a second, can you talk about the difference between sales and marketing? I think a lot of people have those two terms confused and I think there really is an important distinction.

John Bonar:    Marketing is the overall driver for a company’s strategy or business idea. Sales is part of the marketing effort. It’s the tip of the spear if you will, or it’s the front line of the marketing effort, but it is not marketing. Marketing entails much more than just selling to a client.

Dennis Zink:    How do sales impact a company?

John Bonar:    There’s an old adage, which is universally true, and that adage is basically it all starts with a sale. If you can’t sell something, if you haven’t sold something, there’s no reason for the company to be in existence.

Dennis Zink:    Nothing happens until someone sells something is the way I’ve heard it.

John Bonar:    That’s exactly right.

Dennis Zink:    What are the characteristics of a successful sales person?

John Bonar:    They have to be, in my idea and mind, outgoing, confident in their ability both personal as well as their product knowledge, the ability to relate to a client and understand the client’s objectives. They have to be intelligent, obviously. They have to have product knowledge; that’s a given but sometimes it’s not. They have to sell benefits, not features. That’s very, very important. And they have to be able to identify key decision makers inside the client’s organization when it’s not just a one-person business that they’re selling to.

Dennis Zink:    John, you mentioned characteristics of a successful salesperson. I know you and I have discussed different traits that are important to be a successful sales person, and they’re different. Can you explain what traits are important and how that’s different from what characteristics?

John Bonar:    The characteristics come from just the person’s personality, but traits are something you can develop if you decide you want to be in a sales function or in a marketing function. Those are much more important than whether you look good, do you part your hair on the right side, are you wearing clothes that are appropriate. Those types of things should be automatic for somebody in sales.

However, developing traits such as product knowledge, identification of key decision makers, how do you go about that, those are things that sometimes you have to learn the hard way, but a successful salesperson is going to do that.

Dennis Zink:    What should a salesperson try to do with a potential customer?

John Bonar:    With a potential customer I believe some of the things you really need to do: You need to understand what drives their business. Is it they need absolute high quality? Do they need the lowest cost product? Is delivery crucial for them? You need to understand those things to tailor your approach to the client. You need to develop solutions to those problems. You need to identify, again, key decision makers, and you need to close a sale so that you can start the relationship.

Dennis Zink:    What should a salesperson try to do with an existing customer?

John Bonar:    To me the most important thing with an existing customer is putting yourself in a position where you are the “go-to problem solver” for them. You want the first phone call when they’ve got another problem they want to work on with you. If you don’t get that then you’ve got a problem. You don’t have the exact relationship you really want. You need to figure out how to get there.

Dennis Zink:    What are the most difficult things to master when selling?

John Bonar:    Listening is the most important topic that has to be mastered. Salespeople like to talk. They like to talk about their product; they like to talk about what they can do for a client. That’s all well and good. You need to be able to do that. However, if you don’t listen, you don’t understand what the client’s problems are or what their pain is, and if you can’t understand that then you can’t develop a solution for them, and therefore you’re not going to build the relationship that you want. That’s key to me.

Other things that might be interesting and important: knowledge of the client’s issues, development of a basis for a relationship. Again, does it got to be quality? Is it cost? Is it delivery? Is it one or two of those things that are key to making sure that the client’s business is running right and you’re part of the solution to helping him make that leap? Bringing value with everything you do: that’s very, very important. And maintaining a relationship both in good and bad times, because there are going to be bad times.

Dennis Zink:    If you’re an entrepreneur or small business owner, do you have to be a salesperson?

John Bonar:    Absolutely. If you can’t sell or if you’re incapable of selling then you’re not going to be successful as an entrepreneur because by definition you’re probably a one person show. Again, there’s no sales manager or marketing manager to go to; you’re it, so it’s got to be you.

Dennis Zink:    Should you ever stop selling?

John Bonar:    Absolutely not. Everybody in the organization is a salesperson from the receptionist at the front desk, to the truck driver, to the person on the production line or the packaging line, or the person putting together something. They’re all salespeople. They may interact with a client once in a while. They’ve got to be ready to interact with that client if the clients happen to be touring your facility for whatever reason or they’re walking through the front door. Everybody has to be a salesperson and you can never stop selling. You should never stop.

Dennis Zink:    How does selling relate to marketing and marketing strategy?

John Bonar:    Selling, again, is the tip of the spear as far as marketing is concerned. Marketing drives the business. Its responsibility is to take the strategy or a direction for a company and translate it into programs that are going to accomplish those goals. Selling has to be on the front line of the marketing effort because it’s the person or people who are most in contact with the potential client or the existing client. If they are not capable then the marketing program is probably going to fail.

Dennis Zink:    How does sales relate to product development and production, and even finance?

John Bonar:    Selling, again, because it’s on the front line, it’s the place where the feedback about how the product or how the client looks at the product is coming back into your organization. That influences the marketing programs. Part of selling’s responsibility is to bring information back to the organization about how is your product perceived, is the quality where it’s supposed to be or it needs to be, is your pricing good? What’s the competition doing? All of that feeds back into how many units do you have to produce and when do you have to produce them. How’s the price look? That feeds back into the finance vs. your cost. Those are all how things … They also bring back information about gee, I need a new product. I need a new service. That feeds back into product development or the marketing effort to define what they need to do in addition to whatever you’re currently doing in the marketplace.

Dennis Zink:    In my experience, one of the most challenging things is hiring the right salespeople. If you have the right salespeople, sales cures all. If you’re selling then you should be making money and doing everything else right hopefully. What are some different ways in your experience to compensate your sales team?

John Bonar:    There are really no set programs that work for everybody at all times. Salespeople, depending on what they’re selling and what their marketplace looks like, could be just straight salary. They could be salary plus commission, salary and a bonus. They could be salary and profit sharing. No one compensation plan is right at all times for all people. You may even have different compensation plans for different salespeople in your organization depending on what their responsibilities are and how you want to split up your marketplace and your territories.

Dennis Zink:    In another company many, many years ago the question of territories always comes up: how do you split territories and how do you compensate? When I worked in New York many years ago, if someone sold a product in their territory but it was delivered in another person’s territory, then sometimes they had a split commission either 60/40, 55/45. What’s your suggestion on doing that in territories?

John Bonar:    Those are a little tricky but I’ve faced that situation more than once. We had people who called on headquarters organizations and the headquarters generated the yearly blanket purchase order. However, very little or nothing was drop shipped into that territory that covered the headquarters organization and it was shipped to outlying plants. How do you compensate somebody for going in to make sure you got the purchase order at headquarters? That’s a real tricky situation.

We wound up basically doing what you suggested. You split the compensation plan along the lines of 70/30, 40/60, 50/50, however it works out that your organization functions well and nobody’s upset with the fact that they’re spending all this time at headquarters but everything is being shipped out of their territory to Podunk, USA some place and that person, it shows up on his shipping report and he’s getting credit for it and he’s getting a bonus for it – but he really may or may not have done a whole lot to generate the sale. It’s a tricky situation but you have to work out something that’s equitable and that the salespeople agree to. If you don’t, you got a big problem.

Dennis Zink:    As recently as yesterday I heard about salespeople at a company that if there was an issue they had to work it out amongst themselves. If they couldn’t, then the manager would just split it right down the middle and said “Okay, 50/50.” Now we’re done with it and we’ll move on. It wasn’t something that lingered. Do you think that’s a good idea?

John Bonar:    I think the salespeople have to talk about something like that, because again, you can’t have one going around feeling upset that his efforts are not getting him something back for the time. He’s only got so many hours to work and if he won’t spend it at headquarters making sure they’re happy you got a big problem out in the plant because you’re not shipping anything.

Fred Dunayer: That manager’s name was Solomon, wasn’t it?

Dennis Zink:    Oh yeah.

Fred Dunayer: Split that baby right in half.

Dennis Zink:    It’s been a while since I’ve been in Podunk, by the way. It’s still there, I guess.

One of the big complains I hear over the years is in a sales territory where someone says “Gee, they’re cutting my territory into two or they’re hiring somebody else, so now I’ve got half the availability to make the kind of money that I was expecting to make.” How do you deal with that?

John Bonar:    That is inevitable if you’re in a growth mode in a company. Eventually, certainly the marketing and sales managers are looking at how much can you produce in the 1,800 hours you have in a year to spend working. If it makes sense to split the territory along some lines, then they’re going to do that. It’s their, also, responsibility to make sure that they take care of the salespeople when they do that. They need either to give them overrides for some period of time to keep them happy without getting crazy as far as losing control of their compensation plans. Somehow you need to work out something that both salespeople are going to be happy. If you’ve got potential to grow, even splitting a territory sooner or later you’re going to get back to making the same amount of money you were when you ran the territory by yourself.

Dennis Zink:    Is it better to divvy up a sales territory by geography, would you say, or are there other ways that make more sense?

John Bonar:    There are other ways that may make sense. Again, it depends on what you’re selling and what your potential in the marketplace and the territory is. I’ve split them along the lines of you’re going to handle the existing accounts. You’re also only going to handle new accounts. You go get them. I want to grow this territory and I want to double the size but I can’t make the existing accounts go away and I don’t want to turn them over to a salesperson inside where they lose contact with the account, so you need to split the territory along those lines.

You can split them along lines such as key accounts and maintenance accounts. There’s any number of ways of splitting a territory. You got to look at an individual’s business and make some common sense solution to the problem while you’re still trying to grow and grab all of the potential in the territory.

Dennis Zink:    What are your thoughts on an entrepreneur starts a business and he says “Hey, my salespeople are making more than I am”?

John Bonar:    I’ve had that occur more than once to me and the only way to look at that in my opinion is if you design a compensation plan that allows them to make more money than you or your managers, that’s fine, but you need to recognize that upfront. If you don’t and then get mad about it, well shame on you. There’s no reason why a salesperson, if they’re really doing their job, shouldn’t make good money and as much as any good manager.

Dennis Zink:    Over the years I’ve had the belief that a sales position with a specific company and a given product is only worth so much. Whether I pay it in all salary, salary and commission, as you mentioned salary and bonus, draw against commission, whatever – at the end of the day, I’m going to look and see how many units the person sold, what kind of sales volume they’ve done, and what I paid them, and that’s got to be a certain percentage. Basically that’s the percentage I’m looking for, give or take a little bit, no matter who I’ve got selling. Does that make sense?

John Bonar:    Yes. Yeah, it makes sense from a management standpoint. You still have to control cost of sales. You can’t let it get totally out of whack; otherwise your gross margin is going to go the wrong way and therefore your profitability is going to go the wrong way. Sales has got to pull its weight but it’s still important. You have to compensate the manufacturing people in your organization and production people and the finance people and everybody else that’s part of your overhead organization.

Dennis Zink:    When do you think it makes sense to bring in a product person on a sales call?

John Bonar:    Where salespeople don’t have intimate knowledge or where the client may need a modified product. That person, the product manager or the market manager but more likely to product manager, is going to probably want to make that call for several reasons. One, to define whether they really want to do that, and two, are they missing a potential market here and has the client given them an opportunity to expand your offerings in the marketplace.

Fred Dunayer: John, is there a difference from a sales perspective selling products vs. selling services?

John Bonar:    There is. Products are defined. They’re more rigid in what can be offered vs. a service. They’re not easily modified. Services can be modified very easily, and to me there’s a difference in how you approach a client. Whether it’s something you’re shipping on a pallet vs., say, selling a service that coats a part with something, you can tailor the service much more easily to a client’s wishes than you can going out and going back and changing your production line to knock out 50 of something because the client needed some modification. That may be much more expensive than you really want to get into or upset your whole production line for 50 units when you’re cranking out 5,000 a day or something like that. That’s not easily done and it gets very expensive not only to you but it also may price you out of the marketplace. It may not be worth doing.

Dennis Zink:    That which we incentivize tends to improve and I’ve had good experience over the years with target accounts where you’ll say “These are the accounts that we currently don’t have that we’d like to have. Go get them and we’ll give you a bonus for it.” what do you think of that?

John Bonar:    That’s legitimate. It’s legitimate also to say “I want to move this product. I want to get this into the marketplace so I’m going to pay you an override, 1 or 2% or 5%, something like that. I want you to move this product for this reason.” Those are legitimate things to do with a sales force, absolutely.

Dennis Zink:    As long as it’s not a restaurant peddling old food.

John Bonar:    Something like that. Absolutely.

Dennis Zink:    Can you ever sell too much? Can a company say “Hey, we’re just moving too fast. We’re selling too much. We can’t keep up”? Does that ever happen?

John Bonar:    Absolutely. Absolutely. You can outsell your production line or you can outsell the ability to service whatever you’re selling very easily. You’ve got to control that. You either have to make sure you’re anticipating and putting in the capability of handling the increased value or you’ve made a fundamental error in your marketing plan and you’ve got to go back and rethink what you’re doing here, because there’s nothing worse than getting a client mad after you’ve decided that you’re going to go out and try and sell them something and now you can’t deliver it.

Fred Dunayer: John, do you recommend that salespeople or companies that employ salespeople have any sales management software, and do you have any specific suggestions with regards to that sort of thing?

John Bonar:    I don’t have specific suggestions on software to use but yes, today you can automate a lot of things that we used to do by hand – certainly about what are you selling in a particular territory or a city or a state so that you can look at trends, which are probably more important to analyze than actual hard numbers per se. Also, why wouldn’t you automate sales call reports and things like that. Those are certainly something that’s done today and should be done today.

Dennis Zink:    I know a big one is Salesforce.com, is widely used. Do you have experience with that?

John Bonar:    No, I don’t.

Fred Dunayer: I used to use a program called Act, which is a contact manager and kept track of things. I don’t know if that program’s still around or not.

Dennis Zink:    I used it, too. It was very good.

John Bonar:    I’ve used that one specifically because it allows you to communicate internally to both production, finance, and the management group if there’s something coming down the pike that really needs to be brought to their attention that’s out of the ordinary, for example.

Dennis Zink:    I know a local entrepreneur that had an interesting philosophy. What he did is, if someone asked him to do something he said “We can do it.” Then he’d go back to his office and say “I don’t know what I’m getting into. We have no idea how to do this but we’ll figure it out.” He’d stay up all night if necessary, bring in his team of people, and they would figure it out. Well today he’s a very, very successful entrepreneur and he’s obviously figured it out. What do you think of that?

John Bonar:    That type of thing, as an entrepreneur, is doable because you’re on the front line. You’re running the business. It is your business. It’s more difficult to do that if you’re in a larger organization or even an organization with only 2 or 300 people in it, because now you’ve got planning to do and what you’re talking about is impacting a whole lot of people. If you’re an entrepreneur and you’ve got a couple of people working for you, an engineer or a production person, and you come in and say “I want to do this,” they’re not going to tell you no. They may give you reasons why it’s going to upset the organization, but still, at that point if you decided that you want to do that and it’s in your best interest as an entrepreneur then you’re going to do it, sure.

Dennis Zink:    You mentioned different size companies. It makes me think that do you see a big difference between selling in a startup phase or a very small company vs. a very large company?

John Bonar:    Absolutely. Even in a large company in the startup phase of a new product launch, for example, selling is much, much different. You’re going to spend a lot more time in the marketplace. Your product managers are going to spend more time going face to face with clients because you’re launching something. Launching something is totally different than just showing up and taking an order for the same amount of product or the same product you’ve been selling to the client for the last 10 years.

Fred Dunayer: Do you think there have been any changes in the ways salespersons work given the changes in technology that have occurred in the past few years, different ways of communicating and that sort of thing?

John Bonar:    Absolutely. I think certainly the internet has replaced a lot of face to face things. We used to have an old adage: if a client was only buying $5,000 a year you never showed up. If he was buying $20,000 a year you might show up once a year. If he was buying $500,000 a year you showed up every day.

Dennis Zink:    If it’s a million dollars a year you live there.

John Bonar:    Exactly. If it’s a million dollars you’re on-site.

Dennis Zink:    There you go. Do you recommend using LinkedIn for sales, and if so, how?

John Bonar:    LinkedIn is an interesting organization and an interesting phenomenon but it’s oriented, in my mind anyway, to professionals or groups of people who have a like interest in something. Therefore I think it lends itself to business to business selling quite well. How you would use it on a consumer basis I’m still a little bit antsy and baffled about how you would pull that off. For example, I’m not sure my wife’s interior design business would have worked well on LinkedIn. I’m in five different LinkedIn groups right now and I use it to keep my face and my technical expertise in front of potential clients almost on a daily basis.

Dennis Zink:    I think you’re allowed 35 groups so you’ve got a way to go.

John Bonar:    How could handle all the email from 35 groups?

Fred Dunayer: John, is there anything that we haven’t covered in the course of this discussion that maybe you’ve thought of that you’d like to mention before we close?

John Bonar:    I think selling is a profession that everybody ought to think about and consider. It’s instant gratification from the standpoint of solving problems. If you really enjoy helping people I think it’s one of the greatest careers that you could ever have.

Dennis Zink:    Well John, thank you for being our guest on Been There, Done That.

John Bonar:    It’s my pleasure.

 

Fred Dunayer: You’ve been listening to the SCORE Small Business Success Podcast, Been There, Done That. The opinions of the hosts and guests are theirs and do not necessarily reflect those of SCORE. If you would like to hear more podcasts, get a free mentor, view a transcript of this podcast, or would like more information about the services we provide, you can call SCORE at 800-634-0245, or visit our website at www.score.org. Again, that’s 800-634-0245 or visit the website at www.score.org.

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