There’s an adage that you have to spend money to make money, and there’s no question that your salespeople must incur certain expenses to be successful. Specifi cally, they probably need to spend money on travel, lodging, and cell phones if they’re going to land and keep customers. At the same time, they may be able to land and keep the same number of customers if you make judicious changes in four areas. Let’s look at each one and some easy changes you might make.
Vehicles
Many small companies have taken a cue from larger corpora- tions and have leased cars for their salespeople. Years ago, this was standard practice. Now, some companies have recognized that this can be an unexpectedly costly arrangement, especially when salespeople do more driving than anticipated. For instance, we used to lease cars for our employees. These leases always had huge penalties for exceeding mileage limits. When I started with Peer- less Saw Company, we had three salespeople with car leases set for 20,000 miles annually, but our employees put between 40,000 and 50,000 miles on them. We incurred about a $7,500 mileage penalty per car.
We now have our salespeople buy and maintain their own cars.
We pay a fl at amount monthly as a car allowance and reimburse each salesperson for auto insurance premiums. This has reduced our overall insurance by about $1,500 per year as well as reduc- ing some of our liability exposure. Consider adopting a similar policy on salespeople’s cars if you’re still leasing, particularly if your employees are incurring mileage penalties.
Second, if you have fi ve or more salespeople, stop paying for their gas and instead get them fl eet gas cards. BP, Amoco, and
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101 Don’t Sell Yourself Short: Controlling Sales and Marketing Costs
other companies make these cards available, offering customers discounts if they supply their salespeople with their credit cards to pay for gas. The discount varies based on the volume of gas you use, but typically, the range is from 3 to 5 percent. In addition, some credit card companies offer a 2 percent discount on gas pur- chases if you use only a certain brand. It may not seem like much, but the discount can add up to signifi cant savings over the course of your salespeople’s travels.
Travel Expenses
Most salespeople don’t spend excessively on purpose. They simply don’t think that much about what they’re spending because it’s not their money. There are steps you can take, though, to get them to be more conscious of what they’re spending and consider less expensive options. Your salespeople need to know that they can impress a customer without spending $200 on lunch. In fact, some customers prefer modest expense account lunches, fi guring that one way or another, this cost will be passed on to them.
How do you encourage salespeople to think about what they’re spending and opt for less expensive alternatives when appropri- ate? Here are two suggestions:
Have them use a company credit card to pay for everything.
When people know that everything they spend will be item- ized and reviewed by a supervisor, they will think twice before taking their smallest customer to the most expensive restau- rant in town. They won’t become cheapskates (nor do you want them to be), but they will at least refl ect on whether an expense is a good investment in making a sale or keeping a customer happy or if it’s an unnecessary extravagance.
Give salespeople a direct, understandable incentive to cut sales-related costs. If you try to convince salespeople that the future of the company depends on their keeping spending 1.
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down, you probably won’t get much of a response. If, on the other hand, you offer to share with them whatever sav- ings they help produce, they will probably be much more responsive. Last year, we reduced our sales-related costs by
$2,200 per salesperson by sharing 50 percent of the sav- ings with them. In other words, if a salesperson reduces sales-related spending by $10,000, then that salesperson receives $5,000.
Cell Phones
Perhaps there are salespeople out there somewhere who don’t value their cell phone above all other possessions, but I haven’t met them. Cell phones have become the lifeblood of every type of salesperson, and as such, each one has particular preferences designed to facilitate a particular selling style and customer requirements. I would urge you not to buy the cheapest cell phone and service for your salespeople, since it is unlikely to meet their needs. At the same time, I would recommend that you fi gure out what those needs are. Specifi cally, ask your salespeople to answer the following three questions:
What are the average number of minutes you use per month? Do you ever exceed these minutes? How many months in a given year do you exceed them? How many more allowable minutes per month would prevent you from exceeding your limit?
Does the service you currently have cause you to lose calls frequently, infrequently, or never? Do you fi nd yourself unable to get a signal in certain areas when you’re on the road?
What features on your phone are most useful and are indispensable to doing your job well? What features do you rarely, if ever, use?
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To help you answer the previous three questions, consider what happened when my partner bought his fi rst cell phone for business use. He set up his account for 500 minutes per month, but when he exceeded his limit by just a few minutes, the rates increased dramatically. Monitoring his bills, we determined his average monthly use was around 650 minutes. Upping his minutes to 1,000 monthly was actually cheaper than staying with the 500- minute plan and paying for the extra minutes.
By answering these questions, your salespeople will supply the information you need to fi nd a more cost-effective phone and provider. It’s possible that everyone is happy with what you’re currently providing, but it’s more likely that you can save at least
$1,000 monthly by making changes—changes that also will make your employees happier with the cell phones and service they’re using. One of the small business owners I interviewed, for instance, told me that he had always assumed that his salespeople required a trendy, feature-loaded cell phone; he fi gured that they wanted to impress their customers with this brand of cell phone and that it provided them with all sorts of communication options via the Internet. Because of the questionnaire, however, this business owner discovered that most of his salespeople believed the trendy phone was a waste of money and that they would much prefer a less expensive phone with a few key functions as well as a higher number of maximum minutes.
Speaking of minutes, it’s wise to shop around to fi nd a provider that offers the best rates. We have a salesperson in the southern United States who receives 3,000 minutes for $150 monthly, while our West Coast salesperson gets the same number of minutes for
$129 per month from a different carrier. Again, don’t automati- cally take the cheapest rate, since the cheaper company’s coverage may be inferior or its contract may contain provisions that make it less desirable, such as a rate increase after an introductory period.
Still, the odds are that if you shop around for the best service deals, you can save some money.
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Finally, require that your salespeople use a hands-free device.
The cost is relatively low, and the long-term benefi t is high. Your salespeople probably do a lot of customer and prospect calling while driving, and a hands-free device is a good investment given that frequent usage.
Hotel Expenses
Here are two quick pieces of advice that will save you money with very little effort on your part:
Look for regional chain hotel deals. This is ideally suited to companies whose salespeople cover specifi c regions of the country. Many of the small company executives interviewed agree that these smaller, regional chains usually offer better deals than their national chain counterparts. Your salespeo- ple may prefer to stay at one of the huge chains because of the name or because it offers a superior bar or restaurant, but if the regional deal can save you even $500 per salesper- son annually, it’s a better option.
Find hotels that offer free breakfasts. In recent years, the number of hotels that have moved from free donuts and coffee to full continental breakfasts has risen dramatically.
The odds are that your salespeople can fi nd a nice one where they stay. If they do, you will no longer be receiving expense account forms from a salesperson indicating $300 a month spent on breakfasts.
This last point reminds me of an experience I had with a free hotel breakfast, an experience that communicates you can fi nd a wide variety of lodging deals if you’re willing to explore options.
I stayed at a Comfort Inn in West Virginia recently for $69 per night, and their breakfast included toast, pancakes, cold cereal, grits, apples, melons, and the best homemade biscuits and gravy
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I’d ever had. Even better, those biscuits had been homemade a few hours earlier.
For a salesperson who has been working hard and been on the road a while, this is a great perk. Using the Internet and talking to other salespeople who have traveled extensively in a given area, you can discover many different types of deals that will save your company money and be greatly appreciated by your employees.