handling operation, because they often advise retail customers on the best
configuration of parts for a particular need. As always, make sure that the
compensation plan is congruent with the goals and Unique Selling Proposi-
tion of the company.
Advertising. Depending upon your location and industry, heavy advertising
may be needed. See how your competition and nearby retail locations have
resolved these issues and consider doing something similar.
Speaking of location, this and location and also location are critical in the
success of small businesses engaged in retail sales. Sales will be a function of
many factors, including population and demographics, local foot and car traffic,
visibility, signage rights, competition, parking, location history, image, zon-
ing and local restrictions, competition, interior design, and expansion alter-
natives. Choosing a location is discussed further in Chapter 10.
The Internet
There is no avoiding the Internet these days, so every small business should
have a Website to augment sales efforts, and many should also consider e-
catalogs, e-commerce, and keyword ads, as described in the following section:
Website. Every small business must have its own Website. A Website vali-
dates your business and provides information critical to new customers, such as
your Unique Selling Proposition (Chapter 2), business specialty, location, and
hours. It also helps many other new customers find out that your small business
simply exists! Setting up a Website is easy and inexpensive (as detailed in Chap-
ter 5). Once the site is up, it becomes the foundation of related initiatives such as
on-line catalogs, e-stores, and e-mail accounts. Your domain name should then
be added to all marketing materials, such as business cards, brochures, and even
the side of delivery trucks. The Website is heavily used by inside and outside
sales reps when customers ask common questions or need information.
E-Catalog. A catalog in this sense simply means many Web pages describing
the products and services offered by your small business; but customers cannot
buy from a catalog—they must buy from an e-store (described in the following
section. The e-catalog option is especially relevant to small businesses selling
complex, expensive, or regulated products, where on-line sales are not feasible
but where customers want detailed product information. A distributor of phar-
maceutical products, for example, cannot ship prescription drugs to unknown
buyers. The same reasoning applies to products such as guns, industrial chemi-
cals, capital equipment, and many others. In each case, it is not realistic to sell
the product on-line, but the sales force will greatly appreciate the ease and speed
of guiding customers to Web pages where detailed product information and de-
tails are immediately available and can be reviewed on the telephone or in person.
Perhaps the most important reason for a good e-catalog is that customers can no
longer put off the sale by saying “Mail me some brochures, call me in two weeks,
and we’ll discuss it some more.”
-Commerce. E-commerce, through an e-store, is where products are actu-
ally sold on-line with little or no help from your sales force, and customers pay
through credit/debit cards, PayPal, or similar electronic means. E-commerce
continues to grab an increasingly large share of total retail sales. In 1999, e-
commerce sales totaled $5 billion, increased to over $16 billion in 2004, and are
expected to reach $316 billion by 2010 (Census Bureau, Forrester Research,
ClickZ, as reported in Processor Magazine, October 2004, 4.) Many small busi-
nesses are finding the setup and operation of an e-store increasingly easy and
affordable. The e-commerce alternative should be seriously considered because
customers from all over the world may shop 24/7; the growth numbers cited
above are compelling; and many small businesses believe this is the future. On
the other hand, e-Commerce requires new methods of doing business and may
affect existing sales channels. Many small businesses find that an e-store is a
handy augmentation tool to supplement the inside sales force. The e-store at-
tracts buyers, but many want to speak with a real person for a few minutes be-
fore entering a credit card and committing to the sale. The inside sales force or
call-center can then fully explain products, convince customers to purchase more,
suggest high-margin accessories, or work out expedited shipping arrangements.
In any case, an inbound call-center and customer service desk is needed to aug-
ment the benefits of an e-store.
Search Engine Marketing and Keyword Ads. The rage in Internet marketing
these days is keyword ads, having supplanted alternatives such as e-mail, banner
ads, and others approaches. Keyword ads (also known as Adwords on Google
and called various other terms elsewhere) appear when an Internet browser
searches certain keywords. The search results include sites and articles of inter-
est, as well as small advertisements. When browsers click the keyword ad, they
link to the seller’s Website and hopefully then call or buy something on-line.
Some firms have reported huge increases in business from keyword ad cam-
paigns. Still, keyword ads can be expensive, and much time is required to main-
tain these programs.
Much more information on Websites and Internet marketing is provided in
Chapter 5, which is dedicated solely to these subjects.
Channel Conflict
Be aware that success in selling through new channels may not please other
parts of the sales and distribution network. For example, when small businesses
open Internet stores and sell directly to the public, dealers and retailers are
often unhappy because products may now be purchased on-line at lower prices.
This conflict exists on two levels: legal and marketing. On the legal level,
there may be agreements in place between parts of the distribution channel that
prohibit your small business or others from selling directly in certain areas, and
this could kill plans to open new channels. Review existing agreements with your
legal counsel to see if vendors or various resellers have a legal basis for objecting
to the new plans.
On the marketing level, perhaps no legal agreement is in place but valued
distributors simply object to being cut out of the deal. They may threaten to stop
buying or selling products that are sold through other means.
In both cases, the management of your small business must weigh the risks
and rewards to make a strategic decision and either terminate existing agree-
ments and move into new channels, or hold off on opening new channels. Obvi-
ously, it may be difficult to cut off existing revenue-producing relationships in
favor of promising but untested new sales channels. The decision may be com-
plex and will vary with each small business, but a decision must be made.
The “Retail Store” That Doesn’t Want Customers
I recently helped a new small business
set up operations and sell a popular
electronics product. Sales mush-
roomed from zero to over $1 million
per month in only 18 months. The com-
pany sold exclusively through three
on-line stores and was set up as a call-
center and shipping operation.
One day I noticed that overnight,
the firm installed a cheap and badly
designed retail showroom. A few prod-
ucts were on display among dozens
of empty boxes, tape, and computer
cables. It wasn’t pretty.
Did the company have aspirations
of becoming a big retailer? Not ex-
actly. A major vendor had apparently
received a complaint from aa local
retailer, who said that my client was
selling products exclusively on-line
(which was true), in violation of the
distribution agreement that allowed
for on-line sales only to supplement
sales through a retail location.
Fortunately, there have been no
visitors to the “retail location” so far:
neither customers nor auditors from
the distributor.
Selling to Government
Small businesses looking to sell to the government should consider sepa-
rately efforts directed to the federal government and the state/county/city/local
levels.
Selling to the Federal Government
The U.S. Government purchases products and services through the General
Services Administration (www.gsa.gov). The GSA is thus the one-stop purchas-
ing agent and business manager for the world’s largest buyer. Just in case you’re
not sure if that’s big enough, note that the GSA acquires equipment, office space,
supplies, and services for more than one million federal workers in more than
8,000 buildings in 2,000 U.S. communities.
The good news is that instead of contacting every U.S. government office
that could possibly need the paper clips manufactured by your small business,
just pursue the GSA. The federal government consumes incredible quantities of
just about every possible good and service—and the GSA is mandated to spread
the business around by purchasing from many vendors rather than just a few
heavy hitters, which works in the favor of small businesses. That’s the good news.
The bad news is that even though the GSA has attempted to simplify its
procurement processes for years, selling to the U.S. Government remains a spe-
cial undertaking. Dealing with the GSA requires a significant amount of time
and attention, probably unlike any other initiative ever attempted by your small
business.
Also, pricing is cutthroat, so before commencing these efforts, small busi-
ness owners must ask themselves, “Can we afford to offer these products to the
federal government at the most competitive prices in our industry?” If your firm
is not geared toward low pricing, then save yourself the time and stop now.
Notwithstanding these concerns, the GSA is seeking small businesses able to
provide services and products anywhere in the U.S. and worldwide. All GSA
contracting opportunities over $25,000 are advertised on FedBizOpps at
www.fedbizopps.gov/. This Website allows vendors to register to receive e-mail
notification of opportunities in specific business areas. FedBizOpps is somewhat
similar to Monster.com or other job sites, in that buyers post their needs and
requirements and sellers may respond with offers.
GSA contracts are managed by GSA headquarters and regional offices, while
managers of federal buildings also purchase products and services.
Most small businesses, and even the largest of large businesses, employ spe-
cial sales groups to deal with the federal government. That is because of the
regulations, processes, procedures, systems, etc., put in place to consider every-
thing from good pricing, to the “Reduced Greenhouse Gas Intensity of Electric
Power,” to Section 508 of the Rehabilitation Act of 1973, to Amendments of 1998
[29 U.S.C. § 794(d)] requiring that the federal government acquire only elec-
tronic and information technology goods and services that provide for access by
persons with disabilities. It takes a great deal of time to get familiar with all of
these requirements, to remain in compliance, and to keep abreast of the con-
stant changes.
If there is a strong desire to sell to the federal government, it’s best to seek
outside help, probably by employing or contracting experts who are knowledge-
able about dealing with the federal government, and, more specifically, with the
products and services sold by your small business.
Another approach is to establish a close relationship with the “big fish” that
can afford the long and tedious selling processes required to gain larger con-
tracts from the federal government. Here, the strategy is to appear after the deal
has been awarded, and the larger contractor needs products and services offered
by your small business. Becoming a subcontractor to larger private businesses is
usually an easier and more familiar process for small businesses.
Small business owners must consider if it is realistic to sell to the federal
government. Access to the very best pricing and the ability and staying power to
deal with the GSA bureaucracy are the minimum prerequisites. Otherwise, at-
tempting to sell to the feds can be a time-consuming foray that ultimately does
not bear fruit.
Selling to the State and Local Government
Selling to government at the state, county, city, and other local levels may be
a bit less intimidating to small businesses. These situations vary widely from
hopeless bureaucracies to informal deals that any newcomer can quickly win if
the price is right.
The best approach here is to call government entities that use the products
or services sold by your small business and learn if there is a current need. If the
answer is positive, learn about the processes needed to sell.
In many cases, this will first require becoming an approved vendor. Approved
vendor status usually means that your small business is properly registered and
in good standing, financially sound, in compliance with local laws and regula-
tions, and has signed a thick contract concerning everything from kickbacks to
subcontracting to indemnification.
The advantage here is that approved vendor status normally allows small
businesses access to databases or printed notifications of all upcoming business
opportunities. This makes finding new business opportunities much easier.
Most purchases by government are managed through a formal Request for
Proposal process, in which small businesses prepare a written response or price
quotation and submit this for consideration. Selling (in the traditional sense)
and presentations are less relevant, which may require a change in thinking at
many companies.
Selling Internationally
Many small businesses suspect that their products would sell successfully
outside the U.S. but feel that they should first exploit fully the huge domestic
market before venturing outside American borders. Besides, selling overseas
may seem intimidating because of unknown regulations, taxes, customs, compe-
tition, and pricing. And there are so many countries. Where to begin?
International selling may be easier than many small business owners believe,
and there are ways of testing the market without opening offices in the major
capitals of the world. Here are some alternatives:
Trade Magazine or Internet Site Ad. Buy a continuing ad in a trade
publication or Internet site visited frequently throughout your industry.
In the ad, offer to ship your product anywhere in the world, but require
that the buyer pay for shipping, taxes, customs, and import fees. This
is common. Expect to make a few telephone calls overseas in the
middle of the night. You will need a customs broker to deal with the
foreign buyer and help figure out the fees and compute the total costs
paid by the buyer, such as local transportation. Just handle the deals
as they appear, and later see where the sales are coming from. You
may be pleasantly surprised when contacted by a foreign distributor
seeking a reselling relationship.
Foreign Distributor. Contact companies that are already selling
related products overseas, and discuss whether it makes economic
sense to import and resell your product through their channels.
(Regarding the language issue, it’s not much to worry about these
days: Just about everyone in business speaks English.)
E-Store and eBay. This is the easiest alternative and requires simply
that products sold through your e-store allow for international shipping.
Again, add language stating that buyers pay shipping and all other
fees once the product leaves your location. If your small business
does not yet have an e-store, try a few listings on eBay (selling a
single product is acceptable on eBay, but an e-store must have many
products). Once again, see where the business is coming from, and
expand efforts accordingly.
The overall strategy here is to test the market and let buyers do the footwork
in the various countries where your products may sell. As business develops,
consider reducing costs and expanding volume by contracting a sales
representative or opening a sales office in the most productive overseas locations.
80/20 Rule
The 80/20 rule is one of those mysterious phenomena which seem to occur all
the time in sales. It is worth mentioning here. Many small businesses notice
something like this:
80 percent of sales are generated by 20 percent of the sales force.
20 percent of products generate 80 percent of sales.
20 percent of customers account for 80 percent of revenues.
80 percent of sales and marketing efforts are directed at 20 percent
of the product line.
80 percent of problems come from 20 percent of customers.
80 percent of profits come from 20 percent of the product line.
20 percent of your competitors are seen in 80 percent of deals.
Don’t be surprised to notice the 80/20 rule hard at work in your small business.
Tips on Hiring and Managing Salespeople
Salespeople require a little extra care and attention. Here are some tips on
how to find the best people, build morale, point everyone toward the same objec-
tives, and get better results:
-
Measure Sales Objectives Against the USP. To meet business objectives,
make sure that salespeople are measured by goals that tie in with the Unique
Selling Proposition (Chapter 2) of the small business. Everything must be
consistent. For example, if growth in revenues is the most important objec-
tive, tie compensation to sales volume and discount the importance of cus-
tomer satisfaction surveys or units shipped. Of course, all this is important,
but clarity in tying compensation to the USP will yield best results. Sales
objectives must be congruent with the USP and overall business objectives.
-
Manage Consistently. “Plan your work and work your plan” is an old adage
that works well in managing salespeople. Once a plan is in place, be consis-
tent about applying it to everyone all the time, under both positive and nega-
tive circumstances. This sends the message that personalities and politics do
not rule in your small business, but results do. Everyone must see that the
only thing that matters is results, and they must know for sure that certain
results yield certain actions. Consistency also suggests confidence, and helps
salespeople manage their efforts and set expectations.
-
Recruiting Salespeople. Where is the best place to recruit established sales-
people? Why not poach from competitors? It’s an ancient trick to quickly
pump up business. But be up-front about your expectations, and watch out
for “non-compete” agreements, where your new sales star may have signed
an employment contract with a competitor stating, in part, that the departing
employee may not call on certain clients for a period of time (usually one to
five years) after leaving. Such agreements are difficult to enforce but may
still get in the way.
-
Hire 5; Get 1. The 80/20 rule at work again. Sorry, but that’s about the ratio
of successful hires to duds. Both employer and employee may try as hard as
possible to make the relationship work, but most of the time only one in five
salespeople really produce. (Of the other four, one or two will barely meet
expectations, and the others will be on a downhill slide from day one.)
-
You Get What You Pay For. Expect to pay serious money for good sales-
people. Remember that more than anyone, salespeople are money-motivated.
-
Meet Frequently and Manage Consistently and Closely. It’s a good idea to
hold weekly meetings with all salespeople to learn what they are selling, to
whom they are selling, and how they are spending their time. If things are
going in the wrong direction, sales management must act quickly and deci-
sively to fix the problem. Otherwise, no one will be happy when sales efforts
are terminated after much time and expe nse.
Big Commissions for Bad Business. Related to the aforementioned topic,
creative salespeople may be leading the company into the wrong kind of busi-
ness, when loopholes are found in commission agreements. Sales managers
must be prepared to referee situations where, for example, two people are
chasing the same deal, or where a new salesperson calls on a forgotten ac-
count of a more senior rep.
Compensation Agreements. Be prepared to spend considerable time design-
ing and writing the sales compensation plan, and especially details on salary,
commissions, and bonuses. If a mistake occurs and an eager salesperson
wants commissions for something that wasn’t really considered, it’s okay to
change the agreement but only after the commissions are paid in full. One
way to limit this problem is by placing caps on commissions. Good sales-
people are difficult to find, and a good way to lose them is through unclear
and frequently changing commission agreements.
-
Perks are ’Preciated. Salespeople these days are motivated by commissions,
but other perks are appreciated as well, and money spent in this direction
may buy a lot of goodwill and loyalty. Consider the personalities of your
team members and the importance of building a collegial environment where
everyone enjoys coming to work. Here are some ideas to reward top per-
formers and motivate everyone:
Entertainment event attended by everyone making quota (sports
event, monthly awards dinner).
Primo parking space
Dinner with the boss
“Salesperson of the month” plaque and photo mounted in a
prominent place
Article and photo in company newsletter and Website
Newer offices and computers go first to top performers
Company pays for an educational course
-
Some of this may seem cheesy at first, but look around at all the other
businesses successfully employing these motivational tools. Build fun and
recognition into the lives of your salespeople: It’s often cheap and easy. A
couple of final notes however: Perk plans must have minimums. The deal is
off if the company normally sells 100 units per month and then sells 50 units
in the first month of the new “basketball game with the boss and top five
producers perk plan.” Also, make sure that these programs serve to bring
the group together and are not divisive. This will depend upon your small
business and the personalities involved.
-
Having said all this, be prepared to “weed and seed” your sales staff quickly.
Tell recruits before hiring that they have a certain amount of time to achieve
predefined results; if the numbers don’t come in, it’s over (for example, “I
need to see you working on three good deals in the first 30 days, and close
one sale in 60 days.”). Sales managers must then stick to the plan to maintain
credibility, and because it’s the right thing to do.
Just Don’t Ever Stop Selling
Success in sales is an ephemeral victory. For the moment, everything seems
easy. One deal follows another, and the successes become bigger and bigger. But
small business owners can never relax. Other entrepreneurs see your success
and are tempted to enter the same market. Success attracts larger companies,
too, who could not be bothered when the numbers were smaller. Competitors
are not standing still either. The market continues to change, and customers
have new alternatives. It’s only a matter of time until change hits home, affecting
your small business.
For this reason, it is imperative that sales efforts never cease. Small business
owners should always examine their products and services; keep track of the
competition, selling channels, and methods; and watch the markets to learn the
best way to keep reinventing the small business and remain competitive as the
world moves on.
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