Supercharge Your Sales Efficiency

Salesperson A goes out and sells $2,000 one-time service jobs for your business. Salesperson B sells $1,000 per year service jobs that recur each year multiple years into the future.

Which salesperson had the better day? Which salesperson will have a better year? Which salesperson (and approach) is doing your business more good?

A Crushes B

Obviously, as seen below, Salesperson A is killing it relative to Salesperson B on sales volume. A will produce twice the sales of B… in the first year.

Annuity Sales Model - Table 1 of 3.png

B Comes Back to Crush A

But what happens to your business volume in subsequent years? And more importantly, which sales approach makes for a better business model? Constantly selling larger, non-recurring new jobs? Or selling smaller (or, ideally, same or larger) sized recurring jobs - once - that will continue years into the future?

A picture is worth a thousand words – check this out below:

Hands down, as seen in the table above, I’ll take the Salesperson B approach (“recurring revenue” or "recurring sales") every day of the week and twice on Sunday!

Yes, in year one B results in only one-half of the sales potential of A. But by the second year, the annual sales potential under both approaches are equal. By the end of year three the cumulative total sales potential (all years) have equalized. And by the end of seven years, B's potential is more than double the total sales potential (all years) of A over the same time period.

All About Efficiency

It’s logical and easy to understand, isn’t it?

There’s a saying that if you give a man a fish he eats for a day, but if you teach him to fish he eats for a lifetime.

The business and sales management corollary is this: If you sell a job for a single time you’ll have to keep selling over and over again to repeat the same (more limited) annual volume. But if you sell service jobs that recur for many years at a time, your sales efforts will, over time, compound to the point of eventual abundance!

In the illustration above, with the same amount of time and effort, salesperson B outproduced A’s sales by $3.64 million or 100% over seven years’ time – and that’s even with B selling jobs one-half the size of A. Imagine what would be possible if your business went for the same or larger sized sales that recurred year after year, in place of those that are just one time!

If you’re struggling to build your business, sustain your success, or get to a level of sales volume that better covers your costs and overhead, think long and hard about this differential in the table above – and the all-important benefits of having a sales approach that results in recurring sales or revenue!

Not Convinced Yet? Consider Profit Differential

Below I’ve modeled the net profit difference of A vs. B for net profit margin levels between 5% and 30%. Notice how in this comparison B has more profit potential at any margin level over seven years' time, and also how substantial the difference becomes at larger net income margins!

Then consider: What difference might extra profits such as these do for you and your business over time?

Would I be correct to assume the numbers above would represent meaningful financial improvements for you and your business? Money you could use? Money perhaps you need?

Money perhaps that enables you to continually replace and update your fleet of trucks? The cash needed to reinvest in an expansion you’ve wanted to pursue? Money to get current on accounts payable, taxes or personal bills? Savings for retirement or children’s education? Or the ability to fully staff your business so you can get more time away for breaks?

Ok, I’ll stop being coy and give it to you straight because I have witnessed the answers… these types of benefits become possible with the advantage of recurring revenue, and it’s very hard to succeed long-term in business without recurring revenues.

So, if you don’t have any or much recurring revenue in your business right now, my sincerest hope is that this commentary and the tables above will motivate you into improving or altering your business model so that it focuses on generating as much recurring revenue as possible.

In other words, stop fishing just for today. Eventually, (like next time the economy turns down?) the fish won’t be biting and you’re gonna go hungry!

Instead, start fishing for meals that last 5, 10 or more years at a time – yes, even if you have to fish for small mouth bass instead of pike. If you do, I am very confident you will long remember with fondness the day when you read this commentary and changed your “fishing” strategy!

In business, the tournament and trophies are most often won by those that most-effectively apply this strategy. If you need some help evaluating or brainstorming how your business can become the tournament champion, I encourage you to contact us here today. 

Long live small business! Long live small business owners!