Breaking the Sales Elephant Into Bite-Sized Pieces
Customized for Contractors
By Vicki Suiter
Sales are the lifeblood for most businesses, but they also cause anxiety for many contractors who worry, “Do we have enough work to keep us afloat?” or “Are sales happening fast enough?”
The solution to overcoming sales anxiety, may be found in the punch line from the old joke: How do you eat an elephant? One bite at a time!
If you have a plan for getting where you want to go, reaching your destination is so much easier! First, know what your revenue goals are for the year. From there, bite-sized sales goals can be set and accomplished by utilizing these three basic pieces of information:
- Have a specific revenue goal in mind. If you’re not sure what goal to set, use last year’s sales figure plus 10% is a good starting point.
- Know your average job size.
- Calculate your average close rate or the number of jobs closed versus the number of jobs bid. See below for how to do this.
Most contractors have some idea what the above numbers are, even if it’s just a gut feeling. I encourage my clients to determine their average job size using jobs from the last six months to one year. Sometimes, they will have two or three distinct job sizes. By knowing these numbers you, too, can be on your way to setting and consistently meeting your goals.
Five Steps to Meeting Income / Sales Goals
By following these five steps, the process is broken down into manageable, bite-size pieces shown here with revenue goal examples contractors can attain.
Step 1: Set an annual revenue goal and know how much of this amount is already booked in signed contracts (backlog). Every successful company starts with a goal for how much revenue they will generate.
- Revenue Goal for this year : $450,000
- Backlog / Signed Contracts – what you have currently in signed contracts and how far out those projects go.
- $450,000 – $100,000 backlog = $350,000 – amount of work to sign and complete to meet revenue goal for year.
- Duration of current signed work – three months
Step 2: Calculate the dollar amount to be bid to meet sales goal.
To figure out the amount you need to bid to meet the sales goal of $350,000 remaining work to sign, you must first know the close rate. Close rate is the percentage of jobs bid that turn into actual sales. The close rate will help determine the dollar amount to be bid during the year to meet your sales goals. The higher the close rate, the fewer jobs and dollar amounts needed to be bid. The fastest way to increase sales is to increase your close rate.
Close Rate – Calculated by taking total dollar value of bids signed (won) divided by the total bids submitted = your close rate. We’ll use the data from last year:
Bids Won Last Year:
Bids Completed Last Year:
Close Rate Percentage Last Year:
Dollar Amount You need to bid to meet it’s sales goal can be calculated by applying close rate:
Sales Goal ÷ close percentage: $450,000 ÷.37% = $1,216,216 Amount to Bid
Note: You should assume that you want some amount in signed backlog of work at the end of a year, so add or deduct the amount you want to have in backlog at the end of the year to the sales goal for the year when figuring how much to bid for the year.
The above example assumes backlog of $100,000, same as current year
Step 3: Break bids down by month
Knowing how much you need to bid each month and week will allow you to better track results and meet your annual goals:
Amount to Bid = $1,216,216 ÷ 12 months = $101,351 per Month
$101,351 ÷ 4 Weeks / Mo = $25,500 per Week
# Jobs = 16 bids per year ÷ 12 months = 1.35 per month
at an average size of $75,000
Step 4: Track these numbers and share them with key employees.
What gets tracked gets managed. Have a mechanism to track actual vs. goals and share this information with key employees on a regular basis. Weekly in a spreadsheet format is preferable, but just having it on a white board in the office is a great first step! Tracking sales performance during the bid process gives you more control over what shows up on your profit and loss statement and on the bottom line.
Step 5: Analyze
Assess each month what’s working, what’s not working, and what needs to be different. If you are off track, figure out if it’s possible to get back on track, create a new plan and then manage that plan. You may want to hire a consultant to assist you. Having an objective third party provide input facilitates the creation of clear goals and actions and provides powerful input for staying on track.
By following these steps, the sales process is no longer an elephant you have to face each day. Sales goals become manageable and results attainable.