Do you train your employees? Odds are, NO!

Employee training should be the gold standard for every company, but over a life-time of working for companies, I realize it is not. The position most lacking in training is also the most important to the company … sales. The very position that generates the revenue that supports the company.

I have worked for far too many companies in my life and with only one exception, the training is as follows: “You see that map of our territory? You can call on anyone east of this line. Now go sell something.” And that is one of the better ones, but at least it pointed me in the right direction.

The one exception? Lanier Worldwide. They took training to a level I had not seen before nor since. A new sales person spent the first month in the hiring office studying spec manuals for their products, followed by a week at Corporate putting that knowledge to work. The emphasis in their training was on how to communicate that information to the prospect and make them a customer. They were also the best company I worked for at communicating information, but I’ll save that for another shortcoming of companies article.

I’ve heard lots of excuses for the lack of training programs … it costs too much, it takes too much time, it’s not practical, the new hire is experienced, etc. If I had a dollar for every sales person thrown into a territory completely unprepared, I could retire. And I suspect the results reflect the training. Little training, little results, fantastic training, fantastic results. I know this from my personal experience.

I’m curious, how much time does your company take to train the sales people it hires? Now don’t count the time the new sales person spends in the office filling out paperwork and meeting with HR. I mean real product, territory, and sales training.

In my experience, the only position that receives less training than a new sales person is the newly promoted Sales Manager.

Landed Cost on Merchandise

Editors Note: This is part of my series on sales math.

Landed cost is the simplest loaded cost to deal with. The landed cost is calculated by adding the actual cost of the product (raw cost) with the shipping costs. Here are a couple of examples.

The washing machine you sell has a cost of $200 and the freight company charges $50 to pick it up at your vendor and deliver it to your store. The landed cost  is the sum of these two figures, or $250. That is what it cost to get the washing machine to a point where you can sell it.

Sometimes though, it is a little different. The carton of 24 light bulbs costs you $40 and the freight is $10. That makes the landed cost $50, but you sell the bulbs individually. Now we have to do some math.

The cost of each bulb is $1.67 ($40 /24). The freight for each bulb is $0.42 ($10/24), so the landed cost of each bulb is $2.09. You can also just add $40 + $10 to get $50 and divide it by 24 or $2.08. The difference is a rounding issue.

The next cost you need to become familiar with is the Loaded Cost, which we’ll discuss next.

(note: the definitions given on The Magnum Life are for salespeople, not accountants.)

Raw Cost of Goods

Editor’s Note: This is part of my series on sales math.

Raw cost of goods is only the cost of purchasing a product or service. It doesn’t include any other costs associated with selling, but the acquisition cost.

Example: A manufacturer makes bicycle handlebars. They sell these handlebars to bicycle shops for $15.00 each, F.O.B their plant. The raw cost of the handlebars is $15.00.

There is one problem, though. You can’t sell handlebars that are sitting in the manufacturers warehouse. You need them in your bike shop where customers can see, touch, and purchase the handlebars.

This requires the manufacturer to ship the bars to you via some type of freight company, i.e. UPS, FedEx, Motor Freight, etc.

That brings us to the landed cost.

Margins and Markups

Editor’s note: This is part of my ongoing series on sales math.

Margins and Markups are related, but only as far distant cousins. As I work with sale people, I find many, if not most, do not understand the difference between markups and margins.

Most of my conversations  with sales people and sales managers, revolve around the fact that multiplying by 1.4 does not constitute a 40% margin, only a 40% markup. Two very different numbers in the sales world.

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Math for Salespeople: The Definitions

Dollar SignHere are a few terms I will be referring to in this series, and the book.

These definitions are not accounting definitions, but are mine as they address salespeople working everywhere.