Are You Selling or Taking Orders?
We encounter a lot of businesses with salespeople on staff, and when we do, one of the first questions we ask the owner or operator is “Are they salespeople or are they order takers?” That’s because our experience is that many people who think they do sales aren’t actually proactively selling anything. Instead, they are nurturing existing relationships and facilitating transactions when a customer comes to them.
Noting this is not to denigrate that as valuable work. Having good order takers is important. They’re responsible for making sure a business maintains loyal customers and increases average order value over time. But what makes a good order taker is often different from what makes a good salesperson. Or as the head of sales at one of our businesses puts it, there are hunters and there are farmers.
A good salesperson, unlike an order taker, is full-time doing the work of finding new customers. That means searching in new geographies, categories, and industries for novel business. This is important work because outsized growth comes from combining new and organic growth.
Our experience, though, is that making sales is more difficult than taking orders in the sense that the hit rate is lower (repeat customers are much more likely to make a purchase than new prospects). Further, prospects are likely to make smaller initial buys than repeat buyers, which means anyone who works on commission is incentivized to become more and more of an order taker over time, a reality that is detrimental to the long-term health of a business. Further, a salesperson may be unwilling to hand off a customer to an order taker who might be better at nurturing the relationship because it’s in the long tail of that relationship where he or she will make their money.
Here’s an example…
We met with a manufacturer recently who had five US salespeople covering the northwest, southwest, midwest, northeast, and southeast regions. When we asked how they spent their time, we were regaled with stories of how they worked with existing customers to make and fulfill orders. So we asked who was in charge of finding new customers and were told they were and they had acquired 20 new customers in the past year. So we asked how they had acquired the customers. The answer was that all of them had come to visit their booth at a trade show. So we asked if anyone had looked at gaps in the customer base and proactively reached out to potential customers who had not already shown inbound interest. Crickets.
This business had great order takers, but no salespeople. So hire a salesperson, we advised, and give them residual interests in the new customers they acquire for you so he or she will always be scouting for new business while letting the order takers build relationships. Not only should that person clearly pay for themselves over time, but by separating the functions of sales and order taking, it’s easier to delineate who is doing a good job in the numbers. That’s because a salesperson should be measured on new accounts and an order taker on average account size. Because when the two are smashed together and a combination salesperson/order-taker is measured on revenue, a shortfall in one area can be masked by performance in the other, even though a good business needs both.
– By Tim Hanson