Measuring the Half-Life of a New Salesman

Hiring the right person or promoting yourself on your value is what we all do. What is the half-life of your prospect or your personal history? How is it measured and valued? What makes it worth anything in the first place? Does it vary by industry, role/position, and length of time?

Hiring and Value

Let's take a look at this from the hiring manager's perspective. The manager gets a request from the VP of Sales for a replacement sales position. In the description the term "book of business" is used as a qualifier. What does that mean to the hiring manager? What will it mean to their prospects?

If you have ever sold anything that has repeat sales you may have developed a group of companies or customers that you get repeat business from. As a salesperson, you are recognized for the work you do, the products you have sold and how well you did what you do. You can go back to those customers with replacement products, additional lines, or another sale over and over again. This is your book of business.

But that isn't a limiting factor as some people know doing business isn't always a front line process. I have done much better myself, to use someone's line, dealing with Vito - whoever it is that is at the very top that actually makes decisions but is not a buyer, purchasing agent or accounting. So it could be industrial relationships, army buddies, golf club relationships, or fraternity/sorority brothers/sisters may be included in a list as well.

Exploring this by industry may be interesting too. Insurance is something we all buy - and renew - without ever wanting to change or review because it doesn't seem like a lot of money and the person who is taking care of us either is a friend or has done a good job in keeping us taken care of as our needs have changed. This is a true book of business - but it can change in a minute if services aren't rendered as expected or if prices skyrocket. But is it portable? Can that agent move from State Farm to Farmers and move you with them? Why would you move to Farmers if State Farm had been great to you? If your agent had been an independent agent and had you with Travelers and now they move to Progressive and want to move your account there - why would you go? They could have sold you Progressive as an independent earlier so are they just padding their commission book (yes)?

How does this compare to other industries such as logistics? If a company does a great job moving product for you from point A to point B day after day why would you switch companies? Let's say Quicko logistics has 3 brokers handling the freight for two of your distribution centers, Bob, Mike and Tom. GotitandGo offers Bob, Mike and Tom double the income to come to work for them - because of their "book of business" handling your account with the two distribution centers. Will you change to GotitandGo just because Bob, Mike and Tom move or will you talk with the manager of Quicko to see what you can do to keep your relationship with them? Did their policies change? Can you work an even better deal now? What value do Bob, Mike and Tom have if they move - and don't bring your business with them - assuming it was your business that made them worth anything to begin with?

Something else to consider is longevity. If we have a solid salesperson in a particular industry who has been around 30 years and knows the history of many of the companies in his/her industry - what is their value to your company? How will you value it? I have heard some hiring managers scoff at the value of a person with 30 years of industry experience saying "sure but what have they done lately? They probably don't even know the current buyer or decision maker." Remember what I said above about Vito? Have you ever been out with a real, seasoned quality salesperson on a call when the discussion of the product, the use, the application, the value doesn't come until the very end - and the conversation goes something like this: "Bob, I also wanted you to start using our new valves. Who should Jim call to set up delivery and go over the new products with?" "Just have Jim call me tomorrow and I'll set him up to meet Jane and set up the purchase order and get the delivery and volume correct."

No need to go through all the two dogs sniffing each other or the issues of not knowing each other - familiarity and trust are already there. That is a book of business.

The medical field has all kinds of possibilities. It is divided into so many splits and influences and demands, all with some very high volumes and profit points it makes it a very difficult area to pin down. Hospitals - and within hospitals, because they are like little municipalities, you have all services from garbage to surgical requirements and everything in between. Maintenance supplies and repairs, construction, operations and utilities, security and safety, food processing and distribution, laundry and we haven't even gotten into pharmacy, IT, billing/coding, government interactions, then there are all the OR related constructs that are further divided from the needs of a podiatrist, general surgeon or neurosurgeon. It all works together. There are a lot of decisions that are made on a daily basis so there is a lot of influence being bandied about.

How valuable is that influence from the sales rep? It depends. Regarding disposables in a hospital setting, if a company is already in, getting them to change to company B is an act of congress. Oftentimes a hospital has teamed with other hospitals to get buying influence by making volume buys. The reality today is that the cost of joining and being involved with a lot of these major buying groups may have made their buying group price, even after rebates, higher than they could get buying direct. But the hospital continues to use the higher cost product because their contract with the purchase group requires them to buy 80% or more of their total from them! The deals are too large for anyone to review so they just hope they are all doing a good job together - or someone is getting paid somewhere, right?

So along comes a salesperson with a new offering on a commodity product the hospital buys every day through their purchase group. What are the odds they will get past go? Slim to none even if they used to work for the company that has the commodity the hospital is currently buying through their group.

Let's get more specific and we find a great rep working for a major medical device company in a hospital. You may not be aware, but in most parts of the US the reps actually are in the OR to support the product for the doctor while it is being used. Any questions that come up during surgery are handled by the rep. So this surgeon went to medical school and was taught how to do this particular surgery on patients using this particular brand of medical device. The rep and the doctor see each other every other day for two years in surgery. They develop a good relationship. Along comes a start-up medical device company that has improved on the device the rep currently works with. Start-up X catches the rep at a restaurant and offers him a job where he can make twice as much money if he can just get the doctor to switch companies and start using Start-up X new device. First, the device needs a champion in the hospital to even get it approved for purchase, so the rep has to risk everything to try to get the doctor to consider it. If he will consider it, and the hospital will accept a free case to try it, everything has gone through well - and now the doc tries it. Of course now the rep has had to quit his first company to represent the Start-up X product which turns out to be crap or no advancement at all. Doc says sorry, I'm going back to my previous company. Start-up X loses it shot, rep is sucking wind and can only beg to get his old job back and doc might even be pissed for having used a sub-standard product on a patient. What is the value of the rep's "book of business?" Keep in mind, doctors are extremely risk averse. Doing something unknown versus doing the same thing they have done a thousand times with a very high batting average is in itself a wall that is hard for anyone to penetrate and get change.

Historical Perspective

Decades ago entering certain sales jobs was only going to happen because your father/uncle had "been in the business." That would be about the only way you could come out of school - and start into the business with a base of business sustainable if you worked it as hard as your predecessor. If we go way past decades this might apply to trades where you grew up banging a hammer against gold or silver or iron, cutting hair or trimming a horses hooves. Back in that day the learning was very "hands on" and the apprenticeship period ran for years. We don't have time for that today, right? Nor does business. And the chance that dad can pass on his book of business is less and less with more and more inputs from outside sources interfering with the process.

The Common Denominator

IN the world of sales today, building relationships that have any depth to them may take more time than is allowed before products, regulations, or manufacturing alliances change! Blood may still allow for some flow of business in some lines - but it is becoming less likely and more valuable than ever.

If you happen to be the child of a doctor, and you do not go into medicine but want to make a very good living and your father/mother is willing - you can just about write your own ticket. Companies fall all over themselves seeking these anomalies to take advantage of the potential. The potential is in the millions in sales and profits, again, IF the parent is willing. What is the risk? The risks can be several and can run from representing products that really aren't superior but because that is what is being repped they are used by the parent/doctor, or if there is some sense of inducement to benefit from the use of these products - son keeps the 42 foot Bertram at the dock for mom and dad to use on the weekend. Yes, there are laws that can be enforced about that.

What can a situation like this be worth to a manufacturer or marketing company? Depending on the field the parent doctor is in, the numbers can range from unimpressive to OMG. A prolific spine surgeon may perform fifteen or more surgeries per week - using one brand of instrumentation and implants for every single surgery. Those implants may bill in the $15,000 or more range for every surgery or $200,000 or more in sales per week - $10 million annually with one surgeon! If there are two or three or ten surgeons in the group and the influence is such that the parent is the leader, count on three or four times this out of the same group! Now figure that salesman's income to be 20-35% of the gross sales. Who needs to be a surgeon when being that surgeon's daughter pays like that...oh, keep in mind, that manufacturer is getting the other 65% so they are happy too, wouldn't you say.

It isn't limited to the medical field of course. Lucrative relationships in all industries exist and keeping it in the family is common. Finding the crack in the wall, the entry point and utilizing your experience to move on that and make something happen is what is critical knowledge.

That ability is the real book of business and that is what should be valued when evaluating a new employee's half-life.