For now, let’s see how much money you are leaving on the table by doing things as you are doing them today. The book’s website, www.route2revenue.com , has a very comprehensive ROI calculator (drop me a line to get this software) that shows the potential benefits you can gain by implementing the proposed solution. It calculates approximately how much new revenue you can create, how much cost savings you can generate, and what the overall impact on your business value will be within the very first year of doing the things the way world-class companies do. The ROI calculator then allows you to estimate the investments required to implement the solution, hence estimating the Return on Investment (ROI). I encourage you to check it out online.

To explain how the calculator works, I have created a simple version, as shown in Figure 1.4. Let’s first walk you through a worked example of using this calculator

To use this simple calculator, start by inputting your 2008 gross sale number (A) e.g., $23 million, as shown in the worked example, Figure 1.4. Next, enter your all of your go-to-market expenses—salaries, commissions, discounts, website maintenance, advertisements and marketing budget, etc.—as a percentage of sales in field B. The industry average for a consumer goods manufacturer is between 25 to 29 percent.

The first column in the figure shows the different sales channels that world-class consumer goods companies are using today. The second column (C) shows the percentage of revenue that these world-class companies are capturing through each one of these channels. For example, their field sales force is responsible for almost 40 percent of their sales; 39 percent of revenues come from distributors and partners; and another 12 percent comes from the Internet. The rest is captured through other channels like direct-mail catalogs and call center up-selling.

In the third column (D), estimate the percentage of revenue you are capturing by different channels. This is one piece of information that most business find hard to determine. If you don’t know how much money you are making through which channel, you cannot rationalize expenses and hence control them. Just doing this exercise is worth the price you paid for this book. If you are reading the online version, please buy the book!

In the worked example, you can see that the example company is capturing 32 percent of its revenue through its field sales force, 62 percent from distributors and the rest from the Internet.

In the last column (E), calculate the difference between your values and those of world-class operations; subtract your percentage revenue (D) for a channel from the percentage of world-class companies for the same channel (C). In our worked example, this difference is -2 percent for the field sales force, 11 percent for manufacturing reps, -23 percent for distributors, 2 percent for retailers, 5 percent for the Internet, 5 percent for telesales channels, and 2 percent for catalog channels.

Next, calculate P by adding all the differences (E) that are greater than zero. P shows your deficiencies in comparison with the world-class companies in your industry. This is the percentage of revenue that you are leaving on the table because you are not efficiently implementing selling. For the sample company, this comes to 25 percent, meaning if the sample company does nothing innovative but simply adopt the selling strategies of world-class companies, it can easily grow its business by 25 percent!

Calculating field Q is nothing different. Simply add all the differences (E) that are below zero: That is your Q. Q shows where you are spending more than the world-class companies. The sample company is spending a quarter more to generate the same dollar as world-class companies. You can save that same quarter by implementing the system that we are going to introduce in this book. That’s significant.

Now we are ready to calculate the benefits. Multiply P with your 2008 revenue (A) to get a feel for how much revenue you are leaving on the table (X). For our sample company, it comes down to almost $5,750,000. This is a lot of money that the sample organization could have captured last year, but was not able to because it didn’t have the most efficient selling organization.

Similarly, multiplying 2008 revenue (A) with the percentage of SG&A expenses (B) will give you SG&A in dollars. Now multiply it with Q: This will give you Y, which shows the dollar amount of how much more you are spending than the world-class companies. For our sample organization in the worked example, this number comes to almost $1.5 million. This is the amount of money that you spent unnecessarily. World-class organizations could have generated same amount of cash without spending this money. It's a big number. Actually it is really big number, because it is coming out of your bottom line. If our sample company is operating at 10 percent net profitability level, this $1.5 is equivalent to $15 million in sales!

The full benefit for implementing this solution (Z) is the sum of revenue and profitability opportunities. In our worked example that comes to $7.3 million, which is almost 30 percent of  gross sales for our sample company. This is an absolutely big number, don’t you agree?

Now, I encourage you to fill in the blank worksheet shown in Figure 1.5 with your own to data to calculate firsthand the estimated impact of this framework on your business.

Did you find your own opportunities? Are you still pessimistic about the benefits of this solution? If your answer is yes, please don’t read further. If you believe, however, that it make sense, than let’s move on to the next chapter,  cracking the billionaire code, where I will explain the framework in detail. I promise you will love it.

Related:

• Table of Content
  
• Red Queen Effect – An Introduction
• The Billionaire Code
  • Secret of World Class Companies

These results are extraordinary even in a normal growing economy. But in a recession, these kinds of results are jaw-dropping. I don’t know about you, but I look at these results with great envy and really want to know how they did it. Let's find out. Are you ready to be the hero of your own CSI episode?

The first question is: Is inclusion of big companies with small are skewing these results? Of course not. We are comparing averages, so we are comparing apples to apples or oranges to oranges. Big and powerful corporations, however, do have deep pockets and unlimited resources, even in today’s credit crunch, that allow them to make stupid mistakes and still get bailed out, but that's not the case in this report. The report shows that there are world-class companies in almost every revenue category, as you can see in Figure 1.2. 

World-class sales organizations, whether they are micro, small, medium, or large, are outperforming the rest of the 11,000 worldwide companies by significant margins. For example, in revenue growth and operational efficiencies, medium-sized companies are doing three times better at almost 70 percent less cost than the rest of benchmark companies. Smaller world-class companies have an even more impressive scorecard: They are growing nine times faster at half the cost of their counterparts. Their operational efficiencies are almost 200 percent greater! What’s the secret?

Not so quick. We are CSI detectives and can’t pass verdict so soon. We need more evidence that concludes that world-class companies are really world-class.

Let’s look at these companies from a different angle. We know the slowing economy is not affecting everyone at the same level. Finance, banking and housing are a few industries that are going through tough times right now, whereas pharmaceutical, health care, management, scientific, technical, and consulting markets are booming. Are there world-class companies in each industry? How they are performing? Luckily, the Sales Benchmark Index (SBI) report provides the same data for 19 industries that they are tracking. Figure 1.3 shows the results.

The Return on Sales measure shows that world-class companies are outperforming their counterparts in every industry. Even in troubled industries like finance and insurance, world-class companies are growing at 10 times the rate of their counterparts. Of course, world-class companies are really shining in the technology sector, where they are beating their competition like Nikolay Valuev, heavyweight boxing champion of the world.

What’s the story behind these world-class companies? How are they beating their competitors left and right? I invite you to do what I did. Download a copy of the SBI report and walk through the list of world-class companies. You will find that each of them has products that are not very much different from those offered by their competitors. Of course, when you ask them, they will point out the differences. As a consumer, however, I really don’t care about those un-differentiating differentiating features.

You will also find that there are a few big brands like Apple, Google, Garmin, Oracle, Microsoft, and Crocs, but the majority (60 percent) are not well-known brands and a few of them are even in commodity markets. Yet they are outperforming the rest of the world. Close scrutiny of these world-class companies reveals the secret: They all use innovative ways to sell.

First, world-class companies are using multiple sales channels²  to reach their target markets. They are using their sales force to build relationships with top clientele, serving mid-markets through partners, and creatively using digital sales channels (telephone, the Internet, video, social media, etc.) to sell and build a strong bond with their customer base. This use of hybrid channels is nothing new. The real innovation, however, is the way world-class companies are integrating these channels into one coherent system that pushes the rudimentary tasks to low-cost channels, which results in significant cost advantages and improves the productivity of their sales organization.

Second, world-class companies view their way of selling as a competitive advantage. They realize that their competitors can counter any product in just few months; as a matter of fact, their competitors already have as good a product as they have. However, the barrier they are creating by establishing an innovative selling organization—establishing strategic alliances, building customer loyalty, and putting together a network of wholesalers, distributors, and value-added resellers—is not easy to copy or defeat. That is why world-class companies are pounding their competitors with such big margins, growing at such a fast rate, delivering big returns on sales and gaining customer loyalty.

The new answer for the age old-riddle of how to stay afloat and thrive in tough times is: Treat your way of selling as a competitive advantage. Implement an integrated multichannel sales and marketing strategy.

How can you maintain the flexibility needed to succeed in a down market and yet capitalize when market demand returns?

This is the question many businesses asked themselves during the last three recessions. It is the same question we are pondering today. As we look at companies that cracked the billionaire code in previous recessions—emerging as a stronger, more powerful, and unbeatable force—we realize their solution is quite simple. Actually, it could be summed up in just one sentence:

It is not only what you sell, but how you sell it.

If the answer is so simple, why it is not working this time? After all, you may argue, many companies are selling exactly the same way these companies did in the past. Well, Albert Einstein (that guy with weird hair) was asked a similar question when he administered an examination to an advanced class of physics students.

As he left the building, he was followed by one of his teaching assistants. "Excuse me, sir," said the shy assistant, not quite sure how to tell the great man about his blunder.

"Yes?" said Einstein.

"Um, eh, it's about the test you just handed out." Einstein waited patiently. "I'm not sure that you realize it, but this is the same test you gave out last year. In fact, it's identical."

Einstein paused to think for a moment, and then said, "Hmm, yes, it is the same test."

The teaching assistant was now very nervous. "What should we do, sir?"

A slow smile spread over Einstein's face. "I don't think we need do anything. The answers have changed."

And just as the answers in physics changed, so too have the answers to our quandary. To all appearances, we may have the same recurring problem of recession and a slow economy. However, the the old way of selling— make a product, find a customer, meet face-to-face to familiarize her with the benefits and features of your products or services, negotiate on prices, close the deal, fulfill the commitment, and find a new customer—is not going to work. 

To uncover the new answer, let’s see how today’s thriving companies are beating the recession, accelerating sales and gaining a larger market share.