STEP 2 – How to Increase Your Average Deal Size

What’s the easiest way to increase deal size?   The traditional approach to increasing deal size requires: increased sales training, establishing effective sales methodologies and ongoing coaching.

Though this approach works, it requires time, and a substantial investment.  Our approach is simpler and doesn’t require any of that.  We focus on 3 areas:

  • An expanded view of the 80/20 Rule
  • Identifying your Ideal Customers & Prospects
  • A quick lesson on prospecting

The 80/20 Rule

Ever heard of a man named Vilfredo Pareto?  I’d be surprised if you had, since he passed away almost 100 years ago. Pareto was an Italian economist who created and developed what you and I know as The 80/20 Rule. Pareto’s Rule is applicable in the sciences, in statistics, in business, and most importantly, to your distributorship.

For equipment distributors, the impact of The Rule is that 20% of your customers generate 80% of your total annual equipment sales and revenue. You probably knew that, but here in Step 2 we are going to apply it, because it’s the easiest, quickest, and surest means of increasing deal size.

Ideal Customers & Prospects

Want to discover something amazing that has far reaching implications for growing your distributorship? If you will make a few quick calculations, you will find that your customers in the top 20% generate at least $16 of revenue for every $1 generated by your customers in the remaining 80%.

That is a revenue ratio of 16 to 1, but it gets even better than that! We routinely calculate the ratio for our prospects as part of our revenue growth formula process, and in all the years we’ve been doing that, we have never yet seen a revenue ratio as low as 16 to 1. Usually, we see revenue ratios in excess of 20 to 1.

We refer to this coveted group of customers as “Ideal Customers”. We refer to the remaining 80% of customers as, “Non-Ideal Customers”. Wouldn’t you love to know who your competition’s Ideal Customers are? We can tell you.

Here’s the rest of the lesson–the part that makes all the difference when it comes to growing your distributorship. The Rule also applies to every other distributorship in your sales territory. Also known as: your competition.

To create a list of your competition’s best customers, we take the customers in the top 20% of your customer list, (your Ideal Customers), and analyze them demographically. We want to know the type of work they do, how many employees they have, their annual revenue, etc. With that information, we can generate a list of all of the businesses in your sales territory that match the demographics of your Ideal Customers. Once we have that list we remove your customers from it. The remaining businesses in the list represent your competition’s Ideal Customers.

Having the list of your competition’s best customers is just one of the ways we accelerate growing your distributorship’s revenue and increasing your average deal size.

Prospecting

The customers and prospects that offer the greatest ROI are the ones that qualify as Ideal Customers or Ideal Prospects.

Because we approach prospecting strategically, we focus on this coveted group of ideal customers and prospects. Whether you are doing the prospecting or we do it, it takes time, and time always involves an opportunity cost. And because it does, it is important to maximize the return on the investment.

Step 3 we’ll explain how the Revenue Growth Formula will allow you to increase the total number of sales opportunities available to your equipment and aftermarket salespeople each year.

If you are ready to have a conversation about how we can put our Revenue Growth Formula to work for you and increase your revenue, please click here.

Leave a Comment

Your email address will not be published. Required fields are marked *

*
*