What expenses should sales departments cut first?

The crisis and downturn are forcing many companies to look at their expenses and decide what is important for business operations and what can be cut. From my experience, many companies are able to improve the efficiency of sales processes relatively quickly and at relatively low cost. In this article, I would like to share my most important observations on this topic.

During a downturn, market uncertainty is one of the most important factors leading buyers to expect lower prices - especially in the B2B sector. At the same time, sellers are facing decreasing revenues and have to take particular care to make sure each sale is profitable and to protect their liquidity.

Unfortunately, pressured by falling demand, many salespeople yield to clients’ demands for additional discounts. They don’t stop to analyse whether the sale will be profitable, or whether the client can actually pay - what matters is the sale, ‘here and now.’

Here, let me use an example. When many years ago I became the head of sales at a large company, I often fielded inquiries from the sales department about giving clients additional discounts on their orders. When I asked how much more a given client would order with the discount, my salespeople sometimes told me that if we don’t provide an additional discount, the client probably won’t order at all. When I said no, they sometimes tried to negotiate for an extended payment period. They usually argued that a longer payment period wouldn’t actually cost us anything.

If the company’s business situation deteriorates, the first thing to consider is how many employees in operational departments are actually needed to serve customers. However, it’s worth training those who stay in techniques for generating profitable sales and making the most of marketing campaigns. Later on, I will discuss what aspects of training are worth paying attention to and why.

Why educate key salespeople during a downturn?

The competences that companies pay attention to when recruiting employees for sales departments are, above all, communication skills, the ability to build relationships, analyse customer needs, and deal with stress, and generally being action-oriented, which we understand in terms of a drive to make sales. Job postings rarely make any mention of the ability to analyse the profitability of sales activities. Meanwhile, not all employees are educated in economics and finance; even at the university level, the practical aspects of profitability and effective sales operations are rarely addressed.

Therefore, based on my own experience, I would like to emphasise that one of the most effective solutions that can help reduce price pressure from clients and, consequently, have a positive impact on the company’s financial results is educating salespeople in business mathematics. Such training will help them understand how discounts and extended payment terms affect their employer’s business. The ability to calculate profitability and conduct negotiations based on knowledge of business mathematics is especially valuable during an economic downturn, as it will help the salespeople we keep sell more consciously, even in a difficult market.