Having a Full-Time Non-Selling Sales Manager

What do you think about these statements:  Sales Managers have to pay for themselves by selling and they can sell on the floor while they teach others at the same time?  Sound about right?  If you are a believer you are in the majority.   While training hundreds of Sales Managers and Owners over the years we have preached the following:  Sales Managers are not overhead and, in fact, if they do their job right they are profit generators.  You cannot coach and play at the same time, and having your Sales Manager sell to cover their overhead is actually a huge growth limiter.  Changed your mind? 

We were willing to die on the sword with our philosophies because we trained hundreds of managers over the years and would follow their progress as well as store results and we knew that having a full-time non-selling Sales Manager was a no-brainer.   But there were two issues with our philosophy:  the sample size was too small to prove our theory and one could argue that they were all successful because they received specialized training and ongoing mentoring. 

Now with our surveys, where several hundred flooring owners participated over a three-year period ending in 2013, we were able to validate that having a full-time, non-selling Sales Manager, regardless of training, did indeed have a substantial positive effect on a flooring business.  Below are the survey results:

  • Sales Volume – 77% greater volume. That’s right, stores that had a full-time non-selling Sales Manager averaged $5,137,675 versus stores without a manager that averaged $2,899,881
  • Sales Productivity (average volume per sales associate) – $55,943 greater per Sales Associate when they were managed by a Sales Manager
  • Average Days in Receivable (average number of days it takes to collect money) – 7.1 fewer days for those stores with a Sales Manager
  • Gross Profit % - 1.1 points higher for stores managed by a Sales Manager. Keep in mind that 1.1 points on each $1 million in volume equates to $11,000 in profit dollars
  • Owners Salaries – on average Owners took home $23,901 more in income per year when they had a Sales Manager running the sales team

All sounds good, right?  For some maybe not so fast.  See the sales volume increase thing could be a bit of chicken/egg.  Do you hire a Sales Manager when your store does over $5 million or do you hire her/him when your store does much less to drive the growth to above the $5 million level?  Here are two rules of thumb:  it is difficult for a Sales Manager to effectively manage more than ten Sales Associates and it does not make financial sense for a Sales Manager to solely manage a team of five or fewer.  Confused?   Let me explain.  The average annual volume for a sales associate is just over $650,000.  If you have a team of five, the total volume should be somewhere in the neighborhood of $3.25 million.  At that point the store should be able to absorb the overhead cost of having a Sales Manager and she/he will have enough work to justify the dedicated position.   The manager will be effective in managing that team of five as well as an additional five.  For managing ten sales associates and beyond, providing an assistant or support staff may be a good idea. 

So now what for companies with fewer than five sales associates with a need for a Sales Manager?  The best solution is to have the manager work with the sales team as well as go out and prospect new business.  She/he can recruit new avenues of revenue and hand them over to the sales team to boost revenue while not being viewed as competition. We have also seen some success with a Sales/Merchandising Manager combination.

Other results from the survey are pretty straightforward.  If a manager spends time with sales associates increasing close rates and average tickets, makes calls to close quoted jobs, provides support, and implements an effective training program, then an increase in productivity is expected.    Additionally, if a Sales Manager is working with the sales team to collect 100% upfront on retail jobs or institute a policy of collecting any balance due at time of installation, the average days in receivable will drop dramatically. 

If the manager works with the sales team to better handle price objections, reviews quotes and job cost sheets, shops the competition to understand the competitive landscape, then a 1.1% increase in gross profit is attainable. 

Here comes the part that most owners have been waiting for - more annual income!  On average, owners take home 3.5% of net income meaning that for every $1 million in net sales an owner will earn $35,000.  According to this survey a store with a non-selling Sales Manager does just over $2 million in volume than a store without a Sales Manager.  By applying simple math, the larger the volume the more the owner will earn. 

This study goes to prove that having a non-selling full-time Sales Manager in your company will be one of the best investments you will ever make.   Not only will you soar to a greater level of sales, profits, and income; you may actually find yourself with some free time to enjoy the privilege of being an entrepreneur.