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The Stimson Group Newsletter
Oct 2008
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Vol 2 Issue 10
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Welcome Back,
It's been a crazy month for the economy, but that doesn't seem to have deterred most of you from doing a lot of business. When is this downturn going to hit us? I guess its time to take another poll from our readers to peer into their crystal balls.
With the economy tightening, customers will be scrutinizing your company and proposals with a lot more urgency. What can you do to make sure you stay in the running? I have a Sales Training option for you.
Our Best Practices column will continue with Commissions and Incentives Part 2. I haven't decided just how many parts this will need to be, so stay tuned.
I really would like to meet you and your colleagues. Please check out the upcoming events I plan to attend.
Thanks for reading,
Tom (TR) Stimson, CTS
My Direct Email
Website
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 Let's Get Together
We have two Rental & Staging Roadshows coming this Fall. The first will be in Chicago on November 5th. This event will be located at Production Plus' beautiful headquarters and they are proving to be wonderful hosts. I expect a huge regional turnout for our first time to the area. Next we will be in Burbank, CA on December 3rd. Stay tuned for more info on the location and hosts. The Roadshow is a day of training, seminars, and exhibits presented by the folks at Rental & Staging Systems Magazine - the definitive publication for AV Stagers. This is a great opportunity to get some training for the team and for your CTS holders to earn Renewal Units from InfoComm. Learn more and reserve your FREE spot here.  October 20-26 is LDI in Las Vegas. The exhibits are open Friday through Sunday. This event is hosted by my friends at Live Design Magazine and is a must-attend event for anyone in the entertainment and live event industries. LDI 2008 Attendees, You're Invited! Join fellow members of the InfoComm Rental & Staging Community while attending LDI 2008 in Las Vegas. Cocktail Reception
Friday, October 24
5:30 p.m.-7:00 p.m.
Piero's Italian Restaurant, 355 Convention Center Drive
(A short walk from the Las Vegas Convention Center)
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Monthly Business Trends Survey
It's been a roller coaster year of economic forecasts. In February we wondered if the world would end by summer. In June we pushed the downturn back to Fall. Now it's October and financial institutions are failing - but has the downturn happened for you yet?. Is the glass half empty or half full?
Take the Oct '08 Survey Now
In our September survey we asked Rental & Stagers about the 16:9 migration and how it was affecting their business. Before you postpone this discussion in your company, read this comment:
"The local wedding video company that handled my daughters dance recital is using 16X9 projection and screens- the feed was straight from their camera!"
Download this report.
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 Increase Your Advantage with Sales Training
Are your ready for 2009? In a down economy it's true that only the strong survive. Give your sales team the edge they need to win business even against low price rivals. I have taken all my best sales advice and put it into a one-day, kick in the pants sales seminar presented exclusively for your team. We have two programs available: one geared for Stagers and another for Integrators. We'll cover these topics: - Business Development 101: Networking, Image, and Relationships
- Segmenting Customers versus Understanding People
- Choosing the Right Proposal for Each Opportunity
- Winning the Price War With A Tighter Scope of Work
- Tools for Closing the Deal
- Tips for Sales Managers that Sales Persons Need to Hear
Contact Tom about how to customize this program for your special needs.
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Best Practices Series:
Commissions & Incentives Part 2
Structure
Last month we introduced these ideas about commissions and incentives:
· Commission and incentive programs need to change and evolve in tune with the needs of the firm and the development goals for the employee.
· Determining the right program for today starts with financial analysis to understand what makes the company profitable.
· You can reward achievements, improvements, or both.
· Individuals are motivated by different things, therefore programs might vary among the team.
After analyzing your business to understand what makes it profitable, you may already have some ideas about behaviors you want to reinforce. Suppose - like most companies - your goal is to grow revenue more profitably and you have identified 2-3 business segments that you want to cultivate. And you have learned that travel costs and last minute shipments are eating into profits. The next step is to break those components down into short, medium, and long-term factors. Examples:
Short Goal: Sales
Sales is a short term concept because the measurement comes when business is confirmed on a job-by-job basis. It can be measured monthly or quarterly. Some companies even commission sales by the job. The important thing to note here is the value of immediate cause and effect. Sell a project; get a commission. This is far more motivating than selling a job and having to wait months and months to see how it turned out before earning something for it.
Medium Goal: Profit
Profit is the by-product of actions over time. It is medium term because the actions that will lead to increased profit and the efforts to adjust them often take months (or years) to achieve. In the case of escalating shipping and travel costs, the root cause is probably in the planning and review phases of order delivery. Seeing a consistent change in profit should probably be measured in no less than quarters.
Long Goal: Market Share
In our example the company had 2-3 segments they want to grow. Overall growth is a macro concept that requires a lot of diverse efforts to achieve. Marketing plans, operational processes, and business development have to align to pull this off. Long-term goals like this should be measured in years. Most importantly AV sales is not just about one project or transaction, there is generally a relationship that could lead to future business. Evaluating segment growth needs a full year to measure.
This exercise helps us understand the time frames in which we should measure accomplishments in terms of commissions and incentives. How you weight those metrics in terms of rewards varies according to the person and their role in the process.
Sales Persons
In the AV business, most sales are developed over a great deal of time. Integration projects can take months or years to mature. Staging projects frequently take months or several weeks. Sales and rental orders generally happen quickly. In most companies I would recommend at least a three-tier program. On a monthly basis, commission the gross and/or margin on jobs completed. For extended integration projects, you can match this to the incremental billing you submit to the customer. Quarterly, sales should share in a bonus based on operating income that is meted out to all employees. At the end of the year, pay a sales bonus on how well that person reached pre-determined development goals. Here are several factors you might consider as year-end goals depending on the person and needs of your company:
Gross Sales - Rather than set a target number, measure the increase from the previous year and bonus on a sliding scale: The bigger the increase, the bigger the bonus.
Mark up/Margin - If the goal is to get the individual to sell more profitably, then calculate a bonus based on either improving margins or better yet, reaching specific margin goals with an added bonus for exceeding them.
Repeat business/New business - These can both be good things but together they cancel each other out. You might have one salesperson that is bonused for maintaining key accounts and another that wins big for new business. A sales person that focuses on both probably won't succeed at either.
Product Lines - Many Integration companies enjoy manufacturer discounts based on volume. When a sales person sells another line, it could affect the company's profit. Especially when you are moving from one product line to another, an extra bonus for selling the new line makes sense. For stagers trying to grow a new service or technical product, a little extra money to the sales person never hurts.
Terms - Can sales folks improve your CASH FLOW? They can and will - if they make more money when they get deposits and up front payments. Add a bonus that encourages the terms you want to enforce and sales folks will ask for payments instead of hinting at them.
Everyone Else
When sales persons are successful, everyone else works harder. If the individual's job is to support the business development process (Design Engineers, for instance), then they should share in a monthly sales commission. I recommend that this calculation be pooled and distributed evenly by work group. All engineers get the same portion. Managers on the other hand are often responsible for the efficiency of a larger group of people. If you can measure their effectiveness, then you can bonus for improvements.
Operations hourly workers are often the most overlooked group. Pooling a monthly bonus based on company volume tells them you know how hard they work. However, set a threshold that will trigger a bonus on busiest six months of the year. If you have a big growth year, they will get bonus in more months. Next year you will hire them more help and reset the threshold.
There are few limits on the things you can measure to calculate bonus and incentives. Don't forget that profit sharing and other benefits are also a form of incentive. Also, if you have an existing incentive system and decide to change it, you will need to demonstrate how the person could benefit from the change. And in conclusion, not everyone is motivated in the same way by bonuses or other forms of variable compensation. Some even find it stressful and demotivating. Take extra time to tailor a package for each segment or individual in your sales team, and ensure that bonuses for everyone else address factors in their control.
Share your thoughts, ideas, and successes with your peers. I look forward to your emails.
Comments? Email me.
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 About Thomas R. Stimson, MBA, CTS
Tom
Stimson is celebrating over twenty-five years in the communications
technology industry. As a Consultant, Tom helps companies build
smoother operations, focus sales, and increase profit through strategic planning, process improvement, and market research. For more
information visit the website.
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