Ship Wreck, Fraser Island by NeilsPhotography

A web site without a goal is like a rudderless ship. You have no idea how to improve the site, you have no clear vision of the site’s purpose and you wind up throwing money into a hole that adds no value to your business. Your small business website needs a goal – preferably one in line with your company’s goal. And, what is your company’s goal? I’ll go out on a limb and guess “to make money.”

Most small business websites don’t achieve this goal. In the rush to get a site live, make it attractive and fit the needs and desires of the business owner, the whole purpose of the site can get lost. When planning your small business website – whether you’re launching it for the first time or working through a redesign – you need to start with this goal, figure out how to measure it and plan all improvements and tweaks to your site with the purpose of achieving this goal. Being able to measure how well your site is achieving its goal is the most important indicator of the success of your site.

This measurement is called the “conversion rate”. You can calculate the conversion rate by dividing the number of people who have converted into customers because of your site by it’s total unique visitors.

But how can you tell if someone has converted?

Measuring Success

The secret to a truly successful website is identifying the conversion actions a customer can take and optimizing everything else around them. The conversion action is simply the action a visitor takes that meets the goal of your site (i.e. when a customer is in a position to pay you).

For online stores, paid online magazines and any other site that accepts payment online, the conversion action is easy – it’s the point at which the credit card is successfully accepted and charged. The typical purchase process looks like this:

1. Customer adds one or more items to their shopping cart
2. Customer clicks on the “Checkout” button
3. Customer enters their payment and shipping information
4. Payment information is sent to the payment processor (Authorize.net, PayPal, etc.)
5. Once the payment is accepted, the customer sees a “Thank You” confirmation page.

You can track every one of these steps, but which one counts as the conversion action? Step 4 seems right – it’s the point when the customer actually hits the “buy” button. But what happens if the card gets declined? They didn’t accomplish the site’s goal – giving you their money – so, no, you’d better not count them as goal complete. The right conversion point is step 5, after the credit card has been charged and the money is on its way to your bank.

Converting Leads

What if you don’t accept payment online? What if you run a lead generation site? The obvious conversion action is the confirmation page after the visitor has filled out your lead form and you’ve successfully captured their information. If filling out the lead form is all you care about, then measuring those completions may be all you need. To measure the true value of those leads, though, you’ll need to do a little offline tracking.

Tools like Salesforce, SugarCRM, BatchBlue and other Customer Relationship Management (CRM) applications can help you track your leads through the entire sales process. You can track your customers’ actions anonymously on your site, then take the data from your lead form and import it into one of these systems – making sure you marked the website as the source of the lead – and track them through the rest of the sales process. Your site may tell you how many visitors filled out your form, but your CRM can tell you how many of those visitors actually became customers by – you guessed it – giving you their money. This information not only allows you calculate your conversion rate, it can also provide valuable insight into why some prospects become customers while others drop out, allowing you to optimize your sales process.

What’s the point of all this tracking? Is it worth the effort? If you know how well your site is converting – or how poorly – you can start focusing on how to increase your total number of new customers. To get even more useful numbers, you can segment this data and figure out the effectiveness of individual pages, marketing campaigns, offers, etc. You can use that information to duplicate successes, trim out the efforts that aren’t working and get a far greater holistic vision of just how well you’re performing at achieving your company’s ultimate goal. You remember what that is, right?

the blank canvas by xinem

Starting from zero with a website can be intimidating. Certainly, you can look at similar sites and competitors and get ideas for design, purpose, etc. Without experience, though, design seems so subjective.

What makes a web site’s design successful? For small business web sites, good design is never subjective. If the site achieves its goals, it’s a successful site. And a site can always be more successful in achieving its goals.

The fatal flaw in web site design is that too many sites are not designed with these goals in mind. In fact, you can break down most web site designs into three categories:

Ego-Driven Design

Have you ever found yourself telling a web designer, “This bar needs to be a darker shade of red – that’s my signature color!” Have you had a designer insist that the signup form needs to be pushed down because the logo image isn’t big enough? Take heed – your site is a victim of ego-driven design.

When you’re just starting out with your site, it’s easy to get caught up in this. You have little information to drive your design decisions, and you’re trying to get the site to match your brand. As a small business owner, your entire company is a reflection of you and your personality, and you want to make sure your site matches that perfectly. Your designer also has a lot at stake – they have a vision for the layout, line, color and other design attributes that will help make their portfolio pop. It’s easy to get caught up in the details.

Here’s a reality check: Craigslist. You’d be hard pressed to find a site that’s less attractive by modern site design standards. It breaks almost all of the rules – no graphics, no real color scheme, blocky layout, nothing but links. It looks like it was designed in 1997 and no one ever bothered to revisit it. For the most part, that’s actually the case.

On Alexa, which ranks websites according to the amount of traffic they receive, they come in at about #37 out of millions. The goal of Craigslist is to get as many people as possible to post classifieds while helping as many people as possible find what they’re looking for, and the site succeeds in spades. Their design is a reflection of a pinpoint focus on this goal alone.

By no means am I suggesting that you have an ugly site – Craigslist is also popular because they’ve been around so long, so they don’t really need to impress first timers too much. But, if you find yourself needling over the design details of your site, take a break and re-evaluate the design from the perspective of its stated goal – making money. If a design element has no discernible affect on that goal, it’s not worth sweating.

Customer-Driven Design

In the process of figuring out whether a new design meets the site’s goals, you may begin asking yourself what your customers expect out of your site. You may even do one better and get some of your customers involved in the design, asking their opinions and, perhaps, hosting focus groups. You can get a lot of valuable information this way and, in the absence of any other information, it may be the best way to determine whether a site’s design is on track or not.

Your customers know and – hopefully – love you. They have already bought from you in the past. They usually know a fair amount about your services and products. And, when they look at your site’s design, they’ll see it through this prism. If you optimize your site’s design to their needs and suggestions, you’ll serve them well. But you can’t address all of your customers’ needs. You can’t even ask each of your customers – some are too busy to participate in a focus group, some simply don’t care enough. And, if you optimize a site’s design for your existing customers or even your targeted customers, are you leaving out customers you can’t even anticipate?

If you can get customer feedback on a design before launching your site, take advantage of it. But don’t drop everything just because of one or more customers’ comments – keep in mind that their goals may not necessarily be the same as yours.

Results-Driven Design

A lot has been made of the marketing power of the web. While it does allow companies to reach entirely new markets for a fraction of the price of other methods, that’s not really where its power lies – its in the ability to measure just about every aspect of the marketing effort. With the right set of tools, you can track a user from the moment they arrive on your site all the way through to the conversion – every page and image they see, every link they click. It’s a numbers geek’s dream.

You can use these same numbers to track how effective your site is in converting visitors to paying customers. You can analyze click paths that lead to a conversion and better promote those pages that lead to the most conversions. You can also prune or improve those pages that aren’t converting as well as you expected. Not sure whether a new design is going to work better than the old design or not? Take advantage of “split A/B testing” – serve the old page to half of your visitors and the new page to the other half and see which one converts better.

If you’re starting from scratch, you don’t have any of these numbers. To get any truly meaningful results from your site’s statistics, you should have at least one month worth of stats – preferably three. But your designer can still rely on the studies, reports and best practices available on the Internet – many for free – driven by actual numbers to help drive their design.

Some of these resources include heat maps that visually show the areas of a page most viewed or most clicked on by visitors, A/B test results that demonstrate the most effective placement of page components like navigation and advertising, and word lists that can help persuade a visitor to take the crucial next step.

Once you’ve established your own numbers, you can begin measuring the true effectiveness of your site. Though these studies are helpful for getting started and can trigger ideas worth exploring, they are rarely one-size-fits-all solutions. Nothing beats actual results with actual visitors to your site, and you should analyze your number frequently to uncover opportunities for improvement.

Watching your web numbers can be as exciting as watching a sporting event, but don’t focus on the numbers alone. Look at the trends the numbers are showing – which days of the week typically get the most users? What is your week over week, month over month and quarter over quarter growth numbers? With experience, you’ll discover your own set of key performance indicators you can use to quickly measure your site’s health and know how to quickly react.

The ideal design methodology is one that take into account some amount of all three of these design types. You want a site that successfully reflects your company’s brand, is open and responsive to customer feedback and is optimized to convert visitors into paying customers. Consistently review the success of your site and sanely change its design and content to improve the numbers. When you’re faced with a tough design decision, though, only one question matters – which choice better serves the goal of your site. That single minded focus on your site’s goal will serve you well.

"Listen to ME!" by Jonathan Powell

The best marketing asset I have is myself. Whenever I go to trade shows, I bring a fat stack of business cards (complete with my phone number, email address, website and – yes! – my Twitter account name) and freely hand them out. I engage directly with everyone I meet at the trade show booths, during sessions and at all of the mixers. I’m there to get more business, true, but I don’t thrust my hand at someone and immediately begin my pitch. The first words out of my mouth after an introduction are usually, “What do you do?”

Listening to someone talk about their job, their company, what they value and what their goals are is the best way to win them as a customer. You should be listening for their pain points and immediately develop strategies to fix them, preferably with the services or products you sell. The best sales people aren’t the ones who convince someone to buy a product, they’re the ones who actually solve a customer’s problem. If you gain a reputation as a problem solver, customers will not only keep coming back, they’ll send their friends and colleagues your way as well.

Successful business websites are no different – they consistently address and solve problems customers face. Treating a website as a digital brochure is the surest way to kill its success. By taking advantage of content management systems (CMS), blogs and discussion forums and encouraging customer interaction, your site not only helps sell your services and products, it helps customers solve their problems.

Of course, your website can’t actually listen to your customers and customize solutions for each of them. Built and maintained properly, though, it can address a surprising number of pain points your customers face and still make it feel like a perfect fit. This is, in fact, the secret to long-lasting, effective Search Engine Optimization. Think of Google and the other search engines not as a way to search for information, but as a way to answer questions. When I type “chicago style pizza in the bay area” into Google, I’m not really looking for a list of links, I’m looking for the best place to find that luscious, deep-dish pizza I happen to be craving at that moment.

Your site should strive to be the best answer to the questions prospective customers are likely to ask. The best way to accomplish this is by providing timely, targeted information on the pages of your website that help your customers find the answers they need. If you provide clear, concise ways for customers to get directly in touch with you through your website, you can get them into your sales funnel right at the time they need you most.

"Flaking Paint" by Bart Everson

Whenever I speak to small business people, I always hear the same story – they found a web developer or web designer, contracted with them to develop their business site, then quickly became disenchanted with the results. Either the site took too long to build and wound up nothing like they had imagined, or the web developer simply up and flaked on them, never to be found again. This tale is almost always followed up by a request to take on whatever work the previous developer left behind. Never one to turn down money, I almost always used to accept.

I soon understood that I could take on this work full time and start my own business. In the Fall of 2006, I quit my full time job to start TechKnowMe: designing, developing, marketing and maintaining web sites for small businesses. Getting work was easy – I simply hit all of the local Chamber of Commerce mixers, introduced myself as a web developer and waited for the inevitable stories to be told. I marketed TechKnowMe as the company that would stick around. I was dedicated to building web sites for small businesses – nothing else. It wasn’t something I did in my free time; it was my job.

I soon found myself with far more work than I could handle on my own, so I sought the help of other local developers and designers to ease the load. For a while, things looked fantastic, and business was booming. But soon, due to a number of personal and economic factors – along with a rash of first timer mistakes I made – things began to fall apart. Before I knew it, the freelancers I worked with were no longer available, and I found myself stuck with half a dozen unfinished projects and practically zero cash-flow. With a new baby in our house, I had to improve our financial situation fast. I finally had to face the fact that I would need to take a full time job outside of TechKnowMe in order for my small family to survive. I explained this to my remaining clients and, though extremely frustrated, most understood and agreed to allow me to finish the outstanding work in whatever free time I had.

It’s been a year since all this happened and I’ve either completed most of that outstanding work or simply had to let it go. For some of my clients, I became just another guy who flaked on them.

Good Help is Hard To Find

The shame I feel for this is immeasurable. Cash-strapped small businesses don’t have many options when it comes to developing professional-looking websites and online marketing campaigns. They either must turn to a “build it yourself” service such as Homestead or SnapPages, or they must find someone affordable enough to not completely blow their budget who can also understand and address all of the business-owner’s needs. In both cases, the small business person must spend valuable time educating themselves on the intricacies of building and marketing a business online – a rather sizeable task, especially for the majority of non-technical small business owners out there. While several full-service online marketing and web development agencies exist, they’re often so focused on the big fish that small business owners quickly get left behind. TechKnowMe was intended to fill that gap by providing affordable full-service web design and development specifically to small businesses. I have not yet heard of any other company with the same goal.

If you live in a metropolitan area, you probably have hundreds – thousands, if you’re in the Bay Area – of talented, qualified web site designers and developers eager to help create your small business web site on a freelance basis. Filtering through these people to find the ones who won’t flake on you, however, is a challenge.

The simple fact is that too many web folks quickly get in over their head when they start working on a site. They may be able to design and build the pages, and they may even be able to apply some kind of off-the-shelf system like WordPress or Joomla to the final design to control the content. Beyond that, though, many get lost. What about SEO? What about online marketing? What about email newsletters and traffic building and conversion rates? The best web sites are developed by a team of people, led by a single person who controls the overall vision of the site. As a small business owner, that leadership position often falls on your lap. But maintaining a team of freelancers is sort of like herding cats – they don’t have any real loyalty to you, and they’re often working on several other projects at the same time.

Avoiding The Flakes

When you’re seeking a web developer to help you with your site, you should keep in mind that they can’t possibly get all of the work done themselves, and you shouldn’t expect it of them. If you’re talking to a programmer, make sure they know they’re not a designer, but have one they can work with. The same goes for a “web designer” – a title that does little to indicate that person’s level of skill. Are they a graphic designer with some web experience? Are they a programmer who’s tired of explaining the difference between programming and design? Are they someone who really understands functional design and the online user experience? You’ll have to suss these things out in your conversations with them to determine just how much they know and, more importantly, how they handle the areas where they’re out of their range. In those cases, Google is not the right answer.

There are several other steps you can take to reduce the chances that the people you hire to build your site will flake on you:

1. Ask for referrals. If you’re looking for the cheapest option possible, you may be willing to take a risk on someone who has the skills, but has never developed a site outside of a professional environment. If that’s the case, this one won;t apply – they won’t have referrals – so you’ll have to rely on samples of their work. I suggest, however, that you don’t take this risk – find people who have been freelancing for a whole and have the referrals to prove it. Certainly, they’ll only give you the positive referrals. The fact that they have any, though, is a strong indicator not only of their professionalism, but their commitment to getting the work done and adding you to their referral list.
2. Ask for examples of completed, live sites. You want to see a record of successful site building. Even if it’s just one site – even if it’s just their own web site – you want tangible proof that they have designed, developed and launched a complete web site from start to finish. As a bonus, ask if they’d be willing to share their traffic and analytics numbers to get a sense for how successful they are in driving traffic as well.
3. Ask them to tell stories about their experiences. As you’re looking over their sample sites, ask probing questions: What challenges did you face when building this? How long did it take to complete this site from conception to launch? What can you as a customer do to ease the process? These questions should lead into a deeper discussion of their process and your expectations of them. It will also help to raise any red flags early on – for both of you – that can save you a lot of heartache in the long run.

Being a Great Customer

It’s unfair, though, to put all of the blame for flakiness on the web developers – your attitudes toward the people you’ve hired to build your site make a huge difference in their loyalty to you. I found it far easier to work with some clients rather than others and continue to work with them when I can today because I enjoyed it so much. There are a handful of things they do that make me eager to continue working with them:

1. They treat me as the expert I am. If you’re hiring someone because of their technical expertise, you should be willing to accept their recommendations. It doesn’t mean you shouldn’t question them or seek a second opinion from other experts, but if they stand firm on their recommendation, you should accept it as their expert opinion. More importantly, you should simply show them the professional respect you would to any expert in their field – the same respect you expect from others.
2. They understand my human limitations. Deadlines are finicky things. It’s very difficult to estimate how long a technical project will take – especially one with a lot of custom elements. Experience helps in this area, but even the most experienced developers underestimate how long projects will take. I try to give as solid an estimate as I can before the work starts, but there have been several times when I have found myself half way into a project only to realize I had severely underestimated the effort involved. I try to compensate by overestimating the time before any work starts, but I have had customers who balked at such inflated timelines. More often than not, even after I’ve hedged and pulled back, the project took as long as my initial estimate. Deadlines are important – projects can’t go on forever – but be reasonable in your expectations, try to listen to your developer when they explain the deadlines they set and focus not on the time when things will be done, but on the set of deliverables expected at those times. It’s better to launch a bit later with a site that’s well thought out and developed than to launch with a half-assed, rushed site full of compromise.
3. They listen when I tell them “No”. Again and again we’re told “The customer is always right”, that the customer should always get what they want. Sometimes, though, you just need to get the work done. I’m talking specifically about what tech folks call feature creep. I do as much preparation and planning as possible before starting a project, and base both my charges and my time estimates on what the customer and I have agreed upon as the set of work to be performed. For larger projects, I prefer to break the work into phases – Phase I contains everything necessary for a successful launch and nothing more; Phase II iterates on the work in Phase I and adds more important functionality; Phase III is usually where “nice to have” items are placed. But even after the Phases have been well defined, it’s difficult to imagine what the final product will look like until the first few prototype pages are built. At that time, the customer often comes up with several other things they feel they must have added right away. This is OK, and every once in a while something does pop up that got forgotten in the planning stages. But every little addition adds time and cost to the final estimate and pushes the deadlines further and further out. Usually, I put my foot down and simply say “Phase II”, meaning we’ll revisit adding the item later. The best clients understand that we want a finished, launched product, so they can prioritize accordingly. If you insist on getting your way, however, you should not be surprised when the costs and deadlines balloon out of control.
4. They know I’m worth it. Nothing good comes cheap. With more than a decade of dedicated experience in web site design, development and marketing, I’m well worth the hourly price I charge. Truth be told, I don’t charge enough. When researching my pricing, I targeted an hourly rate that was higher than most freelancers to prove I was serious, but cheaper than many larger agencies so that cash-strapped small business owners could afford me. My customers understand that I’m an expert, they’ve seen the positive results of the work I’ve done and they know that my prices are more than fair. The only time I’ve ever gotten pushback on my prices is when I worked with small business owners who missed the other three items in this list. In other words, they were nightmare clients all the way around.

Remember that your website should never be a static thing. You want to build and maintain a solid relationship with you web developer and the team that gets your site up and running so they’ll be with you for the long haul. It’s a two-way street, and you can keep your developers from flaking on you if you develop an atmosphere of mutual respect from the beginning.

(This article is published concurrently at the “Integrated Profitability” blog.  Please visit for the full series of articles.)

The final article on capital and equity was posted at the end of July: Equity Capital: In Conclusion. Since then, one of the most written-up examples of the need for equity capital to cover adverse conditions has published 2Q10 financial results: British Petroleum.

The explosion on the Deep Water Horizon, killing 11 people; its subsequent sinking; the ruptured oil well; and wide-spread environmental damage has added huge expenses related to fixing and cleaning up the problem. It is for exactly these types of disasters that capital and equity are needed.

A quick review of BP’s 2Q10 results highlights the following:

Income Statement

● Production and manufacturing expenses*:

Increased to $38.0 billion (from a ~$6.0 billion quarterly run-rate)

● Taxation:

Received offsetting credit of ($7.2 billion) (from a ~$2.5 billion quarterly tax run-rate)

● Profit (loss) for the period:

Became a ($17.0) billion loss (from a ~~$6.0 billion quarterly run-rate)

*: Footnote to Production and manufacturing expenses:

“Second quarter and first half 2010 include a charge of $32,192 million in production and manufacturing expenses, and a credit of $10,003 million in taxation in relation to the Gulf of Mexico oil spill.”

Source: Excel download from investor relations portion of BP’s website; “Copy of FOI_quarterly_ifrs_full_book”

Balance Sheet

● Trade and other payables

Increased to $45.5 billion (from $38.1 billion at the end of 1Q10)

● Provisions

Increased to $13.4 billion (from $1.6 billion at the end of 1Q10)

● Other payables

Increased to $16.3 billion (from $3.2 billion at the end of 1Q10)

● Deferred tax liabilities

Increased to $11.0 billion (from $20.2 billion at the end of 1Q10)

● Total liabilities (includes the above items)

Increased to $162.3 billion (from $135.7 billion at the end of 1Q10)

● BP shareholders’ equity

Decreased to $85.5 billion (from $104.1 billion at the end of 1Q10)

Notice the Income Statement’s 2Q loss ($17.0 billion) and the Balance Sheet’s decrease in Shareholder equity from 1Q to 2Q: $18.6 billion.

Which re-emphasizes the desirability of having adequate equity-capital.

Bill

William A. Stong

Email: william.a.stong@gmail.com

SBF&P # 84

Telephone: 925-202-6244

Copyright © 2010 Integrated Profitability ^TM

(This article is published concurrently at the “Integrated Profitability” blog.  Please visit for the full series of articles.)

Trend reporting is important because it provides a dynamic component to the static “point in time” reports of the Balance Sheet (e.g., end-of-month/quarter/year) and “period in time” reports of the Income Statement (e.g., the month of July; the 3 Qtr; full year). Trends indicate how the financial numbers are moving over time.

Assuming comparable data, the longer the time period, the more insight that can be garnered.

In a very simple example, let’s say you have $10,000 to invest in the stock market. Which is more revealing:

● A single intra-day stock quote

● Three months’ worth of daily end-of-day closing prices

● Five years’ worth of daily end-of-day closing prices

● Five years’ worth of daily opening, intra-day, closing prices

These include peaks and troughs during each day

● Five years’ worth of daily opening, intra-day, closing prices; adjusted for actions affecting the stock such as splits

The more trend data you have, the more you will know about how the stock price behaves, when it goes up/down, and by how much. A graph of the data will indicate certain cycles, and will give hints as to which way the price may be heading. Of course, anyone in the market knows that:

1. “past performance is no guarantee” of future performance and

2. it is incredibly difficult to forecast tomorrow’s price

The point is that with a sufficient amount of history and comparability, you are in a much better position to have an informed opinion about where the price may be heading. Without the information, it’s like flying a plane from a cockpit that has no windows and no instruments. You can do it for a while but the likelihood of a crash goes up astronomically.

Bill

William A. Stong

Email: william.a.stong@gmail.com

SBF&P # 83

Telephone: 925-202-6244

Copyright © 2010 Integrated Profitability ^TM

(This article is published concurrently at the “Integrated Profitability” blog.  Please visit for the full series of articles.)

Given what Finance people do, their accountability, and the information they use while doing their jobs, what are some of the ways to measure how well they are performing?

Given that Finance accountabilities cover significant internal and external ground, measuring their performance needs to include both. Here are a few common approaches, by the three major functions:

● Accounting

- Accuracy of booking entries

- Findings from internal and external auditors; regulators

- Promptness of the monthly close

- Timeliness of submitting regulatory and investor reporting

● Finance

- Accuracy of the financial plans

- Accuracy and business-relevance of variance/performance explanations

- Accuracy of the forecasts

- Timeliness of financial reports after accounting close

- Use of reports and analyses by business partners

● Market-related

- Net-profit from proprietary trading

- Amount of idle funds

- Adequacy of liquidity

- Net value of hedging activities

Bill

William A. Stong

Email: william.a.stong@gmail.com

SBF&P # 82

Telephone: 925-202-6244

Copyright © 2010 Integrated Profitability ^TM

(This article is published concurrently at the “Integrated Profitability” blog.  Please visit for the full series of articles.)

Given what Product Managers do, their accountability, and the information they use in performing their jobs, what are some of the ways to measure how well they are performing?

Given that Product Management accountabilities cover significant internal and external ground, measuring their performance needs to include both, irrespective of how much weight is given to the various components. Indeed, this weighting will depend upon each organization’s current situation, which will dictate what the most critical deliverables, and hence performance, will be (e.g., the weight given, at any particular time, to external benchmarks versus internal project milestones, cost control, risk mitigation).

Here are a few common approaches:

● Project deliverables

-         On time

-         On budget

-         With the features & functionalities originally included in the project

● Availability

e.g., on a 24-hour clock, how much time is the product available to customers?

● Operational Service Level Agreements (SLA’s)

e.g., are specified times, timing, amounts fully met?

● Customer satisfaction

● Market share

● Profitability

Product Management may also share a few performance measurements with Sales, such as:

● Penetration

e.g., the degree to which a customer’s known business needs are being met by your company’s products and services

For example, a bank may be a counterparty with a corporation’s foreign exchange (FX) trading activity. Penetration is increased if the bank becomes the settlement bank for that corporation’s FX transactions.

● Share of wallet

e.g., the amount of a customer’s known spend-for-products/services is being met by your company’s sales to them

For example, a corporation might buy all of a particular raw material from one supplier; or a bank might handle all letters of credit for a corporation.

Bill

William A. Stong

Email: william.a.stong@gmail.com

SBF&P # 81

Telephone: 925-202-6244

Copyright © 2010 Integrated Profitability ^TM

(This article is published concurrently at the “Integrated Profitability” blog.  Please visit for the full series of articles.)

Given what Sales people do, their accountability, and the information they use in performing their jobs, what are some of the ways to measure how well they are performing?

The task of measuring sales performance and the subsequent rewarding of that performance is a deep, board, and constantly changing topic. Sales people are exquisitely tuned to the structure of sales incentives and are very quick to adapt to the way any incentive program is structured to maximize their personal reward. Thus, the construction of sales incentive plans must anticipate the ways that the plan will cause sales people to react in terms of what, how, when, and to whom they make sales.

Here are a few common approaches:

● Amount of Sales revenue, based on signed contracts ($)

● Revenue growth ($ and/or %)

e.g., change in actual revenue booked from customers in the Sales person’s portfolio

● Closed deals

● Implemented deals

● Retention rates (# of customers; $ of revenue)

● New customers/relationships

● Lost business

● Penetration

e.g., the degree to which a customer’s known business needs are being met by your company’s products and services

For example, a bank may be a counterparty with a corporation’s foreign exchange (FX) trading activity. Penetration is increased if the bank becomes the settlement bank for that corporation’s FX transactions.

● Share of wallet

e.g., the amount of a customer’s known spend-for-products/services is being met by your company’s sales to them

For example, a corporation might buy all of a particular raw material from one supplier; or a bank might handle all letters of credit for a corporation

Finally, and of critical interest to the Sales people, there is the data that feeds directly into formal Sales Incentive programs to calculate performance according to the predetermined structure of the plan, and the calculation of the reward amount.

Bill

William A. Stong

Email: william.a.stong@gmail.com

SBF&P # 80

Telephone: 925-202-6244

Copyright © 2010 Integrated Profitability ^TM

The way in which companies staff themselves has changed dramatically in the past couple of decades. Many of the changes have been made possible by the advent of the internet and by huge advances in technology. At one point, seems like ages ago, companies internally staffed most functions needed to produce and deliver their products and services. For example,  Ford owned Philco for more than a decade to supply radios for their automobiles.

As mentioned in “What to Do, Delegate, Outsource,” companies can take advantage of other companies whose business models focus on providing core services, especially in support and administrative areas, e.g.,:

● Payroll

● Financial bookkeeping

Outsourcing has expanded into infrastructure and operational areas:

● Technology

● Customer Service

And there are what I would call hybrid-outsourcing arrangements:

● Commission-only sales

● Business process applications

e.g., car financing software packages or senior management MIS dashboards

Several areas are beyond the scope of this short article:

● The rapidly expanding SaaS (Software as a Service) market

● Equally rapidly expanding “cloud computing” applications

● A complete answer to the question: just because you can, should you?

The last question is essentially how to decide whether a company should outsource a particular function. That decision, which is not a trivial one, needs to consider two primary facets:

1. Cost/Benefit

should include both a financial quantification as well as a qualified review of impacts on your brand, quality, customer satisfaction, and long-term strategy

2. Risk

e.g., once outsourced, what could go wrong? What mitigation steps are necessary?

As with most business decisions, an “All-in” analysis, encompassing every aspect of your business that may be affected, provides the best answer.

Bill

William A. Stong

Email: william.a.stong@gmail.com

SBF&P # 79

Telephone: 925-202-6244

Copyright © 2010 Integrated Profitability ^TM