Whenever it comes time to focus on increasing sales, most companies focus in the wrong place. How do we know that? Simple, there are more wrong places than right, and without an understanding of how to focus, the odds are you’re going to get it wrong. So how do you get it right? The answer is to understand the theory of constraints and the lessons it holds for increasing “throughput” in sales
What is throughput? In sales, throughput is simply selling and delivering more products and services to your customers…..a simple idea, not always remembered by those who attempt to manage sales efforts. How often have you seen a sales manager attempt to manage the sales process by measuring a single intermediate point when they should be measuring enough intermediate points to determine the “constraint” to increasing sales.
A constraint is defined as anything that limits a system from achieving higher performance. To increase throughput (sales) you need to follow a five-step process:
1. Identify all of the constraints in the sales system. Every business unit has at least one constraint and most have several and sales is no exception. What are your constraints? Too few leads, too few qualified leads, too few qualified sales people to follow-up on the leads, too few people to create useful proposals, too few qualified buyers……
2. Exploit the system’s constraints. Make sure you don’t bother to increase output of things that are not constrained. If a constraint is too few people to qualify leads, then increasing raw leads beyond the level you can qualify is a waste of system resources. Maximize the input to the constraints just to the limit of the constraint’s ability to handle the input. Any more is a waste of resources.
3. Subordinate everything else to the decisions made in step 2. This will maximize system efficiency. That is, the cost of selling will be minimized for the level of sales being achieved, but it doesn’t yet increase sales. The reason is that we have not yet relieved any constraints, we have simply acknowledged that they exist and that trying to “force feed” more through the constrained system is a waste.
4. So now we must elevate the constraints. What is the one step in the process that if you expanded its capacity would increase sales? Make sure you understand what the constraint is and then expand its capacity until it is no longer the constraint.
5. Sales will increase and… there is now another constraint so go back to step 1 and repeat the process.
This process sounds simple. It seems obvious, and it’s tough to force yourself to do it. We are too quick to want to jump on a “solution” without understanding if we are increasing throughput or activity. The purpose of your organization is not to increase activity but rather to increase throughput and it will not happen by guessing.