Managing the Cost of Sales in a Shrinking Economy

December 10th, 2008 by

Many companies are in survival mode in this tough economy, looking for ways to preserve cash to help run operations during lean times.    During the last 5 to 10 year economic expansion companies invested significant money into sales and marketing initiatives and now they are facing the stark reality that they need to reduce or eliminate marketing and sales budgets to survive.  The following are a few ideas to help companies reduce cost, but not at the expense of completely eliminating sale marketing budgets.

Communication – It is important that employers communicate the current financial situation with employees.   Employers often feel embarrassed about being in a tough economic situation and do not consult with employees about options on how to save costs.  If you were willing to talk to the employee about how to expand the business you need to be willing to discuss strategies on how to manage a shrinking business in a tough economy.

Commission – A company can look to reduce the amount of commission paid on a product and maintain the sales person base salary.  A best practice is to review commission structure on a yearly basis, making sure the commission structure reflects the current economic environment.  Now is the time to look at commission models and adjust commissions early in 2009.

Base Salary – have your base salaries been inflated due to high recruiting costs of top sales talent in the economic boom.  We are no longer in the boom cycle as result this would be the time to adjust base salaries down and increase the variable pay target.  The business can leave the targeted income the same, reduce base salary and increase the commission pot.

Reduce Hours – Offering sales or marketing personal a reduction in hours.  When the economy is slow do you need a sales person five days a week or could you get the same results from a 3 day work week?  The reduced work week allows the sales rep to find temporary part time employment to help compensate for the reduced wages.

Outsource – Using sales outsource firms like POIM to provide the required market coverage while benefiting from the reduced costs. 

Topics: Uncategorized