Managing Cash Flow

108 Analyzing the Sales Function
agement deficiency, but also such sales statistics would have to be developed in
order to evaluate sales function performance. Typically, the 80/20 rule (Pareto’s
Law) applies; that is, 80 percent (or more) of the company’s sales come from 20
percent (or less) of its customers; and 80 percent of its profits come from 20 percent
of its products. These customers and products should be identified and evaluated
with regard to their effect on sales and company operations.
Based on this analysis, the company might ask:
• On which customers and products does the sales force spend most of its
time?
• Is adequate consideration being given to whether the prime customers
pay their bills on time?
• Is sufficient emphasis being placed on selling those products that contribute
adequately to company cash flow?
• What is the sales emphasis, on the top 20 percent or on the other 80 percent?
• Is the focus on existing top customers, other customers, or potential new
customers?
• Is there any emphasis on finding new uses for the top 20 percent of customers
and products?
• Are sales personnel aware of customer and product statistics, and do they
actively alter their sales plans based on such statistics?
• Is sales emphasis on dollar sales resulting in sales commissions rather
than on company goals and profitability?
• Does sales staff communicate problems with products regardless of the
products’ salability (high sellers as well as low sellers)?
• What is being done about the 80 percent or so of customers and products
that produce only 20 percent of sales and profits? Are there any sales
efforts to increase sales of those products and to those customers?
• Are there new products that need increased sales efforts or older products
in decline that should be considered for elimination or phasing out?
• Does sales staff provide adequate customer service to all customers—top,
middle, bottom, and potential? What is the extent of customer service for
the top 20 percent, others, and new customers?
• Are opportunities such as product enhancement, new products, changes
in use, decline in demand, and so on recognized?
Methods of Sales
There are a number of different ways of selling products and providing related
customer service, among which are:
• Direct sales to the ultimate customer
• Selling to original equipment manufacturers (OEMs)