Rent Turnover Ratio

I was doing a little job for someone that involved a customer profitability analysis.

One element reminded me of the time in the Nineties when I spent a day with an office supplies salesteam in Torquay. A thoroughly enjoyable day ended with me keen to sample the nightlife of the town of Basil Fawlty. As we ventured towards the local action, the Red Arrows dazzled across the sky, defying gravity over the cliff face.

During the preceding session, I used BI software to quickly show how successful certain areas were. One chap had run a patch far away from his main territory for almost twenty years. He spent one day of every week on it. He’d insisted on keeping it through several re-orgs. Yet incredibly it turned out to only provide less than two thousand pounds of profit. A fifth of all time taken up on such meagre pickings. We all suspected there was another reason for him guarding this piece of turf so preciously. Words way less elegant than paramour rang around the room.

Most sales teams conduct some sort of customer profitability assessment. Yet the workings often mislead. How relevant can it be when all it tends to take into account are total orders and margin?

Another slant crossed my screen from an Aussie site for small business owners.

nicola-mills-startupsmart

In the retail franchise space, founder Nicola Mills appears to have learnt at her firm that one key figure is the rent to turnover ratio.

“We were less bowled over by a site because it was in a great location.
If it cost us above a certain percentage of turnover, then it was a ‘no’.”

Imagine this thinking transposed to your customers (or even prospects). What would you do if you realised that the accounts you spent the most time on yielded only average returns? No matter how glamorous they may seem, can you justify the damage that such a large amount of potentially ‘lost’ time causes your commission cheque, or the relationships with other, more deserving clients?

In this case, can you extract your own rent-turnover ratios? Ones where you truly expose the genuine profitability of each customer that also measures time spent with/on them?

If you were in a different trade, say a software engineer, then every minute you spend answering an email to driving to a meeting would be logged against a particular project. Whilst this type of monitoring currently eludes Sales, there’s merit in you working out something along these lines for yourself.

They key question is then perhaps, once you discover a client that’s sucking energy out of your patch, can you cull them?

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