One of my duties is to sell our company’s services. While wearing my "salesman’s hat," I have the chance to talk with many other vendors.
I hear about the exploits of salespeople and their clients. Many salespeople boast about the gifts they give to clients. They speak freely about hunting trips they sponsor and exotic gifts they offer. The salespeople also talk about the favors clients offer in return. But rarely do they give a value comparison of the gifts given versus the service received. This prompted me to ask the question, "What does it cost you to ‘buy’ work from clients rather than ‘selling your services’ to them?"
Case in point
I heard that a vendor arranged for his client to hunt an Axis buck deer at a cost of $29k. That’s a lot of bucks for a single buck! The salesperson said that the $29k gift landed his company a $20 million project. Assuming the contractor works on a 5% margin, his payback would be around $1 million minus the $29k gift. This means that the Axis buck cost the vendor roughly 3% of his margin. But that’s only part of the story.
Does the contractor have to buy business so blatantly? Are his services so poor that he has nothing to sell? Is there no competitive edge? For the same money the contractor could have purchased several issues of advertising in BIC or another industry publication. According to my calculations, the contractor could’ve reached an audience of about 3,500 industry people. In that group, 1,200 people have some role in the decision-making process. He could’ve run his message three to four times within a six-month period.
Strong advertising is effective. Those 1,200 decision makers could be the equivalent of 50 refineries or facilities sending you a pre-qualification package to get on their bid list. That could equate to $320 million in bid packages. If you win even one-third of the bids, you have $107 million in new business at a 5% margin, or $5.35 million. Which would you prefer? Is it wise to spend $29k on one gift to one client — for which you receive less than $1 million — or would it be wiser to spend $29k and potentially get $5.35 million in margins?
The hidden costs of a ‘buck’
The gift of an Axis deer carried hidden costs with it. I’m betting the kind of salesperson that only knows how to buy business likes to talk a lot and share his exploits. Stories sweep through our industry like wildfire. But there is a silent participant in the story: the company that the salesperson works for. Wherever the salesman’s story goes, his company’s name goes too. The braggadocious salesman is establishing a reputation for his company, which also has to lie about its gift audits in order to keep all of the $1 million. The salesman is slowly labeling the company he works for as an organization that will give to get, and then lie about what it’s gotten. Is that the kind of company that clients really want working for them?
There’s a better way
TF Companies doesn’t have just a few people on its sales team, we have 1,000 salespeople. It’s true. We believe that every one of our employees sells for us. We treat all employees like they’re part of our sales team, and they respond by generating a better quality of work. That, in turn, creates better margins and profits which are then passed on to them in wages and benefits. The money most contractors spend on entertainment and gifts is saved for employee bonuses, making them happier and keeping our retention rate high. This reduces the likelihood of competitors stealing them away. Employees are also motivated to help "sell" when they know it helps them and the company. That is why we have an open-door policy and are very transparent about how the company operates and what we do with our employees. Our entertainment and gift policy mirrors that of our clients.
Clients who dabble in the dangerous and outdated practice of accepting gifts need to know how many people industry-wide feel about gifts and these types of exploits. It’s high time that both contractors and clients put a stop to this offensive practice of "buying business" and take the high road, which means buying and selling based on capability and merit alone.
For more information, visit tf-companies.com, call Whitney Strickland at (866) GOTO-TFC or email to wstrickland@tf-companies.com.
