Business

Joshua Melick Talks About Approaching Sales as a Science And Not Art

Increasing their sales prospects tends to be among the core priorities of any business organization. New customers and sales are the lifeblood of any business, no matter its sector or scale. Joshua Melick underlines that entrepreneurs should ideally approach sales as science and not art, and for this, they need to understand the sales economics of their venture. Joshua himself has an educational background in engineering and math, and hence he focused on getting the math right in the process of transitioning to an entrepreneur and sales leader.

As an entrepreneur, one should firstly try to evaluate what is the worth of a customer to their business on the basis of their Lifetime Value (LTV). Typically, the business shall want a 3X Customer Acquisition Cost (CAC) to LTV. But there are a number of other factors to consider in this regard, such as the CAC payback time, sales overheads, marketing spend, and so on. Joshua Melick points out that in many ways marketing is more complex than sales.  He adds that one should ideally include most of the marketing related tasks within their sales calculations.

Joshua himself likes to do the CAC and sales spend exercise in two diverse ways, top down and bottoms up. Top down can be the comparatively easier method; in which one has to take the whole department spend of sales, marketing and business development, and ultimately divide it by the number of new customers and new dollars closed during that period.  It is common to find an almost equal amount spend in sales and marketing during this calculation process.

While the top down approach is instructive, Joshua Melick finds the bottoms up method more useful when it comes to understanding what actually is going on in the business.  He prefers following an unit economics type approach for the bottoms up method. There are several elements that go into the bottoms up budget, such as the average commission rate per deal,  the amount of base salary going into each deal, the extent of marketing spend allotted to each deal, and so on.

Subsequent to doing all the math entrepreneurs need to analyze the results, and ask themselves pertinent questions like whether the SDR is working or not and how does a particular channel pan out for the company’s  PPC (pay per click) marketing budget.  Each channel will have its natural limits. Even if one can get 10 deals a quarter through trade shows at a certain cost, it does not imply that they can get 10x that for 10x the cost. In most of the cases, the more one wants from a channel, the more its costs are going to balloon as the entrepreneurs have already got had their low hanging fruit.

Joshua Melick underlines that to incentivize cheaper channels and cut down more expensive ones, incentive based plans and uncapped commissions are needed, along with making sales reps share the burden of lead costs.