New Economic Numbers, and your Sales Reps

Should we beware the Ides of March?

• Up to this week, it wasn’t known exactly how much rates would be raised at the next FOMC meeting, but now we do: ¼%.

  • This will cause the prime rate to go from 3.25% to 3.5%.

  • If your business has a million dollars in outstanding bank debt based on the prime rate, your interest expense will go from $32,500 to $35,000.

  • Not much right now, but the market is expecting another 1% increase over the course of the year.

    • For that $1,000,000 loan, that will take your interest expense from $32,500 to $45,000; a $12,500 increase or a 38% bump.

  • We will continue to see volatility through the first two rate hikes. And Russia is not helping.

More Economic News

• February jobs report is in and employers – that’s you – added 678,000 jobs. Very nice.

  • That dropped unemployment to 3.8% - also nice.

  • This was led by leisure and hospitality with 123,700 new jobs in the Restaurants and Bars category. I can tell you from personal experience this weekend that Vegas is back. The Bellagio had occupancy in the high 90 percentile and the place was packed: casino, shops, and restaurants.

    • The strip was very busy even though the weather was cool.

• More than 300,000 people joined the workforce – now if only cousin Eddie would do the same.

• Kiplinger has increased their forecast for inflation at year-end from 3.5% to 5.7%. Plan accordingly!

• Russia is the wild card in the world economy for the foreseeable future with the emphasis on wild. But… it’s only the 11th largest economy. I mean, it’s not like China is showing any irrational tendencies…

 Another Inflation Side Effect

• Just as pension funds were thinking they were catching up with their unfunded liability, along comes inflation.

• For some funds, the consumer price index (CPI) is the basis for increasing the payments you receive for your retirement income (assuming you were lucky enough to get a pension in the first place).

• This will have the undesirable effect of having more money come out of the pension funds and consequently increase the amount of the unfunded liability for that pension fund. It's just a longer time to catch up. 

Your Sales Reps

• Do you trust your salespeople? Put another way, do you trust them to make the right decision?

• I ask because I have experienced a number of interactions with very experienced salespeople this year that highlight the value a good account officer brings to the business.

• I was talking to an account officer who had recently made Presidents Club in her firm. She was 7th out of 56 salespeople. Of the eight reps in her region, she is the most senior with three years of experience (that should get the attention of HR, but that's another topic for another day).

  • She has an account that generates $100,000 in sales annually but is not under any contract.

  • The account asked for a $200 donation for a nonprofit they sponsor.

  • The sales rep has no authority for any spending whatsoever; that is Mistake #1. She had to go to her sales manager who instantly declined it because there was no contract in spite of consistent six-figure sales results year after year.

  • That's just stupid.

• Almost every week I discuss the importance of retaining your good employees. This is not one of those ways. Owners and Managers, resist the compulsion to treat your high performers like your low performers.

  • If they are performing, let them perform and leave them alone.

  • If you don’t, your high performers will be insulted and your low performers will see no incentive to get better.

One More Sales Anecdote.

• I watched the movie King Richard this past week. The title character refers to Richard Williams, the father/coach of Venus and Serena Williams.

• The similarities of Richard Williams to a sales professional are astounding:

  • Patience

  • Persistence

  • Negotiation skills that are a joy to watch

  • And a plan – a 78-page plan, to be exact.

  • A belief in the product.

  • And like every salesperson I have ever known, had some incredibly down days; but he did not let that stop him.

• Venus Williams was offered a $3 million shoe contract with Nike the night before her first professional match. But, it was good for that night only.

• Nike, in its haste to push a deal from an unproven tennis phenom, pushed the buyer into a corner. Richard and Venus believed in the product, told Nike to pound sand, and 8 months later signed a $14 million deal with Reebok.

• Two Lessons:

  • A good deal today could be a better deal tomorrow.

  • You have to believe in your product, otherwise you will short sell yourself. Don’t give it away. 

Finally, you may have to wait a few more weeks for the Bentley you ordered.  Over 4000 cars from Volkswagen were on a ship that caught fire just off the Azores.  They include Bentley, Audi, Lamborghini, Porsche and other VW brands that were mostly electric, and all of them are now on the bottom of the Atlantic. The crew was taken off long before it sank so there were no casualties.  Who knew that when you buy a Lamborghini, you are buying a VW? 

In the meantime, believe in yourself and believe in your product.  Now go sell it.  Just don’t ship it with a bunch of electric cars.