Fixed Training Costs Vs Variable Training Costs

The current economic client makes it difficult for training departments to obtain any extra funds, much less normal operating funds. Many times departments must “make do” with the budget they’ve been handed. But once you have a budget, no matter how large or how small, you should have an idea of what costs are fixed and what costs are variable.

Fixed training costs are simply the ones you can count on at any point. You’ll budget for these costs and be able to rely on the fact that they will most likely stay the same. For example, the salaries of the training staff are relatively fixed. When you work on your budget, for whatever time period, you know if you’ll be able to add staff, which we will discuss in a moment. You’ll also know how much to budget for increases based on the average from the last year. But altogether, you’ll be able to count on salary as a fixed item.

The equipment you use routinely for training is also a fixed cost. In fact, much of the equipment training departments use is bought and paid for at one time. These items are every day use items such as copiers, computers, laptops, overhead projectors, LCD’s, screens, automatic whiteboards, and any other equipment that is routinely used in the classroom or in the administrative office. But don’t forget that you’ll need to fix the cost of the upkeep on these items. Light bulbs for overheads and LCD’s are fairly expensive, and must be replaced with an item that is approved by the manufacturer. One way to fix these costs is to know how long these items last and plan for their replacements accordingly. One of the biggest shocks to a training budget is when all of the LCD’s burn out at one time, leading to an expense item that can add up to thousands of dollars.

Overhead is also a fixed expense. As a training manager, you know how much it costs to maintain your location or locations. These costs include the rent or mortgage payment, the expenses that accompany the locations, such as office supplies and paper, and also any income that comes in from other departments or companies renting space in an owned building. You can also include utility costs as fixed overhead, but be careful when the weather becomes extremely hot or extremely cold – one way to do this is to ensure that engineering installs timed thermostats. Many organizations waste overhead money heating and cooling spaces that are empty overnight or over a weekend, so the training department can continue to prove its worth by turning off the utilities when they are not in use.

Finally, fixed or planned programs are also fixed costs. For example, if you know how many people will be in leadership development over the budget period, you can plan for the materials and outsourcing costs right away. The best thing to do with planned programs is stick to them unless changes become absolutely necessary.

On the other side of the budget, variable costs are the ones you’ll need to plan for more carefully. Do you pay usage fees for bandwidth or online courses based on the number of users? If so, this is a variable cost. You can look at average usage from the previous year, or you can simply purchase an advanced number of users for online courses in order to manage this cost. But don’t end up in the position of turning people away.

Your materials costs can also be variable. Think about which programs are not “fixed”, such as new hire training. You know what the organization’s turnover is, but can you anticipate large jumps in turnover? You also know the organization’s vision and business plan, so use that to plan your materials cost. One of the best ways to deal with this cost is to purchase materials as needed and plan as you go. There’s nothing worse than ending up with boxes of an outdated manual.

Finally, large variable costs can include mergers, acquisitions, expansions, and reductions. You should have an idea of where the organization is headed as far as mergers or acquisitions – and plan the budget accordingly. But there could be unexpected changes such as reductions or expansions that cause you to have to fork over money for space reconfiguration or additions to staff.

The management of variable items depends in a large part on the kind of budgeting system your organization uses. If budgets are fixed, there is not much leeway. But if budgets are “rolling” budgets or “pro-forma” style budgets, you can manage money a little easier as the variable costs swing from one side to the other. For fixed budgets, the best way to handle variable expenses is to look for ways to pay for them out of fixed costs. When variables come your way, find out how the organizational budget is handled and ask for help from the financial managers.

Now that you know which training costs are fixed and which are variable, you’ll be better prepared to manage the money as issues arise.

Qualifying Prospects Is the Better Way to Sales

In our last blog, “We All Live in the Sandler Submarine”, I talked about the seven steps of the Sandler system and how working through these steps will improve your sales process. Step 3 – Pain; Step 4 – Budget; and Step 5 – Decision; are the qualifying steps in the Sandler system. If your prospect reveals 3 to 5 issues to you that are clearly various levels of pain, they have money budgeted to fix the problems, and they have the authority to make the decision to buy your product or services, then congratulations! You have a qualified prospect.

The Sandler way of qualifying prospects before you ever present to them, is substantially different from the traditional way of selling. In the old traditional selling methods, sales people present benefits and savings to prospects who may not even need their products or services at that time. And worse, you often give away free consulting and walk away empty handed. That’s why qualifying the prospect before any presentation is made, makes so much sense to both parties. Nobody’s time is wasted.

THE TRADITIONAL SALES METHOD

In the traditional selling method, the prospect is typically in control of the sales meeting, leaving the sales person in a weak position. Here’s why:

1. Traditional Selling Step one typically means the prospect plays his or her cards close to the vest and reveals very little to the sales-person. In fact, the prospects are so guarded they may outright lie to the sales-person, rather than share the truth about their problems. Some sales scenarios may even include manufactured reasons for the meeting because the prospect is just seeking information about your products and services, especially pricing, so they can use it as leverage in negotiations with other vendors, or to get you to offer major concessions in your pricing. Either way, it’s not a winning situation for the sales-person.

2. The prospect wants to know what the sales-person knows, and they eagerly launch into a presentation and talk, in detail, about all the benefits and advantages of their company. He or she offers a quote, a proposal, references, and a lot of free advice. But, Step two typically ends with the prospect offering what sounds like a big compliment. For instance: “You really know your stuff, and I’ll get back to you in a week.”

3. All too often, though, more than a week goes by and the prospect does not get back to the sales-person at all. The salesperson has entered step three in the prospect’s buying system. Step three is very similar to step one because the prospect has misled the sales-person again. Even though they didn’t live up to the promise of returning a call, the sales-person will still make an inquiry to the prospect in hopes of progress.

4. The sales-person may connect with the prospect, but the prospect is likely to put them off. They will usually make up excuses as to why they haven’t gotten back to you or made a decision. They want to keep the sales-person on the hook, or they are too embarrassed to let you know they chose a different vendor. The sales-person is left dangling in limbo and continues to pursue a prospect that won’t be buying.

5. Finally, that’s how the process ends: in voicemail jail. The prospect doesn’t pick up the phone and “goes dark” on the salesperson. You may never hear from them again.

Notice that the prospect’s system for buying things is the same as the traditional salesperson’s approach for selling things. It works for the prospect, so they won’t change it. The Sandler System, on the other hand, is designed to level the playing field so the salesperson and the prospect can establish an Adult-to-Adult relationship, where both parties have something to gain. Working at the same level, they can decide as adults whether to proceed with the sales process, rather than remain in limbo. The key to knowing whether this relationship will work is uncovering the prospect’s degree of pain. Stay tuned to our next blog for more on identifying a prospect’s pain.

How to Have Beginners Luck Forever in Sales

Have you ever experienced beginners luck, where everything seems to go your way the first time you try something new, or do something you haven’t done in a long time? Every shot goes in the hoop, every puck in the net, every pool shot in the side pocket. Wouldn’t it be nice to have beginners luck all the time? The phrase “beginners luck” describes the phenomenon when people who are new to something, and inexplicably outperform so-called “experts.” The question is, why does it happen?

One answer is that when you are brand new to something, you aren’t bogged down by all the rules, theories, statistics and techniques that may churn through your head when you are an age old veteran and still trying to perform at peak level. When you are the veteran, don’t you hate when some newbie comes in and just starts cleaning up the place and winning everything in site? Well rest assured, in most cases of beginners luck, the luck will eventually fade away and reality will settle in, bringing the new top performer down to earth. This is especially true in sales.

In the selling world, we like to call the beginner stage, the “dummy stage”. Beginners luck usually runs out and performance becomes anything but consistent. However, if done right, you can harness the dummy phase, and use it to your advantage, something we like to call “The Dummy Curve”. The Dummy Curve is a process, or a progression from dummy to professional, but keeping the effective tools from the dummy stage to enhance your honed skills in the professional stage. Many of the “dummy” qualities are charming and disarming to the prospect, if used wisely and without being obvious. The trick is to harness the useful dummy qualities and become more reliable and productive as you grow into a sales professional.

MEET LT. COLUMBO

So you can see what I’m talking about in action, here’s an example we often use in our training to explain this concept. Way back in the 1970s and ’80s, there was a TV show about an LAPD detective named Lt. Columbo. His character was a seemingly bumbling detective who had a way of being vulnerable and disarming during his discussions with murder suspects. They always ended up underestimating him. Check out some YouTube samples of Columbo using his most famous line, “Just one more thing”:

https://www.youtube.com/watch?v=QxBnaMGP2aY&feature=youtu.be

In one episode, Columbo gets a call at 11 p.m. to investigate a murder. He hits the road and goes from house to house, looking for leads, until he knocks on the door of the fifth house. By now, it’s about 1:30 in the morning. A couple opens the door. The husband says, “Can we help you?” Columbo responds, “Oh, yes, I apologize, I know it’s late. I’m Lt. Columbo with the LAPD.” Columbo shows them his badge, and they curiously eye his disheveled appearance. (By the way, if you guessed that these two were the murderers in the episode, you’re right.) “Unfortunately,” Columbo goes on, “there’s been an incident with the Murphys up the street. Did you know the Murphys?” The wife says, “Well, kind of, not really.” Columbo says, “Well look, you’re not a suspect. I’m just here to ask you a few questions. It’s just routine. I know you’re not a suspect because there were tire marks all across their front lawn. I saw your car parked out front here. The tire treads don’t match.”

The couple invites him into the living room and offers him coffee. After a few minutes of questions and answers, Columbo interrupts the husband and says, “You know what? I apologize. I didn’t bring a pen or paper with me. I was asleep when I got the call to come out and forgot to bring those things with me. Could you help me with that?” The wife gets him a pen and paper. You can tell that both husband and wife are thinking, This guy’s clueless. He’s never going to catch us. With his head down and his suspects convinced that he’s an amateur, Columbo continues to ask questions and takes lots of notes. They never suspect the bumbling detective has what it takes to uncover their well-thought out scheme.

Finally, he completes the interview and returns the pen. He’s leaving, and they think they’ve gotten off scot-free. As he’s about to step outside, he smacks his palm against his forehead and says, “One more thing. Do you have another car?” They say, “Well, yeah, right out here in the garage.” They take him out to the garage. Columbo kneels down and inspects the vehicle. The tires are covered in mud,and the tread patterns match perfectly. Case closed. Lt. Columbo was so disarming that, at the moment of truth, the criminals literally forgot that he was a detective investigating a murder. Why was he disarming? Because he was so good at pretending he knew a lot less than he actually did.

Being the dummy and asking a lot of questions can help you disarm your prospects and get them to trust you much quicker than normal. Mastering the dummy curve can lead the dummy to closing more deals and making more money. In our next blog, we will show you how to put the Dummy Curve in to action and improve your sales production.