Want More Sales? Increase Your Share of Customer
“We start by determining the total revenue in Drachmas commanded by FEI’s top 20 customers,” Marka explained as she started scribbling on the whiteboard.
Total Revenue Commanded by FEI’s Top 20 Customers ($)
$10 million x 80 percent= $8 million
“If our current top 20 customers representing $8 million of revenue give one quarter of their business—on average—to us, we have a 25-percent SOC,” Marka explained. “If our SOC were 100 percent, then our total business would be $32 million.”
“Great Zeus!” Zoot cried.
“Relax, Zoot,” Marka said. “The $32 million figure is only important for the next calculation. A 5 percent jump in SOC (from 25 to 30 percent) can be calculated using this equation.”
[Marka scribbled more on the whiteboard.]
Incremental Revenue Growth ($)
$32 million (at 100 percent SOC) x .05 (5 percent) = $1.6 million
“Now let’s add this $1.6 million to the original $8 million from our top 20 customers and add the remaining $2 million from the bottom 80 percent,” Marka said. “FEI now has $11.6mm in sales. This is an overall increase of 16 percent, all from concentrating on top customers with whom we’re already doing business. See the power of even a small increase in SOC?”
“I’m sold,” Zoot said. “Now, what can we do to increase our share-of-customer?”
“Glad you asked…” Marka said.
Today’s FIRE! Point
Some of your best sales opportunities might be right in your backyard. Even a small share-of-customer increase among your top customers can lead to a significant jump in sales. And it’s much easier selling repeat business because the hard job of qualifying the lead is already done
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