Promotion Points: Risk Management starts Here: Pre-Qualify your Pipeline! November 1, 2009

Sales professionals have heard it over and over… Pre-qualify your prospects. Sales managers are so set on getting the prospects in your pipeline pre-qualified because salesmen will waste much less time on dead fish and their sales percentages and profit margins go up. They are dealing with real buyers.

I totally agree that prospects should be pre-qualified. But not only for sales managers’ reasons. In my company I use my sales pipeline as the first opportunity to protect my company from unnecessary risks.

As risk management is the job of everyone in the company it should start with the sales team, your company’s front line. What good is it for you to bring in clients who are delinquent in paying their bills to you? How much time do you waste if you bring in clients who an unprofessional in their dealings? These are unnecessary headaches that can never be totally eliminated but can definitely be streamlined.

My company has an application process where I require references from colleagues in the same industry. I have a standard questionnaire that goes to the provided references. I ask the referees first about the financial capabilities of the applicant. I also ask other questions that give me an idea about how stable, sound and professional the applicant is: Are they operationally professional? How do well do they communicate? Are they cooperative in joint-marketing efforts? Is there anything I should know either positive or negative about this company that I haven’t asked specifically yet?

These background questions give an excellent bird’s eye view of what kind of partner you will be getting in the relationship. Sales people generally balk at such a procedure because it means that they have to vet a large number of potential hot prospects. The sales process is more cumbersome because there are now more steps involved. But this is in your company’s best interest. At the end of the day not only do you want to be paid for services rendered but keep in mind that you will also be known by the associates that you keep.

Of course this does not mitigate entirely all of the risks associated with your clients. There is no crystal ball that tells you what will happen in the future with a potential customer. Some clients will inevitably turn bad on you no matter what you do. For instance, you might have one client who is exemplary for five years and then their own industry goes down the doldrums. Or their CEO dies. Or they have a fire in their warehouse. Anything can happen down the line. With the global economy like it has been the past year most of us have witnessed good clients becoming problem children. There will always be things in life and business you cannot control. But your company will definitely find that placing an emphasis on discovering what kind of client you are potentially getting in bed with saves you a thousand heartaches down the road.

So how does one effect this culture change in their sales department? Isn’t it the nature of sales to constantly be on the lookout for easy marks so that they can move on to the next prospect?

To get your sales team involved in gauging the risks that are associated with bringing in new clients might seem like a chore at first. I believe that the easiest way to manage this though is to change your rewards system. Give some thought to this because in sales you will get what you reward for. If you are rewarding sales people simply on revenue they bring in then you are leaving yourself at a much higher risk than if you reward them on the type customer that they bring in. Every industry is different and every company is unique so the answer that you come up with might not be the same as the one I use. The important thing is that your answer produces the results that you aim for. Start with the desired result in mind and build the program around that.

Embedding risk management into the sales department is not an easy task at first but once the procedure is in place and tweaked to perfection you will see dramatic results in the quality of clients that you attract. You will notice that your customer service will be easier as well as you will have less “problem clientele”. Cash flow will also tighten up. And all of this will pay off where it counts – on the bottom line!

Gary Dale Cearleyis the managing director ofAdvanced International Networks Ltdand is also a columnist and writer. Promotion Points is a monthly column in the magazineManagement Systems Asia, where Gary Dale is a regular contributor. You can follow Gary Dale on Twitter by clickinghere.

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