What are your annual sales?
Last week we discussed the difficulty of asking clients about the specifics of their advertising budget. Sometimes just as difficult is finding their annual sales numbers. The report we highlighted in last week’s sales tip gave you an easy way to find out what percentage of sales your prospect/advertiser should spend on advertising. This week we want to share a simple way to get the annual sales numbers.
Source: Jeff Schmidt, RAB
If your prospect/client is a publicly-held company, finding out their annual sales is straightforward. On their website, usually under the “investors” tab is where they post their SEC (Securities and Exchange Commission) filings. Look for the 10-K, which tells you how much they sold in the previous year. It also tells you their primary competitors, their business challenges, and their expectations for the future. It’s a behind-the-curtain look at the finances of your prospect/client. Publicly-held companies are required to make this information public.
If you’re calling on a private business, it’s trickier to get a picture of their annual sales. You could try asking directly, but they will likely resist answering. In my experience, if you ask three questions the client should have no trouble answering, you’ll have all the information you’ll need.
1. How many people shop your store in an average week?
2. Of the people that shop, what percentage buy during that visit?
3. What is the average sale to those who buy? In other words, how much do they spend?
Here’s an example of how it all comes together:
How many people shop? Answer: 100
What percentage buy? Answer: 50%
What is the average sale to those people? Answer: $300
Now you know that your client generally has 50 people spending $300 each week, or weekly sales of $15,000. Multiply that by 52 weeks, and you know your client has approximately $780,000 in annual sales. If the Advertising-to-Sales Ratio report says the average person in the category spends 10% on advertising, you know you should have about a $78,000 annual advertising budget with which to work.
These numbers are averages. Business flow and the seasonality of the business will have an impact on those numbers. For that, your RAB provides the Top 40 Business Survey that shows the month-by-month sales trends for the top 40 categories.
The bottom line is: A little advance planning and research goes a long way in qualifying your prospects and determining what they -- and your current clients -- should be spending on their advertising. Helping them allocate the proper budget to advertising will allow you to propose schedules and plans that will deliver results. Clients who get results will spend more, get better results, and renew more. They will become trusted partners for years to come.
Jeff Schmidt is SVP of Professional Development for the Radio Advertising Bureau. You can reach Jeff at email@example.com or 972-753-6765. Other ways to connect: Twitter: @JeffreyASchmidt or LinkedIn: linkedin.com/in/schmidtjeffrey.