You may be losing revenue, customers and your best workers without knowing it by neglecting consistent, professional training.
Every company pays for training. You can either pay for it up front or you pay for it through poor results at many times the cost of doing it right. People don’t think about it this way, but maybe they should. Let me tell you a story about a company where a lack of training was costing $1.68 million a year.
There was once a chain of nine flooring stores with $12 million in annual sales. The owners had an overall goal to increase profits, which were sitting at an average profit margin on products sold of 34 percent.
Knowing they could improve the margin if they focused on training and raised pricing, they trained employees to use sales tools and help customers understand the true value the company offered. They concentrated on customers’ needs and helping them find the right products. By demonstrating value and being better in assisting customers, they increased margin and sales.
Their profit margin grew from 34 to 48 percent. The result was a $1.68 million increase in gross profit dollars plus increased sales. The improvement in profit was demonstrable. The reality is that the true differentiator was the training. If they’d simply changed out the merchandising without doing the training, it would have had a much smaller impact.
Another way to look at it is that for years, a failure to train was costing that company $1.68 million a year in gross profit. The cost of training for this company was in essence $1.68 million per year, because they didn’t spend any money on training. You see, every company pays for training. You can either pay for it up front or you pay for it through poor results at many times the cost of doing it right.
Are you paying for training without knowing it? Let’s take a close look at just how that could be happening to your company.
Let’s say that your staff should be closing 40 percent of sales, but currently they are only closing 30 percent. That means you are losing 25 percent of potential sales. So if your company is doing $10 million in annual sales, you are losing $3,333,333 in sales.
With training, increasing a close rate from 30 percent to 40 percent is a reasonable expectation. It can mean training staff how to be more polite, listen better, present products more effectively — and ask for the order. It is very doable. And if you are not doing it, you are paying for training without even realizing it.
Losing employees is costly. According to a study by the Center for American Progress, the cost of replacing a worker who earns between $30,000 and $50,000 a year is 20 percent of annual salary, or up to about $10,000.
Incidentally, the link between training and retention is well documented. Well-trained employees are happier and therefore less likely to leave. And because they do their jobs better, you will have to fire and replace fewer of them
Let’s assume that your average portable sanitation customer spends $100 per month per restroom unit. Through training to upsell to better restrooms or add additional services, your average charge jumps to $125 per month per unit. When you add the $25 to 100 restrooms ordered every month, that’s $2,500 per month or $30,000 per year in new revenue.
If your company does $1 million in annual sales and your customer retention rate drops 5 percent, that translates to losing $50,000 in sales. The right kind of training in sales and customer service has been shown to retain many more customers.
WHERE TO SPEND?
Some will argue a small business should make one of its largest investments in advertising. That’s where you attract new customers and build the company. But those advertising dollars may or may not be successful at attracting customers.
Dollars spent on training help you keep the good customers you already have, and help retain and reward your valued employees the best employees you have.
How much is poor training costing you? How could investing in training up front improve your profits?