8 years ago
April 13, 2016

How to Identify Reasons For A Drop in Sales

All businesses dread sudden and unexplained drops in sales. The following are a few of the most common internal causes of sales declines.

Rhys Metler

All businesses dread sudden and unexplained drops in sales, and though this will not happen to every business, every business should know how to determine and address the causes that can lead to a drop in sales. The sooner you identify the reasons behind a drop in sales, the sooner you can correct the issues. With that in mind, the following are a few of the most common internal causes of sales declines.

Demand that Exceeds Sales Team Capacity

While it is tempting to think that excessive demand would result in increased sales volumes, in many cases the increases in such a scenario are only temporary. As the capacity of the sales team and support teams erodes in the face of increasing demand, service capabilities begin to suffer to the point where prospects and clients can become disillusioned and stop ordering. The impacts to the sales team in this scenario are many, and include:

  • An inability to schedule and keep appointments with new prospects due to time constraints
  • An erosion of lead generation and follow-up with new leads that shrinks the lead pipeline and long-term sales prospects
  • Distraction and conflict on who to service first, especially if long-standing client contacts are dissatisfied

You can tell if demand is exceeding your sales team’s capacity by looking at these metrics as well as the metrics for your output. The solution for this drop in sales scenario is relatively simple, however: Your business needs to add quality sales people to its team, and quickly.

Internal Disruptions That Decrease Morale and Productivity

Change is difficult to manage, and when difficult changes occur that impact your sales team you will likely see at least a temporary drop in sales. The most common disruptions to morale that result in a drop in sales are the departure of a high-performing sales manager or sales person or a corporate-level restructuring. If either of these scenarios have recently come to pass in your place of business, it is likely that this is influencing your drop in sales. Address the causes directly by:

  • Reiterating the long-term benefits of the recent changes
  • Taking concrete action to improve morale through team-building, temporary incentives, or other measures to which your sales team is likely to respond positively
  • Removing any obstacles to overcoming a drop in sales, such as re-opening lines of communication with decision-makers and sales influencers

Ineffective Incentive and Compensation Systems

If you want your sales team to sell consistently, your incentive and compensation systems should encourage selling behaviours that support regular sales in all target sectors. All too often, though, sales teams are being incentivized in the wrong areas. If repeat client sales are needed to support your business, only compensating based on new business will encourage your sales team to go for the immediate sale rather than cultivating long term relationships. If you have a wide mix of products and services with uneven compensation mixes, your sales team will likely focus on those that provide them with the healthiest paychecks.

Especially if your compensation system was recently updated, take a hard look at where your sales team is focusing its activities to determine whether this might be the cause of a drop in sales. Further updates may be needed so that the selling behaviors you want to see are rewarded. However, if your team’s early sales activities, such as lead generation, prospecting, and initial appointments, appear to be on the mark you may want to look at your marketing and distribution channels for a possible cause for a drop in sales.

As a final note, don’t neglect to ask your sales team members about what they believe are the reasons behind a drop in sales. Although some of the responses may sound like excuses, not all will be, and this can lead to valuable insights that allow you to make the adjustments needed to get sales back on track.

Rhys Metler

Rhys is a tenacious, top performing Senior Sales Recruiter with 15+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and daughters, BBQing on a hot summer day and tropical vacations.