Excel: Next To The Phone It's Your Most Important Tool

Author: Perry Burns

Practically all decisions in business have a numerical element to them. The most obvious example is the ubiquitous Business Plan; but far too many people think that the important bit is the words at the front rather than the numbers at the back. But make no mistake, anyone who is going to back a business turns straight to the numbers section to see where and how much money is going to be made.
Unless you are a genius, it is pretty unlikely that you will get the numbers right first time. After all you will have to consider all sorts of contingencies; for example variations in rent, salaries and cost prices. You may have different sales projections depending on your price point and you may have to allow for different interest rates or fees depending on the amount of money you borrow or commit to the business. If you are trading globally you may have to consider fluctuations in exchange rate and factor in different transportation costs.
Excel spreadheet

A spreadsheet allows you to put in all the variables and keep adjusting them so that you can see the effect of any given change instantly. By adjusting the variables you will eventually arrive at an outcome which looks both realistic and believable and this can then be inserted into the business plan as a forecast. Later on, this forecast performance can be compared to the ultimate outcome; and this in turn can then be used to make ongoing decisions about how the business is run.

A Spreadsheet is far more than a simple adding machine though. Excel in particular has a rich collection of formulas which allow you to manipulate data in some remarkably sophisticated ways. This in turn allows you to model scenarios to a surprising degree of complexity. And if you design your sheet properly you can put all the variables in one corner of the sheet with the key benchmark indicators next to them. It is then just a simple matter to adjust one variable and see instantly how it affects the outcome.

Excel is the ultimate tool for this kind of 'what if' modelling. By properly constructing his spreadsheet, the entrepreneur can test assumptions and try out options to find the optimum strategy. The other huge advantage of Excel is that it allows you to take your data and present it in graphical form, literally at the touch of a button.

excel sheet showing rollups

Unless you are an accountant, rows of figures are likely to be unimpressive and quite possibly incomprehensible. But nearly everyone can appreciate the information conveyed by a chart or diagram. Excel automatically integrates with other products so that by updating the figures in your Excel spreadsheet you can automatically revise the charts embedded in say a linked report.

Excel's impressive range of formulas mean that complex calculations involving the time value of money or complex geometrical calculations can be performed in a split second,thereby saving time and of course money.

For sales managers there are three important applications for which Excel is the tool of choice. Firstly the thorny problem of setting quotas and paying commissions. Most sales managers have a rule of thumb about how much they expect to pay. This will be based very much on the industry norms, the length of the sales cycle and the expertise needed by the salesperson. By inserting these variables into an Excel spreadsheet the sales manager can calculate the optimum sales goals, what the On Target Earnings (OTE) should be and where accelerators and prizes should kick in to get the best performance. He can also model the optimum salary and commission package for a salesperson.

For most businesses, salespeople need to return between three and four times their own cost. However the calculation becomes complicated when there are variable price points, margins and accelerators in place. Using his Excel spreadsheet, the manager can model the situation very closely and make an informed decision on the maximum salary he can pay, how much commission should be available and the real cost of hidden costs like car, fuel, and support costs.

The second tool he should be using is a spreadsheet to monitor and control performance against target. By breaking down sales objectives and comparing actual performance he will quickly see if he is going to undershoot target which will then give him time to take remedial action before it is too late.

There are of course, any number of sales software packages that do this simple job. But Excel is widely available, very easy to customize, easily interchangeable wit other managers and very flexible. With proper training any manager should be able to construct a sales forecast spreadsheet in a very short space of time. He can then not only keep an eye on progress but circulate helpful informative charts to his team keeping them updated on progress.

The final tool that should be in every sales manager's tool kit is a pipeline calculator. This allows him to measure and monitor customer progress and identify where further sales effort is needed to close a deal. Many mangers combine this function with the forecaster, but while they are linked they are still separate and distinct. The forecaster is about internal performance against target while the pipeline is about customer facing sales performance.

Many people use Excel as a glorified on screen calculator; but to do so is to ignore the huge time savings and vastly improved decision making that this wonderful tool can provide.

OpenOffice Calc works well, too

Instead of Microsoft Excel, I use OpenOffice's Calc spreadsheet program. It's free of cost, does everything I need in a spreadsheet, and reads and writes Microsoft Excel XLS files.


About The Author

Perry Burns specializes in showing companies how to improve sales performance. You can obtain some of his models here and download state of the art Excel training here. Contact Copyright 2008: Sales 101 All rights reserved