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The Machine

Why Revenue Should Always Be the Responsibility of Operations, Never Sales


The Machine: A Radical Approach To The Design Of The Sales Function

Hardcover & Kindle by Justin Roff-Marsh

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This article was written by Justin Roff-Marsh, author of The Machine. It argues a contrarian and contentious rethink on the role of sales and is indicative of the content covered in his Axion awarding winning book. Complete the form for the first four chapters in hard copy free.

Salespeople won’t like this!

If you make revenue the responsibility of your sales department, you will handicap the growth of your organization. If you want your organization to grow, operations should be responsible for revenue and your sales department should focus exclusively on new business.

Revenue: The Responsibility of Operations

If your organization is typical, it’s likely that more than 70% of your revenue in any given year comes from existing customers. You could think of the transactions that make up this 70% as yours-to-lose. You don’t need to win these transactions; you just need to do a good job of processing them.

The quality of your relationship with existing customers is almost certainly a function of how good a job you do of processing these yours-to-lose transactions. We know this because the most common reasons why customers defect are (in descending order): poor on-time delivery performance, uncompetitive pricing, and poor product performance.

It’s not a big stretch, then, to argue that operations should be responsible for revenue — and, consequently, for the transactions that generate that revenue. Your sales department cannot directly influence on-time delivery performance, pricing, or product performance so it makes no sense for revenue to be its responsibility.

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Growth: The Responsibility of Sales

If revenue becomes the responsibility of operations, then operations will also have to take responsibility for a number of activities that have traditionally been performed by sales. Solution design, quoting, order processing, and issue resolution, to name a few.

What should sales be responsible for then?

Sales should be exclusively responsible for pursuing yours-to-win transactions. In other words, your salespeople should focus on winning business that is currently being awarded to your competitors. And, if you’re serious about growth, that’s all they should do!

To be more specific, salespeople should be responsible for winning transactions from new customers and transactions from new product categories, for existing customers. They should have no involvement whatsoever with yours-to-lose transactions.

Here, you have two choices:

  1. You can fortify your customer service and engineering teams before refocusing your salespeople on growth.
  2. You can convert your existing salespeople into customer service specialists and build a new sales department from scratch.
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The Economics of New Business

In your business there are two types of revenue. And these two types of revenue are so different that they should never be summed — except once a year, when you submit your numbers to the tax department.

I’m talking about revenues that result from yours-to-lose transactions versus those that result from yours-to-win transactions. The value of a yours-to-lose transaction is the number that appears at the bottom of the invoice. However, the value of a yours-to-win transaction is the value of the annuity associated with that first invoice.

Think of it this way. When a customer purchases from you for the first time, there’s a good chance they’ll make a second purchase, and a third. In economic terms, then, a customer is simply a future stream of payments (an annuity). And the value of that customer is the net present value (NPV) of that future payment stream.

I’ve already argued that revenues should be the responsibility of operations. Sales, then, should be responsible for the value of the annuities that they win. What this means is that you should agree on a formula to gross-up first-time transactions to account for net present value. You should also use a term (other than revenue) to refer to the output of your formula (new business dollars, perhaps?). If you must pay salespeople commission — I don’t recommend it — then they should earn a small percentage of new business dollars and exactly zero percent of revenue.

If you’re serious about growth, it’s critical that you keep these two numbers separate. To sum them is to treat them as equal, which they are surely not. In most organizations, the total invoice-value of new business transactions is less than the normal variation in total repeat transactions. In other words, unless you break-out new business dollars in your reporting, your growth signal will be lost in the noise.

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* This article written by Justin Roff-Marsh was first published in Thomas Insights.

What's inside the book?

Request the Sampler and we will give you the first 4 chapters of The Machine in hard copy plus a heap of bonus content.

  • The Titanic is sinking
  • Quiet revolutionaries
  • Are things really that bad?
  • A new assumption
Chapter 1:
After the revolution
  • Four appointments a day, five days a week
  • Management by numbers
  • Arresting the decline
  • Theory into practice
Chapter 2:
Four key principles
(and how to win a boat race)
  • Why do we persist?
  • How did we get here?
  • Directions of the solution
  • Putting division of labor to work: four key principles
Chapter 3:
Re-envisioning the sales function
  • Principle 1: Centralize scheduling
  • Principle 2: Standardized workflows
  • Principle 3: Specialize resources
  • Principle 4: Formalize management
Chapter 4:
The death of field sales
  • The modern field salesperson is a misnomer
  • Why customers postpone interaction with salespeople
  • The inside-out approach to sales
  • The economics of inside sales
The Machine Read the first 4 chapters free, get your copy now

what our readers say

"We doubled our top-line revenue in the year following our implementation of The Machine and are applying these same concepts to an international company we just acquired and seeing the same sort of gains in effectiveness. Justin's book is providing us with an even deeper understanding of the principles that changed our company and continue to drive our sales." Aubrey Meador, President of ARCA
"There's no reason for the sales department to be the least predictable and most chaotic part of a company. The Machine brings order by removing non-sales work from salespeople and replacing it with centralized scheduling, standardized workflows, specialized resources and formalized management. The Machine offers a proven system for growing sales in an organized, consistent way." Andrew Warner, Founder of Mixergy
"In his provocative book, The Machine , Justin Roff-Marsh has thoughtfully and forcefully challenged the status quo as it pertains to the design of the sales function. Some readers will be angry, some dismissive, and a select few will be enlightened by this alternative approach. We fall in the latter camp and have found Justin's approach to be a true asset for growing sales in today's complex selling environment!" Mike Schleyhahn, President of Swagelok San Diego
"The Machine will challenge everything you know about the sales process! It makes a lot of sense, passes all the logical tests, and in the end, might just keep you awake at night. We worked hard to implement a number of these concepts in our organization and I can attest that the ideas are valid and the payoffs are real." Jeff Stuart, President of Hydra-Power Systems Inc.
"Justin's approach to addressing the tired structure of traditional sales environments is nothing short of revolutionary. The Machine shows management how to drive growth with a tightly synchronized machine, as an alternative to herding individual salespeople. There's no question that this book will be a great investment for any executive that runs a sales team." Paul O'Dwyer, Author and Business growth coach
"As an operations guy, I'm driven by process, efficiency, and repeatability. The notion that the sales function is an art immune from the rigors of process has never sat well with me. The Machine shatters that myth. The Machine is a must read for any business leader wanting to achieve predictable results from their sales function." Marc Allman, COO of AMS Controls