Our sales training clients in Edmonton, Calgary and Vancouver have previously believed in the philosophy of having “house accounts.” This refers to a sizable account that is usually serviced by a Sales Manager. Commissions generated by the purchases made on the house account are kept internally by the company. Let’s explain the justifiable reasons why house accounts exist and tell you why you may want to rethink this strategy.
Why House Accounts Exist
There are a few reasons why Senior Management considers the establishment of house accounts. This tends to be a touchy subject in the Sales Department, so let’s keep an open mind and stay objective.
Creation of a Sales Manager’s role
The evolution of a company at some point usually requires the role of a Sales Manager. Initially, Sales Management duties are carried out by the General Manager until revenues can justify the creation of the new role. As the company continues to increase its billings, it becomes more of a challenge for the GM to handle the day to day requirements of Sales Management on top of the total operations of the company.
Within this stage of the company’s development, more Salespeople are hired which has a direct impact on top line revenue growth. This is a good thing, yet it creates big challenges for the GM who struggles to keep up with daily demand. Admittedly, the amount of Management interaction required with the Sales Team, client issues and the negotiation of contracts can be truly overwhelming.
At this point, the company sees the need for a full time Sales Manager to continue to drive revenues and add to the Management Team. Here’s where the challenge occurs.
Seldom has the company budgeted in advance for the new Sales Manager. The most likely choice for the position is a Salesperson with a proven track record within the company. Since that individual usually has several long term champion clients with close trusted relationships, it’s thought that subsidization of the new Sales Manager’s salary can be made up by having him or her continue to work some of these accounts. The commissions earned from the buying on house accounts goes toward the salary of the Manager.
Easy-to-Service No-Brainer-Accounts Negotiated Once a Year
It’s often thought that the new Sales Manager has such a great relationship with his or her best accounts that moving them to house status is a no-brainer. The Sales Manager is told that they should pick their biggest, easiest to serve clients and simply keep them. It’s typical that these accounts have long term deals in place and are stable and consistent in their purchasing. The thought is that these house accounts should take up little time for the new Sales Manager.
Subsidization of Cost to Sale During Growth Years
Depending on your role in the company you may have a different reaction to the reality of this justification of house accounts. Management is always conscious of its cost to sale in the sales process, and sometimes it’s enticing to continue to have the Sales Manager call on several key accounts and increase net profitability.
So, now that we have all been forthright with the reasons why house accounts exist, here’s the downside of having them.
Why House Accounts Don’t Work
There are no Easy-to-Service No-Brainer-Accounts
To believe that some of your Champion Clients are easy to service and take little to no time to work properly is dangerous thinking. How would they react to that philosophy if they were to become aware? Your Champion Clients are the result of hard work, creativity and super-service. Know that your house accounts now have the potential to suddenly become the worst serviced clients in your entire company.
Your new enthusiastic and eager Sales Manager will constantly be at odds in his or her new role. When accepting the new time consuming responsibilities of Sales Management, these house accounts run the risk of being neglected. When working the house accounts, your Sales Manager will feel the same way with your Sales Team.
These potential house accounts became Champions because of regular needs analysis reviews, innovation and your efforts to make them feel a priority in your relationship with them. Your Sales Manager will be adapting to a new role and be understandably preoccupied. Realize that your Key Accounts have the greatest potential for further account growth if worked accordingly. Many house accounts hold the new Sales Manager responsible for the lack of education on new opportunities. Rightfully so! They were receiving that level of service from the very same person before the changes occur.
Conflict of Interest in Representation
This is one of the biggest reasons to avoid the establishment of house accounts. When specific events or limited time offers occur, your new Sales Manager will be caught in a definite conflict of interest when carrying a dual role. A Sales Manager has access to privileged information that needs to be kept confidential before releasing it to the Sales Team. House accounts are usually the last to find out (if they do at all) about new initiatives that can only accommodate a limited number of clients.
Potential Animosity Between Sales Management and Salespeople
Even if your new Sales Manager has an impeccable sense of ethics, he or she will be seen in a different light if servicing house accounts. Here’s the best way to explain it from a Salesperson’s perspective. If you are my Sales Manager, then you should not be allowed to be give me constructive criticism in an effort to help me as my direct report then compete with me in the distribution of sales leads, contests and promotions. The lack of clear distinction in the role leads to confusion on the sales floor and an opportunity for negative feelings.
If you decide to establish house accounts, here’s how to handle it
Do it for only the first year of creating the new Sales Managers role
Budget accordingly for the salary of the Sales Manager in the second year. Fight the urge to subsidize the salary and your company’s cost to sale with commissions that go against it. Distribute the house accounts to the Salespeople who deserve them. This always has a great impact on the team and sends a clear message – work hard and you’ll be rewarded.
Educate the house accounts of your account management strategy
Make sure your new Sales Manager educates his or her Champion Clients and informs them that this will only happen for one year. This gives the Sales Manager the opportunity to find the perfect Salesperson to service their account. The Sales Manager will always still retain the relationship with these Key Accounts and be there to listen to their needs on an ongoing basis.
Be transparent with the Sales Team
Tell them what you are doing and why you’re doing it. Don’t try to sell your Salespeople and give them only the information you think they need to hear. Be forthright and honest and treat them with the integrity and respect they deserve. They are your best clients because they are responsible for growing your company’s revenues.
Giving them all the information, whether they like it or not, helps them better deal with the situation eventually. Allow them the opportunity to voice their disapproval in the right setting and thank them for their opinion. Tell them that you thought they deserved the truth versus a half-baked-smoke-and-mirrors version of it. Watch your credibility go up and their ability to move on occur.
Every Salesperson knows that the company will do what it feels is best. A true explanation is the most any employee can ask for. It helps develop better relationships, improve morale and is often cited as one of the biggest retention factors.
What do you think? Do you have any other suggestions to make as a Salesperson, Sales Manager or Business Owner? I’d love to see them in the comments section below. If you liked this post, please share it on your favorite social media platform.
Thanks for reading!
Dave Warawa – PROSALESGUY
Author of SHUT UP! Stop Talking and Start Making Money
Available on Kindle and paperback.
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