"Closer Q: I have a client who loves to socialize. He likes when I buy him expensive meals and drinks. My company will not reimburse for this. How do you suggest I 'pass the hat'". Dirk in Beantown
Dirk, good question. I am glad you have tried to submit these expenses. The reason companies pay sales entertainment expenses it to get sales and the expenses become part of the 'cost of sale'. If the cost of sale is greater than the product you need to either raise your price or reduce your cost of sales, IE entertainment expenses. The reason sales managers watches sales expenses is because minimizing them can go to the bottom line, at the same time sales expenses are investments in future business. As companies do, you can also look as investing part of your commissions to win this sale. In a separate blog entry I responded to sales is a numbers game regarding make calls, I am going to recommend to you entertainment expenses is a numbers game too.
My first question is to evaluate your client from a company and personal profitability perspective, IE how much you get a year in quality business does this client purchase and how much do you get in commissions on this account. Second, I would look at how strategic is the account, IE is the guy your top reference account or is this a name brand account. Third, I would look at how personal your friendship is with him, IE do the two of you get together because you like each other or because there is new business. Very often sales people spend time with prospects they like versus prospects who will actual purchase their product.
If this is a good business deal for the company for you to take this guy out, I would go back to your boss and push to get your company to cover the expenses. Assuming they do not, I would look at the pros and cons of you covering the expenses yourself. If you are getting $10,000 in commissions a year from this client and he is costing you $1,000 a year, I recommend you keep taking him out to expensive meals. If you are getting minimal commissions and you go because you are friends or this small client likes free meals, I recommend the following, "Mr Prospect, at our company we offer a top product at a competitive price. One way me keep our prices low is minimizing paying entertainment expenses. I would love to go to dinner with you tomorrow but I wanted to let you know up front we will need to split the bill. Do you still want to meet for dinner?" I expect if he is your friend he will understand. If he is looking for a free meal, I assume he will cancel dinner and find another rep to take him out.
If you do decide to pay with your personal funds, I would contact your accountant to see if you can deduct the legitimate expenses from your tax bill.
Quick story, in the late 90's I sold a $20,000 deal to NationsBank (now Bank of America) and we had at least $25,000 in travel and entertainment expenses. I asked my VP if he wanted me to keep taking this guy and to keep flying in company VIPs to meet with the decision maker. The company wanted a name a name brand account who bought our product and I was told it was worth the 'cost of sale' to win the business.
Great question, expenses.
Reader Feedback, please click the comments below to give 'Dirk' additional information on 'Expenses' and I want your feedback on my response.
Dirk, good question. I am glad you have tried to submit these expenses. The reason companies pay sales entertainment expenses it to get sales and the expenses become part of the 'cost of sale'. If the cost of sale is greater than the product you need to either raise your price or reduce your cost of sales, IE entertainment expenses. The reason sales managers watches sales expenses is because minimizing them can go to the bottom line, at the same time sales expenses are investments in future business. As companies do, you can also look as investing part of your commissions to win this sale. In a separate blog entry I responded to sales is a numbers game regarding make calls, I am going to recommend to you entertainment expenses is a numbers game too.
My first question is to evaluate your client from a company and personal profitability perspective, IE how much you get a year in quality business does this client purchase and how much do you get in commissions on this account. Second, I would look at how strategic is the account, IE is the guy your top reference account or is this a name brand account. Third, I would look at how personal your friendship is with him, IE do the two of you get together because you like each other or because there is new business. Very often sales people spend time with prospects they like versus prospects who will actual purchase their product.
If this is a good business deal for the company for you to take this guy out, I would go back to your boss and push to get your company to cover the expenses. Assuming they do not, I would look at the pros and cons of you covering the expenses yourself. If you are getting $10,000 in commissions a year from this client and he is costing you $1,000 a year, I recommend you keep taking him out to expensive meals. If you are getting minimal commissions and you go because you are friends or this small client likes free meals, I recommend the following, "Mr Prospect, at our company we offer a top product at a competitive price. One way me keep our prices low is minimizing paying entertainment expenses. I would love to go to dinner with you tomorrow but I wanted to let you know up front we will need to split the bill. Do you still want to meet for dinner?" I expect if he is your friend he will understand. If he is looking for a free meal, I assume he will cancel dinner and find another rep to take him out.
If you do decide to pay with your personal funds, I would contact your accountant to see if you can deduct the legitimate expenses from your tax bill.
Quick story, in the late 90's I sold a $20,000 deal to NationsBank (now Bank of America) and we had at least $25,000 in travel and entertainment expenses. I asked my VP if he wanted me to keep taking this guy and to keep flying in company VIPs to meet with the decision maker. The company wanted a name a name brand account who bought our product and I was told it was worth the 'cost of sale' to win the business.
Great question, expenses.
Reader Feedback, please click the comments below to give 'Dirk' additional information on 'Expenses' and I want your feedback on my response.
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