Saahil Dhaka
Saahil Dhaka,CEO at Clientell
7 mins read
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Managing sales risk

A picture describing Managing sales risk

The major difference between successful and unsuccessful is that the former looks for the problems to resolve while the latter makes every attempt to resolve it.

Sales risk is the uncertainty that may arise in the sales process as a result of problems with customers or business procedures, unsuccessful sales attempts, or unstable products. Understanding them is crucial because sales risks can have a significant impact on the revenue your sales force generates and subsequently have a negative impact on your bottom line.

In order to understand what the problem may be in the process, let's know the process itself.

A sales process outlines a company's actions for selecting and addressing potential clients, determining business problems, suggesting solutions, and following up to ensure implementation. The ideal sales process is one in which members of the sales team (broadly defined) are aware of and carry out the proper actions with the most lucrative clients and prospects, at the proper times, in the proper frequencies, and in the proper quantities to create predictable outcomes. They create a stream of sales possibilities through their sales activity. There are conversion rates and a yield at the conclusion of the sales process when the sales possibilities advance from one stage to the next. The correlations between these fluxes, cycle periods, conversion rates, and yields are unstable.

As we got to know in sales, everything is unstable. As instability increases the risk factor increases and to tackle this the system should be efficient and proactive enough. What may be the problem arise? What sort of risk does any sale come across? Here’s the brief.

Types of sales risk:


Hubris Risk

Hubris risk is characterized by overconfidence and arrogance, and it causes the person in charge to believe that they are doing nothing wrong. Many times you think you are right but you are not, it is your overconfidence that drives you as said by Norain “Overconfidence will drown you in the sea of reality.’ Since they do not take into account other people's opinions or how their actions will affect other people, it might lead the person in charge of making sales decisions to make rash and unreasonable choices.

Hubris risk is frequently linked to successful people, including corporate executives. Without fully considering the implications of the views of other members of the sales team, a sales manager may make choices.

The lack of consideration is a result of the sales manager's overconfidence that they are making the proper choice and that there won't be any unfavourable effects. Sales managers need to be self-aware and realise that their past successes do not guarantee they will not face difficulties in the future.

Information risk

Information risk is connected to how information technology is used, owned, run, and adopted inside the organisation. Such hazards can harm the sales process, particularly as a result of inadequate information technology installation and poor process management.

Businesses that rely on technology may experience a security breach as a result of failing IT systems, which could lead to fraud, theft, physical asset damage, and even harm to the company's reputation. Consequences of frequent breakdowns or downtimes in the IT systems include lost sales, reputational harm, customer confidentiality breaches, and decreased customer satisfaction. When system failure results in non-compliance with regulatory obligations, businesses may be subject to penalties and fines.

Other than that the performance of the sales force is impacted when your organisation collects wrong or insufficient data on profit margins and/or sales pricing. Data is the most valuable asset in the modern economy, which explains why. Rich, accurate, and accessible information is more valuable to a sales force than gold. However, a lot of corporate data is unreliable. Bruce Rogers, Chief Insights Officer at Forbes Media, stated that "poor-quality data is a significant concern." Many businesses are now forced to travel through the information era using something akin to a horse and buggy. In fact, bad data may cost American businesses $3 trillion annually. The team's ability to provide customers with the correct goods at the right price to make a profit is skewed by inaccurate data on profit margins and sales pricing.

Strategic Risk

Strategic risk occurs when the business pursues an unsuccessful or wrong strategy. An ineffective sales plan can be the result of a lack of understanding of your market and your clients. Although your business definitely wants to understand its market and its consumers, it's possible that your research team isn't going far enough to find out who your customers are, what they want, and how much they're willing to spend for it. A team is at risk if it depends on presumptions and educated guesses. Additionally, just because you were familiar with your clients a few months or years ago does not indicate you are familiar with the current playing field.

"The market is doing what the market will do and sales must respond issue by issue and account by account."
Frank Cespedes, Harvard Business School

It might also occur if a new product line receives insufficient resources from the organisation or if it doesn't react adequately to changes in the business environment. As an illustration, Kodak's management disregarded the technology's rapid advancement and made no strategic choices that would have allowed them to weather the rapid adoption of digital technology.

Tactical risk

Tactical risk arises due to changes in business conditions that occur in real-time, causing businesses to incur a loss. The phrase "tactical risk" is taken from the military and describes the circumstances present on a battlefield. In contrast to strategic risk, which is a plan for the future, tactical risk arises as the events take place in the present.

The hazards the firm currently faces in the marketplace are referred to as tactical risks. For instance, the business should be able to increase productivity right once to meet demand when there is a spike in demand for its products.

Ethical risk

The sales team may engage in any activity that aids them in meeting the established revenue targets in a revenue-focused firm, even if the conduct is immoral. The sales staff could be subjected to inappropriate pressure from the management, which could push them to breach the organizational norms.

The most frequent ethical risks seen in corporations are matters like bribery, fraud, abusive behavior, and lying to stakeholders. While such actions might aid the company in achieving its revenue goals, they might erode the confidence of the shareholders in the leadership team.

Knowing the problem doesn’t solve it. It always takes a step towards it to combat and sail the boat peacefully. Here’s the list of some precautions you can take to overcome the problems and minimize the risk:

Best practices to avoid sales risk

  • Create lean Data: Your sales team employees run the danger of giving inaccurate quotations without clear data, and they might not be able to provide the greatest client service. Close the knowledge gap between your sales representative and the customer to make the sales process even simpler.

  • Get Your Strategy Right: By continually evaluating the needs and desires of your customers and changing your plan to take these into account, you may prevent a complete, sudden shift. Spend some time reviewing the information you've learned about your target audience to make sure your strategy is always in line with their requirements, and you won't be left behind.

  • Align cross-functionally: Disjointed handoffs from marketing to sales at the beginning of the sales process or from sales to customer success at the end can kill deals and cause confusion. Spend some time internally setting expectations about how the handover should go so that you can do the same with your customers.

  • Be proactive about performance management: To identify the sales risks facing your company, use a sales scorecard and have regular discussions with your team about their performance. You will be better able to stop these conversations in their tracks if you can be more proactive about them.

  • Offer ongoing continuing education: Only 3% of people believe that salespeople are trustworthy, partially because salespeople sometimes sell parts of the product that don't exist. This behavior isn't entirely on the salesperson, though—they may be misinformed or undereducated on that part of the product and unable to reach out to get more information mid-call. Your sales culture should place a strong emphasis on ongoing product and service training. Your sales team should spend some time creating their own documentation in addition to reading your training materials.

  • Make risk assessment part of your day-to-day: Work daily with your team to open up dialogue and increase the visibility of your possibilities to reduce risk. Make a list of questions to ask yourself when you consider your own bias during the sales process. By focusing more on your integrations and information in-flow, you can make sure that your data is as clean as it possibly can be. Control your team's output and how everyone interacts with other teams inside the organization.

So, going back to the original question, what is sales risk? If you know where to look and take the time to prevent it before it happens, it won't be a big concern. You're moving forward.

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