Joshua Melick Discusses The Aspect Of Sales Economics

Regardless of the type of business they run or the sector they work in, the core priority of all entrepreneurs tends to be to find ways that help them to get more customers and increase their sales. Joshua Melick underlines that new sales and new customers are the lifeblood of any business, and hence entrepreneurs must undoubtedly put a great amount of focus on it. In addition to these two broad topics, there are multiple other issues that an entrepreneur has to deal with, such as business funding, product fit, HR or legal issues, and so on.

Most entrepreneurs try to see business as a science and not art. However, if their sales are going to be scientific nature, one must firstly gain an understanding of the sales economics of their business. Joshua Melick has an education background in engineering and math, and therefore getting the math right was crucial to him in the process of transitioning to an entrepreneur and sales leader. He mentions that all entrepreneurs must try to have at least a 3X Customer Acquisition Cost (CAC) to their Lifetime Value (LTV), so that they get an extra amount to play with for their CAC.  This math, however, just covers the basic.  There are a number of other factors that have to be considered by an entrepreneur, such as what would be the time to pay back the CAC, whether the CAC is fully loaded or not, what is the sales commission plan ratio, and so on. All these information forms the guardrails of a sales machine. At first, all these information might seem obscure, but the best founders and leaders of the world always keep a note of these details.

In the opinion of Joshua Melick he uses a top-down and bottoms up approach to do the CAC and sales spend exercise for his business. He additionally maintains a unit economics type approach for the bottoms up system. Joshua mentions that this concept was drilled into him by one of his professional mentions. He additionally says that this approach helps in answering a lot of important questions involved in business operations, such as what is the average commission rate per deal, how much base salary goes into each deal, how much marketing spend to allocate to each deal and so on.  After doing all the calculations involved, one would want to check if their math is working by taking a look at each channel. They should especially evaluate whether the SDR is working, and how the marketing budget pans out in regards to diverse channels. The probable outcomes of increasing the sales quota by 25% should also be dwelled over. Marketing is in many ways a more complex topic than even sales, and hence such calculations would be needed to reach proper outcomes that can help make better business decisions in the future and improve overall sales prospects.