Tag Archives: sales cycles

Typical Sales Metrics…for sales managers who have never sold before.

6 Mar

Never been a sales person but now you find yourself managing a group of sales people?

Whether you’re the CEO of a midsized company or a senior manager who has been assigned the task, you’re going to get a lot of well-meaning suggestions on how to manage.  Press hard on results!  Inspect what you expect!  Always move out the bottom 20% of performers!  If you don’t show a willingness to move out non-perfomers then you’ll never gain their respect!  Expect a lot and you’ll get a lot.

Well I will offer up a suggestion also, based on decades of managing hundreds of sales people.  Here are a few thoughts for you to consider before I offer up some management metrics;

  1. Sales people are people.
  2. Sales people are one of the only employee groups that have to fill up their own in basket.
  3. Sales people are one of the few employee groups that have to fight through 5 failures to get one success.
  4. Sales people are one of the few employee groups where 30 to 100% of their compensation is entirely dependent upon their skill, will and tenacity to persevere on a daily basis.
  5. Sales people are the only people who actually go out every day with the sole focus of building your top line revenue.

If you’re going to be a successful sales leader then you should expect a lot.  But you won’t get a lot unless you give a lot…of yourself.

Okay so here’s the metrics I promised.  You should first identify the sales process (cycle) because all sales metrics spin-off the sales cycle;

  1. Suspects – a list of prospects who are likely to be qualified for your products or services.  Most companies buy lists of prospects.  Most people call them “leads”, but that’s a misnomer.  Leads are qualified prospects who have indicated an interest in knowing more about your product or service.  If your database of suspects have not responded to your marketing efforts then they are suspects. 
  2. Prospects – These are suspects who have been qualified.  Generally qualifying prospects has to do with financial ability, a potential fit as a target and is likely to have latent or blatant need for your product or service.
  3. First Presentation – A first meeting between your sales people and a prospect.  There is an exchange of information, your sales person is trying to qualify the prospect and uncover those latent or blatent needs.  The prospect is trying to decide if further discussions warrant any further investment of time.
  4. Needs Analysis – The sales person has found out enough about the prospect to see a good business fit and the prospect sees enough potential benefit to investigate the opportunity in more detail.  This stage of the sales cycle is all about investigation.  The results of that investigation will populate a proposal which is usually presented in the form of a proposal.
  5. Formal Presentation – Your sales person has worked through contacts, influencers, gatekeepers and key influencers to get decision makers into a formal discussion of the needs analysis findings.  The sales person uses this meeting to shape a discussion around the business fit of a business relationship.
  6. Decision Pending – This is where great sales people separate themselves from good sales people.  A good sales person has done an excellent job in the formal presentation and awaits the answer.  A great sales person has developed their contacts over the previous five stages to turn-key influencers into coaches.  They artfully work those relationships so they have enlisted several “internal sales people” who are selling the product/service even when the sales person is not there.
  7. Negotiation – Usually at this stage the prospect is trying to shape the offering to further fit their needs around price, performance and image.
  8. Program Approved (Implementation) – At this stage a good sales person will hand off implementation to an account manager or service group.  A great sales person will stay intimately involved until they are sure the new client gets precisely what they wanted, and that their employer gets all of the potential revenue & account penetration possible.

Okay…so where’s the metrics?

The metics that define the effectiveness of the sales person are the success ratio’s (conversion or close ratio) from First Presentation (step 3) to Implementation (step 8).  For business to business sales people the overall close ratio is usually around 16%.  In other words for every 6 new prospects that a sales person meets with will become a new client.  And here’s your AHA moment.  If you have a sales person who is falling dramatically below expectation you have a choice to make.  You can fire them and hire another sales person.  I will warn you that you only have a 1 in 3 chance that your new sales person will be better than the one you just fired.  Your other option is to peel this onion back another layer and find out why that sales person is failing.  If you’re willing to invest that time your odds of improving results are greater than 1 in 3!

Here are some pretty dependable step by step close ratios;

  • 80% of prospects who receive an effective first presentation ( Step 3 ) will want to understand the potential benefit ( Step 4 )
  • 65% of prospects who participate in a needs analysis ( Step 4 ) will be willing to coordinate a Formal Presentation ( Step 5 )
  • 85% of prospects who participate in a Formal Presentation ( Step 5 ) will make a decision ( Step 6 )
  • 60% of prospects that make a decision ( Step 6 ) will want to negotiate ( Step 7 )
  • 60% of prospects that negotiate ( Step 7 ) will eventually implement ( Step 8 )
  • 16% of prospects that will receive a First Presentation ( Step 3 ) will eventually become a client ( Step 8 )

If you’re willing to peel back one more layer you can set up a sales excellence template.  Let’s say you need for sales people to deliver 16 new average sized clients every year.  You can now take that goal and run it backwards through your sales cycle and create a template.  On an annual basis your sales people should have a sales pipeline that looks like this;

  • 100 First Presentations
  • 80 Needs Analysis
  • 52 Formal Presentations
  • 44 Decisions Pending
  • 26 Negotiations
  • 16 Implementations

 

So now you know all the metrics you need to know.  But what are you going to do with that underperforming sales person?

If you compare an individual’s sales pipeline to the sales excellence template you can easily identify exactly where that struggling contributor is failing.  For instance you may find that sales rep. A is failing miserably.  But on further examination you see that they are extraordinarily good in the latter stages and extraordinarily weak in the early stages of the cycle.  Conclusion?  Improving this sales person’s ability to set appointments and make compelling first presentations may turn them into a sales star!  In other words…why start from scratch and take on all the risks of a new hire until you know if you can help struggling performers catch up?

Next steps?  Meet with your sales team.  Get them to validate your sales excellence template and step by step close ratios.  Then run your meetings based on these metrics.  Strugglers will begin to see where their pain is and ask for help.  If you are willing to help them…they will always return the favor ten fold.

What’s That Prospect Thinking?

17 Mar

At some point in your the sales cycle your prospect has decided they have a need, hopefully because of your world class probing skills.  As you try to help them move from need, through analysis and finally decision time…just what are they thinking?

At a conscious, or subconscious level buyers are always trying to get comfortable with the balance of performance, image and price (PIP).  Think of these three drivers as concepts that are perceived differently by each of us.  Also understand that perceptions change over time.  In our current economy we must all recognize that the relationship between these three drivers will be changing dramatically.  Marketing must understand these shifts and adapt products and messages that will be appealing.  Sales will have to rework sales presentations, ask new questions and think more about the answers they are hearing.

So what are these three concepts and how should I deal with them?

  • Performance – for consumers this concept is going to change dramatically.  Think about the most expensive purchase a consumer makes…a home.  Bigger is better is a dead concept.  Consumers will not sacrafice long commutes to work in trade for a McMansion.  Certainly families form, expand and contract so actual space needs will change.  But the concept, bigger is better is gone.  For business buyers there will be a similar shift.  Product/service claims will all be tracked.  Proof will be examined.  Investments that will not deliver a return for years will not be purchased.  If you thought companies were short sighted before, you haven’t seen anything yet!
  • Image –  this concept is alive and well.  Right?  Image is alive and well but constantly changing.  For consumers the image is more about what something means to me.  For the homebuyer they may want a smaller home closer to work, but they will still want that home packed with what is important to them and their lifestyle.  Some images may become anti-conspicuous.  Is the Prius the new BMW?  If you don’t think companies will change their views on image I have one question for you.  Would you apply for a job selling corporate aircraft today?
  • Price – despite the tone of this posting I do not believe that price will come before all other drivers, but price must make sense.  Consumers may be ready and willing to buy, but are wary about their ability to buy.  Staying with the home purchase example there is pent up demand for quality newer homes, but the fear of the unknown continues to keep these buyers on the sidelines.  Hyundai has done an excellent job in addressing this fear with their recent Assurance Plus program.   For businesses there will be a categorical shift.  If your product is directly related to their product/service core offering then your value proposition will get traction.  If you cannot prove this direct correlation, price will become more important to the buyer.

So the buying process is the same, more difficult certainly.  The shift will be in the buyer’s perceptions and balancing of performance, image and price is going to change dramatically for the next several years.  Consumer preferences will shift and so will business buyer’s.  If your sales presentation was about performance & image and you dismissed pricing as an issue, you are going to have a very difficult time in the coming months. 

Archimedes said “Give me a place to stand and I will move the earth.”  I have always loved that quote, but for the time being the earth is shifting and so should your sales approach.

Sales Execution – It’s more than sales performance management.

22 Jan

Sales execution is all about clarity of strategy and then simply (though not easily) following through.  However the larger the sales organization the more complex execution becomes.  Execution is driven by several variables but in effect we are really talking about defining what we want and then managing performance.  It’s simple but hazy.  Think it’s simple?  Then Google sales performance and see what you get.  Pages upon pages of SFA, CRM, incentive software and a lot of consulting organizations to help you implement your new enterprise solution.  I am a huge fan of MIS and information/data but sales performance is not about software.  Performance Management is about assessing a sales person’s past, present and future contributions, identifying gaps and then coaching them towards continuous improvement!  Software plays a leading role but the core of this lies in HQ leadership, field sales manager attention and ultimately the culture that develops because of action taken.

Essentially there are eight drivers of performance management and each is important but I am placing them in order of occurance:

  1. Goal Clarity – KISS.  The more goals you distribute and the more they are interwoven the harder it will be to determine what is expected and how to meet expectation.  All too frequently every product manager wants to ensure that their product is represented in the sales goals.  The strategy already calls for several variables; revenue, account size, new vs. current client expansion etc.  Integrating too many variables will make defining a tactical prescription for acheivement difficult.
  2. Tactical perscription for acheivement.  To ensure goal attainmment you need to define how you expect the job to be performed.  This is the step most often omitted and is the most common cause of performance failure.  You must be able to translate the goal into a tactical plan.  How many accounts need to be acquired?  Average account size?  What should the sales pipeline look like?  Without tactical plans and detailed performance metrics you are leaving it to each sales representative to create their own plan of action.
  3. Performance metrics.  If you have a simple set of goals then you should be able to reverse engineer them through your sales cycle closing ratio’s to define with precision what a typical sales pipeline should look like.  This is a CRITICAL step!  This benchmark is the tool that will allow field managers to identify gaps during battle and help people alter their approach.  If your metrics are poor then you will have to wait for outcomes before you know if your sales will hit target.  If your metrics are good you will always know where you are headed and will always have the ability to correct your course.
  4. SFA, CRM—essentially any automation tool that allows you to see data about sales activity, progress and prospect information sorted in any way necessary.  Whether you have your own system or use one of the many available online doesn’t really matter.  What does matter is that sales management has the information they need identify gaps and help each member of their team with on the spot coaching.
  5. Leadership Training and unified coaching approaches.  Most companies promote great sales people into field sales manager jobs.  Few companies provide any leadership training.  Great sales people can become great sales managers but they need a road map and every coach can use a coach.  Without training and coaching you are risking the loss of a great sales person and the eight to ten people they manage.
  6. Joint call activity level.  We expect so much of field sales management; overall production, margins, pipelines, forecasting, CRM adoption, resource utilization (cost of sales), turnover ratio’s, training participation etc.  It’s easy to see how field sales management can fall into the trap of reacting versus leading and coaching.  Joint calls are a critical activity and HQ leadership should ensure that they communicate this as a priority initiative.
  7. Performance Management Process.  World class sales organizations will find a routine method to regularly assess the performance of every contributor, team and regional units.  Essentially this is a process that will examine past contributions (previous quarterly results), current contributions (sales pipelines) and future results (skill levels).  Too many companies use annual performance evaluations.  Sales people are not like any other employee.  Annual performance evaluations are not good for the company and they are terrible feedback tools for sales people.
  8. Sales Culture – All of the above drivers will be recognized by members of the sales organization as guideposts of how seriously Senior Management takes sales performance.  Over time this perception will define the culture of your sales organization.  A high performance culture recognizes that management has high expectations, well defined paths of execution, a culture of coaching and self improvement and a laser like focus on meeting/exceeding expectations.

Sales Skills

22 Dec

There certain skills required for a sales person to help prospects successfully navigate through their purchasing process vary by industry and distribution channels.  For my purposes I will create a straw sales competency model for a company that sells products used commonly by other businesses and that the predominant distribution channel is direct.

The first four skills are critical skills that the sales person uses to gain access to decision makers & key influencers, to raise the prosects awareness of their needs, to probe for business fit and finally to help prospects make the purchasing decision.  The second four skills are those that are necessary for the sales person to become a knowledgeable resource, to effectively & efficiently manage their territory and prospect pipelines.

  1. Prospecting – The ability of the sales person to recognize potentially valuable customer relationships.  To find avenues of introduction to coaches, key influencers or decision makers.  The effective sales person will utilize a variety of tools to generate leads including networking, on-line sources, company originated leads and good old fashioned “dialing for dollars”.  It is essential that every sales person have a two minute sales pitch and a telephone script that is committed to memory  (my opinion).  All skills are squarely aimed at identifying opportunity and gaining access.  This is the one skill that fills a pipeline.  No matter how talented a sales person is in other skill areas, a gap here will always put a governor on their utimate contributions.
  2. Presenting – While prospecting is a sales person’s least favorite activity, most sales people feel they shine when it comes to presenting.  However presenting is so much more than standing in front of people and telling them everything you know.  Generally there are two types of presentations.  The first is an exploratory first discussion, usually with a coach or key influencer.  The intent of this meeting is to exchange information and to probe for a business fit.  I do suscribe to the ABC of selling (always be closing), it is most likely that the close on this call is to move to the next step of the sales cycle, usually a needs analysis.  The other type of meeting is a formal presentation (see #4).  This meeting is generally for a discussion of a proposal and to sell the business fit between the two companies.  This meeting may seem like a “love fest” when a talented sales person delivers a flawless presentation.  This presentation is complicated and many sales people are not as competent as they should be.  Topics, tones and delivery are critically important!  Senior level decision makers will buy more from people that sell business fit, and demonstrate a knowledge of the prospect’s company.  In other words they are more likely to buy because of the fit and what you know about them & their company than what you know about your own company and products.
  3. Probing – The most consistently high performing sales people are not surprisingly the best at probing.  They probe for decision making process, players & roles, current practices, potential obstacles, uncovering gatekeepers and they are always seeking out the components of a superior business fit.  This is an area that cannot be over trained, or over practiced!
  4. Proposing & Closing – There are several elements to the proposal presentation meeting.  Introduction, agenda, customer overview, your company overview, the business fit and next steps.  Depending upon your industry, company and products the amount of time invested in each element will vary.
  5. Industry Knowledge – Sales people must be infinitely knowedgeable about their industry and should have a good understanding of the prospect’s industry.  The more the sales person understands about the prospects industry the more referrals and recommendations they will receive.
  6. Product Knowledge – All sales people must know everything about their products.  The knowledge must go beyond the specifications of the product, the must know how the product is used!  Spending time with your customer service delivery group, your operations and within customer’s operations are all splendid investments that will yield great returns over time.  As important as product knowledge is, it is also important that this knowledge is shared sparingly.  Prospect are only interested in enough product knowledge to assure themselves that they are buying a product/service that will work for them.  Product knowledge should be crammed into a proposal, not a presentation.
  7. Sales Pipeline Management – With the installation of CRM the importance of the sales pipeline management has become increasingly important because many companies use CRM to forecast sales.  Errors in prospect assessment can make forecasting at least inaccurate if not misleading.  In addition to correctly assessing prospect pipeline each sales person should be able to correctly identify the obstacles and tactical plans to move the prospect to the next cycle step.
  8. Resource Management – Sales costs continuously move higher and it is the job of every sales person to judiciously apply the resources necessary to acquire new accounts.  Expense management is thought to be a task for sales managers but the sales representative can be the solely determine the necessity of utilizing some centralized resources such as the number of people attending prospect meetings, the utility of centralized prosposal development etc.  Great sales people will call in the cavalry to acquire new business.

This formula and a description of the drivers is copyrighted.  I am publishing this information with the understanding that readers are free to use the insights, provided they reference it correctly.

Are Sales Cycles A Thing of the Past?

20 Dec

I admit I have used a business to business sales cycle in every job and every consulting engagement for decades.  But now I realize that I have been wrong!  You see sales cycles are merely abbreviations for a series of sequential sales activities that a sales person uses to define where they are in their sales process.  That’s good, but doesn’t that ignore the prospect?

What’s more important is the definition of where the prospect is in their BUYING PROCESS.  Think about it…both consumers and companies go through a series of related steps from needs discovery through contracting.  Consumers usually hold this process at a subconscious level while companies dedicate substantial resources to ensure due diligence to their buying process.

A standard B2B sales cycle is usually some variation of the following;

  1. Suspect
  2. Prospect
  3. First Presentation
  4. Needs Analysis
  5. Formal Presentation/Proposal
  6. Negotiation
  7. Contract

In contrast a simplified company buying process would usually include the following steps;

  1. Needs Discovery
  2. Situation Analysis
  3. Desired Impact
  4. Potential Solutions Survey
  5. Identify Potential Providers
  6. Request for Prosposal
  7. Negotiation with Favored Provider
  8. Contract

So it’s easy to see that sales people can easily misread where the prospect is in their buying process and can just as easily apply to wrong sales activity.  For instance; sales person A can be awaiting word on the proposal he/she submitted while the prospect is still trying to agree upon their desired state.  Clearly the sales person is accurately defining their sales cycle step by inputting step 5 (proposal submitted) into the CRM system as the last step completed, but it’s going to be a long wait for an answer that may never come.  And to make the situation worse, the sales manager will apply increasing pressure on the sales person to get a decision which will utimately erode the credibility of the sales person.

These “misreads” of sales pipelines are going to have negative impacts on sales forecasts, revenue projections, budgets and every other metric that sales leaders depend upon.

I am not suggesting that companies try to migrate their CRM sytems or training from sales cycles to buying processes but I am suggesting that field managers use their knowledge of a buying process to validate where the sales person tags their prospects.

If this makes sense to you as a sales leader I would recommend the following steps;

  1. In the next gathering of your top performers lead a session to define the buying process of your typical new customers.  Try to keep the step descriptions simple and try to keep the number of steps under 10.
  2. When you meet with customers you know well ask them to help you validate the buying process.
  3. Begin to train your 1st level of field managers on the buying process and make them accountable to use it as a basis to validate whether prospects are accurately portrayed in your CRM system.

The benefits to understanding customer buying processes are many, but there are two main advantages.  First, your sales people will do a better job probing where prospects are in their process.  This will lead to better accuracy in the CRM system and more reliability in your sales forecasting.  Secondly your sales people will have improved credibility with buyers because they will be viewed as hard helpers instead of hard closers!  And do you want to know something?  Assuming equal skills, hard helpers will always outsell hard closers!

Attention Sales Leaders! – Sales Performance Management Made Easy

17 Dec

I was often troubled that Stephen Covey was right!  As the head of sales I was continuously investing my time on urgent activities and had almost no time left for important activities with no due dates!  I ran from cross functional meetings to budget meetings, then to HR meetings.  I even managed to approve expense reports and return a few phone calls.  But at the end of every day I had no time left to focus on moving my organization to the next level. 

Though my sales organization was expanding each year I knew that ultimately our effectiveness and performance would be driven by continuous improvement in all areas.  There would never be a magical training program and even though I looked for the consultant to help me navigate I never found anyone with the breadth and depth of experience I needed.

So, being a graphical person, I began to draw out a development map.  I wanted to create a guide consisting of all the variables that influenced sales results because I knew that once they were laid out we could honestly assess where the we resided and where the view the largest gaps.  I wanted to take a balanced view of sales skills, culture, expectations, management, execution, leadership, training, rewards & recognition, metrics, CRM and everything else.  At first the list was daunting until I realized that everything you could think of fit into one of four buckets:

  • Sales Skills
  • Sales Will
  • Execution
  • Leadership

All thirty two of the variables I came up with fit neatly into the four buckets!  (Well, I cheated a little to make it balance out correctly).  But the point is, I have used this formula in several companies and used it to create incredible sales growth in a very few short years.  In one year I was able to help a company grow sales by nearly 300%.  I used this system to build a new sales organization within American Express that within four years was generating $1.3 Billion in incremental sales.  I again used this system to improve sales at an established insurance company by 110% in less than 3 years.

Now as a consultant I use this system to help sales management executives pinpoint develop gaps in their organizations and to create field ready tools to begin the process of continuous improvement.  The best attributes of these tools is that sales representatives get the attention and coaching they appreciate, field managers can easily spot and attend to those skill gaps that are block sales performance improvement and most of all everyone involved feels better about the organizational culture.  Because my career started as a territory sales representative and ended as SVP of sales I have a unique understanding of how everything can work to everyone’s benefit.

Though I am new to the blogging world it is my intent to create a discussion around each of the 32 variables.  My goal is to share a system that will bring all the knowledge that an experienced sales executive has from the subconscious to the conscious level.

Why would a sales performance consultant share their most valuable asset for free?  A very good friend (DS) has convinced me that sharing things of value is the best possible way of building a sustainable business.  After much deliberation (and reading) I believe her.

If you are an executive level sales leader interested in continually improving your organizations sales performance I will share everything with you and I only ask in return that you participate with your comments so that others will benefit from your ideas. 

If you are currently in the process of reorganizing or right sizing your group I would be happy to forward a spreadsheet of the sales performance drivers and variables to you by email.  This spreadsheet will help keep the discussions organized.

I am happy that this sales performance blog has gotten your attention.  I am committed to providing you with the resource you need to help your sales teams face their challenges in 2009.  CHEERS