Sales Demos and Pipelines

Find Out What’s Really Going On

By Dave Stein, President of The Stein Advantage, Inc.

When it comes to the valuation of a technology company, a track record of achieving sales targets is clearly important. However, looking backward at past performance is not an automatic indicator of how a company will perform going forward in time. In order to maximize your firm’s return on investment you’ll need to be certain that the CEOs and VPs of sales of your portfolio companies are building a solid and scalable platform to support growth through sustainable, long-term sales performance.

Even before the current economic situation, think about companies that performed quarter after quarter only to then stumble, missing their numbers immediately before being acquired or the long-awaited IPO. In many cases, there were flaws that were exposed by the pressures relating to driving more business—the foundations that were expected to support sales growth just weren’t solid.

Superior sales capability is the most powerful competitive advantage

The single most important factor in achieving consistent sales performance is the disciplined and unwavering use of a sales process. That’s the cornerstone of a solid sales foundation. A process-driven sales operation, with the right people in the right jobs (more about that in a minute) will result in a superior sales capability, with the flexibility to deal with the rapid changes brought about by customer, market, regulatory, economic and competitive pressures.

If you sit on the board of your portfolio company or are an involved investor and are interested in increasing long-term valuation, here are just some of the critical areas where you can zoom-in to find out what is really going on in sales operations. You’ll want to find any major flaws or weaknesses before the market or a competitor exposes them, not to mention before investing.

  • Make sure that qualification of sales opportunities is objective and unemotional. Salesreps love to go after marquee name accounts. Not that this is always a bad thing. However, it so often happens that the technical buyers in the account, interested in educating themselves on the latest and hottest technology, will go to school on an enthusiastic, unsuspecting, early stage company salesrep, but will buy nothing. Time wasted, real opportunities squandered. Not good.

    Zoom-In: Ask the VP of sales to state why the team is pursuing a few key opportunities that appear in the pipeline or forecast. The VP’s response should be based upon comprehensive situation assessments, not gut feel or wishful thinking. A strong VP will know (1) when the prospect will buy, (2) what they will buy, (3) why they will buy, and (4) how much they will spend based upon their need and business conditions. If he or she doesn’t know the answers to those questions they may be taking an outdated, ineffective, shotgun approach to selling, pursuing too many opportunities to win any single one. I’m not picking on VPs of sales—just looking to uncover the root cause of the problem.

    Results: A Boston-based software company that employed four reps finally got serious about qualification. During a day-long meeting with the team, the VP of sales eliminated 50% of their pipeline, immediately freeing up the team to focus on three opportunities, which they won, resulting in a quick one million dollars in license revenue. They never looked back. The company was later acquired together with a substantially more effective, and much more attractive sales operation.

  • Assure yourself that an appropriate level of planning is done for every opportunity, and that those plans must be appropriately documented. There is an old saying, “The value is in the planning, not in the plan.” It’s the responsibility of the salesrep to (1) assess a potential opportunity, (2) determine a specific sales objective, (3) devise a strategy stating concisely why the customer will buy from them and (4) determine and execute the tactics for securing the business. That’s the planning. These four elements must then be either written down, or keyed into a computer. That’s the plan.

    Zoom-In: A simple, “Let me see the account plan for ABC Corporation,” will expose whether that deal is being pursued through the use of a plan, or by the seat-of-the-pants. The VP of sales should have an up-to-date hard or soft copy of the sales plan for every key opportunity. There is no future in seat-of-the-pants selling.

    Results: A small, Toronto-based enterprise application software provider was pursuing a $3 million opportunity with a tier-one automotive supplier, competing against the two largest companies in that space, one of them the incumbent. Prior to this, the largest deal they had won was less than $500k. For the first time in their history, they employed a formal sales plan, executing with discipline and determination. After a nine-month battle, they won the opportunity. The entrepreneur/engineer/CEO said, “The best thing about this win is that it is repeatable.” His team won more than $5 million in ongoing, additional business over the next 18 months from that same customer. If you were acquiring that company, how would you value this proven sales capability?

  • Be certain that everyone knows the answer to the question, “Where’s the value?” Executives don’t buy software or services. They buy business improvement. That’s the value to them. “The value” for operational-level people may be ease-of-use or functional capabilities. IT will describe value very differently. Every member of the sales team—in fact, every person who touches a customer in any way—must be able to articulate the value that their products or services bring to individual constituencies within their customers’ organizations. Although it’s Marketing’s job to create clear, concise and compelling value messages, it’s the salesrep’s job to orchestrate the effective delivery of those messages during a sales campaign to the right people at the right time.

    Zoom-In: Ask the VP of sales to explain precisely how salesreps link their products or services to critical components of their customer’s business plans and what the mechanisms are to cost justify those products and services. If the salesrep and the other members of that virtual sales team can’t quantify the value they bring to the table, their customers will consider them a commodity and buy on price.

    Results: An early stage, software company, based in California, that develops, markets and sells a credit and collection solution to larger companies has figured out the answer to the question, “Where is the value?” They’ve created such a compelling value message that they have little trouble gaining and maintaining access to the CFOs of targeted companies. Since the vendor uploads their prospect’s live data for product demonstrations, the software has literally been installed and is ready to use, right then and there. By the way, they take a percentage of their customer’s incremental collections as their license fee. That’s business value.

  • Have they convinced you that they are measuring what’s important and that they are continually improving? It’s hard to improve what you don’t measure. Without being distracted by statistics, good sales VPs track performance against key sales performance indicators: win rate, percent business to new name versus existing accounts, average discount off list price, attrition rate in the sales organization, performance by rep, by market, by product, etc. The best sales execs use metrics to continually refine their sales processes to overcome weaknesses and effectively adapt to changing buying patterns and behaviors.

    Zoom-In: Request a win-loss analysis on two recent deals—one win and one loss. The VP of sales should be able to provide this in writing. Worthwhile win/loss analyses involve more than just the answers to, “Why did we lose?” But simple is better than nothing. You are looking for a solid foundation of good practices. By the way, a win-loss analysis should never to be portrayed or used as a weapon against any individual sales person, even an underperforming one. Doing that turns the whole team against the process. Rather, the win/loss analysis is a tool that can assist a company in determining exactly where their sales process breaks down and where it is most effective.

    Results: A series of win/loss analyses for one public company just a few blocks from Route 128 revealed that a tough competitor was regularly requesting to go first when it came time for final vendor presentations. The competitor’s sales executive would isolate the prospect’s key decision maker, negotiate a deal and get a handshake right then and there. The prospect was given a rock-bottom price in exchange for no additional work (or risk) on the part of the competitor. Uncovering this valuable information was the basis of a complete overhauling of the company’s strategies and tactics against that competitor, resulting in a win rate of over 90 percent and market dominance.

  • Ascertain that integrity is a key value for the company. Without integrity, you can’t build employee, customer or investor loyalty. It’s temping and easy, especially in today’s hypercompetitive, almost desperate selling environment to take shortcuts and focus on only the short term.

    Zoom-In: A few brief calls to customers will enable you to determine whether they believe they have received what they were sold. There should be no gap between value promised and value delivered. If that is not the case, a fatal flaw exists that must be quickly and decisively addressed.

    Results: Venrock Associates was the first investor (later joined by Alex. Brown, Partech Ventures/Bank Paribas and others) in Datalogix International, a manufacturing software company founded in 1984 that went public in 1994 and was later acquired by Oracle Corporation. Early on, upon discovering that a salesrep was misrepresenting Datalogix’ capabilities, a policy was put in place: the first time a rep misrepresented a capability, they would be “fined,” with “credit” given to Datalogix customer services who often had the burden of making things right. The second offense would result in immediate dismissal.

    From the time the first (and only) salesrep was fired under that policy, the message to the rest of the company was consistent and unambiguous. For a number of years, Datalogix enjoyed extremely high customer satisfaction ratings and acquired more than 150 customers without losing a single one.

  • Confirm that the company is hiring salesreps using a formal process—not the “old boy network.” Your portfolio company can’t build a consistently effective sales organization unless the VP of sales understands the unique skills, attitudes and behaviors that are required for success in their market and can hire to those criteria. Someone who may have overperformed during a different time or in a different market may not be able to deliver consistent numbers now. Currently my clients’ most value business, relationship building and consultative sales skills. They usually require a candidate to have a thorough knowledge of the industry into which they are selling and a network of contacts. And the candidate must exude executive-level credibility.

    Zoom-In: Ask the VP of sales to show you the profile that is used for screening and hiring sales candidates. If there isn’t one, there needs to be. In addition, a documented, structured interview approach must be employed to assure that each candidate really fits the company’s requirements. I’ve often seen candidates outsell the interviewer and get hired, even though they are not close to being qualified for the actual job. They will cost your portfolio company hundreds of thousands of dollars in recruiting fees, salary, benefits, laptops, software, draws again commission, lost opportunities, customer relations, and travel and entertainment expenses, and will demoralize the rest of the team… Need I go on?

    Results: A small software company with an international customer base was at the point of hiring their first professional salesrep. (Up to that point, the CEO, who was supported by his marketing and technical team, did all the selling.) The CEO knew that the first hire would be critical to his success going forward. A “skills and attribute profile” was specifically designed for that job in that market at that time. It was apparent through a structured interview process that a number of what might have appeared to be qualified candidates were not nearly capable of doing the job as required.

    When a candidate was hired six months ago, his strengths and weaknesses were clearly understood by the CEO, they had been openly discussed between both of them, and most importantly appropriate support was readily provided to assure the rep’s success.

    Today, Rich is well over quota, making a significant contribution towards his company overdelivering on their revenue targets, even in a down economy. This was not luck. It was the plan.

    I’ve covered just a few of the many areas that need to be zoomed-in on. And don’t just zoom-in on sales operations. Marketing, customer services, delivery, development, and finance and administration could use a bit of scrutiny as well. If you find the flaws now, before a demanding market or a tough competitor exposes them, you’ll have made an important contribution to the future valuation of your portfolio company.

    Dave Stein is the author of the best-selling book How Winners Sell (www.HowWinnersSell.com). Before founding The Stein Advantage, Inc., Dave was employed by several leading-edge high-tech companies in a diversity of roles: programmer, systems engineer, sales representative, sales manager, director of worldwide sales development, VP of sales, VP of marketing, VP of international operations, VP of client services, and VP of strategic alliances.

 

How to Build a Sales Pipeline

By Philippe Lavie, President, KeyRoad Enterprises

How do you get prospects who are not looking for the “things” you are offering to start to look?

Many of my clients have asked me what their sales people can do to increase their pipeline with qualified leads. The simple answer is to spend more time on effective business development activities. Such activities necessitate at least 20% of a sales reps time and include, but are not limited to:

  • Networking with existing friends, colleagues, and acquaintances.
  • Attending industry/trade meetings and walking the floor
  • Securing speaking engagements at local and regional associations or interest groups
  • Hosting breakfast meetings for like titles
  • Cold and warm telephone prospecting
  • Direct mail/e-mail/fax prospecting followed up with direct telephone callsThe most effective way to build one’s pipeline is to engage in a five to seven touch-point campaign combining direct mail introduction, followed by phone calls, in a very specific sequence. The thing I don’t understand is that most sales reps know that sequence, but most sales reps will also stop doing it if they can find any excuse to use their time somewhere else.

    So Where Do We Start?
    Warren Culpepper, author of the Culpepper Report, writes that there is a 5-year cycle in IT purchasing. Therefore 20% of your total potential universe is actively looking for a way to improve its operation through the use of your technology at any given time. By the way, your competition knows that too. It also means that 80% is not actively looking at any given time. Not looking means that they do not perceive, at this specific moment, that they have a need to satisfy, a goal to achieve, or a challenge to address. So my question is: Do you want to spend your time calling on the same universe that the rest of your competition is also calling on, or do you want to spend your resources and energies calling on the 80% that are not actively looking today, and bring to the forefront of their priority the understanding that their operation does need your offering to help them achieve a goal, solve a problem, or satisfy a need? Imagine two companies, one that is looking and one that is not. Both have similar profiles, work in the same industry, and have a similar history. Do you think that their C level executives share similar goals? If no one has contacted them because they are not looking at that present moment, do you think you could leapfrog your competition if you were to call on them first, and get them to discover that they need your offering?

    So What Works, and What Does Not Work?
    The Kenan-Flagler Business School of the University of North Carolina interviewed senior business executives to understand the circumstances under which they would accept a telephone call from a salesperson. The findings were as follows:

    Always Usually Occasionally Never
    A recommendation from someone inside the Company 16% 68% 16% 0%
    A referral from outside the Company 8% 36% 44% 12%
    A letter(s) from a salesperson followed by a direct call 4% 25% 40% 31%
    A contact at an off-site meeting 3% 16% 28% 53%
    A direct telephone call from a salesperson 0% 8% 19% 73%

    This research clearly shows that cold calling does not work very well. Although important to do, (as one the business development activities), a sales rep could quadruple her chances to reach the desired executive if the call was preceded by one or two introductory emails. Such emails or snail mails would sensitize the executives to challenges, pains, or goals (s)he could relate to. We suggest a five to seven touch-point campaign using email, snail mail, and phone calls for the highest return.

    Whom Should I Call On?
    Now, before you even think of sending an email or making a call, it would be important to identify whom to call. While for some sales reps it appears obvious, I would recommend that for each potentially important account, a targeted conversational list be developed. The two main reasons are that “You can’t sell to someone who can’t buy” and “Buying is always a committee decision”. Another thing that amazes me is the length of time and number of resources sales reps and companies spend talking to people that have no buying power or no idea or understanding of the prospect’s critical business issues that would justify them buying from you. Often we talk about “the power line”, this imaginary dividing line that exists between executives that have a budget to manage, and those that can create/define/allocate a budget. When your sales people call on a company to create a vision of what the prospect could do with your offering, are they better of calling above or below the line? Would her opportunity be better qualified if she was able to talk with the “above the line” decision maker who has the authority to secure unbudgeted funds? Would her opportunity be better qualified if she could get the prospect to realize that the way they do business is costing them ten times more than the benefits they could generate by implementing your offering? Would her opportunity be better qualified if her sales cycle was aligned with her prospect’s buying process? Remember, “People buy from people who empower them to achieve their goals”.

    What Conversation to Have With a Specific Title?
    How many times have you been delegated down to the project manager when you started to have a product feature function monologue with a C level executive? Aside from being upset, did you understand why? People get delegated to people they talk and act like. Should you prepare yourself to talk at the level of the title you want to reach? Of course you do. But many sales executives do not know how to get ready for such calls, nor are they interested in taking the time or applying the discipline necessary to prepare. Our suggestion is that Marketing is, or should be, responsible for preparing the necessary conversational tools and prompters for sales people to have intelligent conversations around critical business issues with their prospects’ C level executives. We recommend you check into the process called Sales Ready Messaging to create these conversational prompters, scripts, tools, and aids. You will empower your sales people with the information and the discipline to have these intelligent conversations and marketing will once again become relevant to the sales organization. We call this “ loading the lips” of the sales people with business issues and information relevant to a conversation with a C level executive, while staying far away from product demo or technical presentation.

    Your Next Steps
    After having identified the universe for your offering (territory plan), having decided whom you should be calling on (targeted conversational list), and after having created the tools and prompters for your sales people to engage in prospecting and selling your offering (sales ready messages), it is also important to remember to:

  • Write your prospecting letters
  • Pick up the telephone and call
  • Manage the rejection that comes with selling
  • Set aside “sacred time” on your calendar dedicated to prospecting (at least 20% of your time)
  • Track your response rate and successes
  • Change your message if it does not work
  • Be prepared to have that conversation if the prospect says: “Tell me more, I am interested”Spending an equal amount of time or more prospecting with people that are not yet looking, will generate better qualified, less competitive, and an easier selling cycle than focusing on those prospects that are already looking. That said, if you get a call from someone who really wants to buy from you, please take the order.

 

Improving Forecast Accuracy…Light At The End Of The “Funnel”

By Bernard M. Aller, Certified Affiliate, CustomerCentric Selling

Picture This …

It’s the last week of the month (or perhaps the quarter). Each Sales Rep has cranked up their individual “sunshine pump” and provided their Sales Manager with their best guess as to what sales will close during this period. Taking this information, the Sales Managers feed it into their own industrial strength sunshine pumps, and pass it up to the VP of Sales. He, in turn, feeds that information into his own twin cylinder, turbocharged sunshine pump, and feeds the result to the CFO and CEO with his forecast.

While this scenario takes place like clockwork in virtually every organization that sells products and/or services, one of the first questions I ask CFO’s is if they actually commit and spend available funds based on the forecast that the VP of Sales just provided. After the initial laughter dies down, I ask three questions:

  • What has been their experience regarding the accuracy of the monthly (quarterly) forecast?

 

  • What correction factor is applied to the numbers that the VP of Sales provided?

 

  • How much time is spent, across the entire organization, producing the forecast?

The overwhelming majority of the time, I receive the following typical responses:

  • The accuracy of the forecast is somewhere between 40-60%

 

  • A 40-50% “fudge factor” is used

 

  • Between 80 to 100 total man hours per forecast

The logical conclusion of this is to wonder why so much of the organization’s energy and resources are regularly devoted to producing a forecast that is so unreliable that an arbitrary correction factor is routinely applied?

Why Bad Things Happen To Good People

I believe, that the reasons for such an abysmally poor forecasting scorecard, may be linked to 2 primary areas:

  • Asking Sales Reps to forecast their own sales

 

  • Lack of established uniform pipeline grading milestones

Let’s face it, asking individual Sales Reps (especially underachieving Sales Reps) to forecast their own sales is the equivalent to asking the U.S. Congress to voluntarily pass meaningful campaign finance reform … and we know how successful that has been. Asking the Sales Rep, who is only 70% of quota a week before the end of the period, to admit to his Sales Manager that he will yet again fail to meet expectations, is a waste of time. The Sales Rep will say what he has to get the Sales Manager off his back … and to try to keep both his job and his expense account. During territory reviews in which I’ve participated, it is truly a humbling experience to hear Sales Reps tell their Sales Manager how opportunities that have been in the pipeline, with little or no change for months, will miraculously become active and close “at any moment”. Clearly, it is in the Sales Rep’s best interest to keep the “sunshine pump” cranking out that “sunshine” until the Sales Manager accepts the explanation and goes away.

Since the Sales Manager may have never established and implemented uniform pipeline grading milestones, he has little or no objective criteria on which to grade the status of the opportunity. In this day and age of micro measurement capability, it still amazes me that sales management still asks Sales Reps for their “gut feel” on whether or not an opportunity is going to close in any specific time frame. Wouldn’t it be nice if the “gut feel” of Sales Rep ‘A’ would always be the same as the “gut feel” of Sales Rep ‘B’? In fact, wouldn’t it be nice if the “gut feel” of Sales Rep ‘A’ was at least consistent each time he was queried by his Sales Manager? My own experience indicates that the further the Sales Rep is from his quota, the less accurate his “gut feel” will be. It’s been said that, “you can’t manage what you can’t measure”, and without established uniform pipeline grading milestones, the forecasting process will remain a very dark art rather than the science that it can become.

First Things First

Establishing uniform pipeline grading milestones, and converting that information to accurate forecasts, does not have to be difficult. In fact, for all but the most complex situations, it can be quite simple. All Sales people are familiar with the proverbial sales funnel. Wide at the top and tapering down towards the bottom, it graphically depicts the status of each sales opportunity as it progresses through the buying cycle from initial contact to close. By establishing 5 or 6 intermediate milestones, each based on the stages of the buying cycle, andmeasured by objective, not “gut feel”, criteria, movement through the buying cycle may be tracked … and subsequently forecast with a high degree of accuracy.

Let’s start at the beginning:

  • Inactive – the sales universe. This initial milestone includes virtually all potential purchasers of your product within the Sales Rep’s assigned territory.

 

  • Active – from the sales universe, these include prospects where either proactive or reactive contact has been made, buyer interest has been expressed, and an initial conversation has been scheduled and documented in a letter or e-mail. The easily auditable documentation, and not the Sales Rep’s “gut feel” verbal statements, moves the opportunity from Inactive to Active status.

 

  • Goal Shared – the buyer shares their goals with the Sales Rep, their conversation is summarized and documented in a response letter or e-mail, which includes documented recommendations for the next step.

 

  • Champion – someone who may not be the decision maker but will introduce the Sales Rep to key players who can. In this stage, the Sales Rep has helped his champion develop a SOLUTION … a vision of himself already in possession, and using, the capability to achieve his goal, the SOLUTION and usage scenario is summarized, access to key players within the organization has been requested, and again, the events have been documented and confirmed.

 

  • Evaluating – after initial meetings with key players, their goals have been shared, additional capability visions and usage scenarios have been created, and an evaluation plan (a Sequence of Events) has been proposed, accepted, and documented.

In the Evaluating stage, as each step in the proposed and accepted Evaluation plan is completed, progress is made towards a final decision and, with each step towards the final decision, the likelihood of success increases. While each organization differs, we have found that once an opportunity objectively reaches the Evaluating stage, the Sales Rep will be successful 50% of the time. As each step of the proposed and accepted Evaluation plan is completed, the likelihood of success further increases until one of 4 things happen:

  • Win – signed documents received

 

  • Verbal – Verbal approval received, documented, and contract negotiations in progress

 

  • No Decision – Final proposal issued and waiting for action

 

  • Loss – another vendor selected

Again, while organizations differ, we have found that opportunities that objectively reach the Verbal stage will be successful 90-95% of the time. Perhaps surprisingly, in opportunities where final proposals have been issued and where the Sales Rep no longer has any control of the buying process, the likelihood of success decreases substantially.

 


Light At The End Of The ‘Funnel’

As you can see, at each stage of the buying cycle, the common denominator is documentation; usually a letter or e-mail that simply documents and confirms the conversation and events that have occurred. The documentation is easily auditable, as all the Sales Manager has to do to advance the opportunity to the next stage in the buying cycle is review a copy of the documentation. The Sales Rep is not asked to forecast and has no additional administrative burdens beyond what is normally expected in their day to day sales activities. As what may have become more clear, the development of uniform pipeline grading milestones are representative of a sales ‘process’ that permits the Sales Rep to take a prospect from interest development to closure. A second, and perhaps equally valuable, benefit to the use of documentation is that it permits Sales Management to determine if the Sales Rep is selling according to the sales ‘process’ in addition to providing the basis for skill and opportunity coaching to be exercised by Sales Management.

To recap:

  • Research, establish, and implement a sales ‘process’ prior to establishing uniform pipeline grading milestones that are appropriate for your unique environment.
  • Do not ask Sales Reps to forecast. Instead, ask them to simply document all communications with the client. In short, just ask them to go about doing what is normally expected in their day to day sales activities.
  • Have Sales Management routinely audit the documentation of the Sales Rep’s completed events.
  • Have Sales Management produce the forecast, based on documented events and not on the smoke produced by the various corporate “sunshine pumps”.

Perhaps the best part of this process is that all of the “sunshine pumps” are retired, which results in much cleaner “air”, “gut feel” has been eliminated from the process, and, based on a majority of the organizations that implement this type of forecasting process, a forecast accuracy in the 85-90% range is routinely reported … something which both the CFO and CEO can take to the bank.