Recently, a small business owner confided to me, “When I started this company I had no idea where I was going with it.” Twenty years later, he’s still trying to figure that out. Yes, his company is still in business, it’s profitable, and it provides him a comfortable income. But what became clear in our conversation was that this business has significant unrealized potential because the CEO never decided where it was going.
The success of a B2B company’s revenue engine, its ability to reliably drive the top line, is determined by a host of factors, including target market strategy, sales personnel/process/operations, marketing, pricing, compensation plans, channel and strategic partners, etc. When sales begin to slump, CEO’s rightly go looking in these areas to uncover what’s not working.
There’s another place we should be looking but too often don’t: the market. You see, we get enamored with our businesses, our products and services, our perception of our value. Our passion for our business, our certainty that we are “the best,” can obscure the fact that the market isn’t as passionate about our offerings as we. Quietly, the market’s needs and demands are shifting and we’re missing the cues. But the evidence is there in the form of depressed sales.
Why are we missing the cues? Quite often, certain aspects of the buyers’ shift are under our very noses. The sales teams are coming back from the field and providing input like, “We’re too expensive.” Or, “Our competitors have a better solution.” Or, “The customer says our service is unreliable.” In our frustration with the poor performance, we begin to blame the sales team, doubting their skills and work ethic. But this response lacks objectivity and does nothing to solve the problem. In fact, it creates a chasm between the sales force and management.
It’s easy to find out what’s changing, because the market will tell us. But we have to go out and ask. This inquiry will uncover opportunities not to be found by looking inward, such as what:
- problems need solving
- voids they see from their current vendor set
- value proposition they’ll respond to
- buying processes have shifted
- services they don’t value
Who’s “the market?” Prospects, current and former customers, lost prospects, strategic and channel partners, even competitors. Their feedback will likely surprise you and provide fresh and important perspectives on changes necessary to improve product and service offerings, impacting revenue growth. Listen carefully for feedback that challenges internal assumptions and beliefs. The market will help you get a handle on such things as:
- where innovation is required
- whether products need bundling
- what add on services enhance value
- if pricing needs restructuring
- whether service levels need to be raised, or perhaps lowered to bring pricing down
This market research can be done internally, though it’s best not performed by your sales team, primarily because customers and prospects may find honest feedback difficult with an “invested” party. Instead have a senior officer of the company make the calls, better still, a 3rd party. You’ll be amazed at how willing folks are to participate in these conversations. Stepping back it’s easy to see why: customers are rarely asked what problems they need solved and instead are “sold” to. If only someone would care enough to ask.
Steve Jobs famously said (though I paraphrase) he didn’t believe in asking the customer what they want because the customer doesn’t know the answer. Well, most of us aren’t Steve Jobs and most of our companies aren’t Apple. In reality, our clients may not know the solution they’re looking for, but they certainly know what problems they need to solve. If revenues are in a slump, it may well mean we’re no longer solving customer problems in a way that makes our company a necessary component of their success.
Go ask the market – it will tell you! Your top line will be better for it.
When I work with B2B sales teams struggling with profitable revenue growth, there’s always one person seemingly outside the biz dev process who wants in on the conversation: the CFO. Inevitably I get asked for a few minutes in private, and when the door is closed, s/he’ll plead, “what can you do to get me a forecast I can trust?”
Great question, particularly for companies with complex products / services and long sales cycles. In small to mid-size B2B companies, so much gets done on an ad hoc basis within the sales organization that forecasting deal closure is way less about reality and way more about emotion, ego, politics and culture. For example, in some companies it’s better for a sales rep to project they’ll close a deal than to admit its improbability; in others, it’s better to sandbag and then have pleasant surprises. Under either scenario, missed forecasts wreak havoc on a company’s health and future.
There is a simple way to creating a forecast you can trust. Follow these four key steps:
1) Identify each stage of your sales process and the milestones completing each stage that tell you when you’ve moved to the next
2) Estimate the average length (in days) of each stage of the process
3) Approximate the average percent of deals that close at each stage of your process (i.e, deals that make it to Stage 3 have a 60% likelihood of closure)
4) Hang every deal in your pipeline on a weighted forecast spreadsheet that maps the dollar value of the opportunity to its stage, and therefore to its probability of, and date until, close.
The results will be eye-popping. And that’s a good thing, even if what you learn about your pipeline isn’t. Because that’s when the fixing can begin.
Many resist the exercise because they lack data to tackle these steps with precision. Many resist for fear of what they’ll learn. Don’t let either stop you. Yes, I’d prefer you have a CRM. Yes, I’d prefer you have hard, accurate data. Yes, I understand you haven’t yet created a culture of accountability around these metrics. Like many things in life, it can be hard to pick a place to start. But, the truth is, there is plenty of anecdotal, historical information in the organization that will get you close enough to create your first forecast based on reality vs. a crystal ball. I’m not suggesting there isn’t both art and science to sales, but the more we avoid the science, the harder it is to do good art.
Ultimately, the true value is in identifying the underlying problems in your revenue engine. You’ll begin figuring out answers to the thorny problems like:
- Where in the process do we fail most often? (Failing early vs. failing late helps diagnose what we need to repair.)
- Where are the opportunities to increase our sales velocity?
- What accountability metrics directly impact accomplishing our goals?
- How might we better qualify opportunities throughout the sales cycle to increase close ratios?
Tackling those questions leads to refining your process which leads to a tightened forecast. Your best sales reps will be elated; they’ll see clearly where / how they should spend their time, and they’ll get straight to the fix. Your mediocre reps will squirm, a solid indicator that it’s time for them to seek other employment. Your head of sales can shift from task management to coaching. And, your CFO will actually crack a smile.
If you need some help thinking about how to apply this to your business, please ping me at firstname.lastname@example.org. As always, I appreciate any additions to this conversation with your comments, insights, suggestions.
Here’s to a forecast you can trust.
It’s a tough smallbiz climate right now. The economy is sputtering; the media is stoking recession fears; uncertainty about the impact of the presidential election is giving everyone dyspepsia; and accessing capital is as hard as ever. So, many CEO’s are clenching their fists around the cash on their balance sheets and not spending money. One might argue that hunkering down with cash is the only prudent behavior under these circumstances.
I’d argue it’s not. The trouble is, when we get tight-fisted with our cash, we stop making investments. When we stop making investments, our companies stop growing. The old adage “it takes money to make money” is as relevant as ever. Investing in people, processes, and systems is both essential to growth and to not being left in the dust by the competition. And the reality is many of those investments can’t be afforded through monthly cash flow.
So how does a CEO decide whether s/he can really afford to let go of some of that cash on the balance sheet? I’ve found it revealing to run both big and small financial decisions through this 2 question test:
1) Is the expenditure truly an expense or is it actually an investment?
2) Can we afford NOT to spend the money?
Here are a few examples, with my answers were I sitting in the CEO’s seat.
Example 1: The company’s marketing materials are junk and it will cost real dollars to hire a marketing consultant to rehabilitate.
1) It’s an investment 2) We can’t NOT spend the money
Example 2: The sales force is on the road a lot but can’t easily access their corporate systems because they don’t have wireless cards for their computers. The cost to purchase card / plan is out of budget.
1) It’s an investment 2) We can’t NOT spend the money
Example 3: There’s an opportunity to purchase furniture at a good price from the company down the hall that’s moving. It’s in great shape, clearly an upgrade, and would make our office more attractive.
1) It’s an expense 2) We CAN not spend the money.
See where I’m headed? I’m suggesting that CEO’s upend their view of expenses – a very now-based way of thinking – and reconsider them relative to the future. It takes some practice, and sometimes the answers seem counterintuitive, as in Example #2. Clearly wireless cards are an expense, yes? For me, no. They’re investments – investments in efficiency, real-time information, and employee morale. We can’t NOT have any of those things, so I would write the check.
The tendency to over-scrutinize the P & L for money saving opportunities is fear based rather than growth based. By reframing an expenditure as an investment vs. an expense, and questioning not whether the businesses can afford something but whether it can afford NOT to have / do something, the answers become focused on a future of growth. By all means, keep a leash on expenses – get downright stingy if you want – but routinely make investments. After all, if you don’t believe enough in your business to take those risks, why should your customers believe in you?
How do you make sure you’re not too tight fisted with your cash? What litmus tests do you use when deciding how to spend? We’d like to hear your ideas.
Last week I was talking with the CEO of a small software company struggling with driving revenue. Looking for a possible solution, she wanted my thoughts on where in the sales engine she might zero in. When I mentioned lack of defined sales process as a typical culprit for lagging revenue growth, she remarked, “I don’t see that as an issue for us. I’ve hired very experienced sales people; they certainly ought to know what to do.”
Many small-biz CEO’s, particularly those without sales backgrounds, perceive sales process as little more than lowest common denominator management. The rationale is, if they hire seasoned sales people (hard in itself but that’s a different conversation) then they shouldn’t need to create a sales process. After all, isn’t the purpose of creating a sales process really just for baby-sitting?
The answer is no.
At its most basic level, creating and following a sales process does ensure that everyone is following a best practices approach to sales. It also creates a method, particularly if a CRM or other reporting tool is utilized, for sales people to organize themselves, and for management to track and measure activity. All well and good and valuable. But, if that’s the only rationale, then this CEO may be right to think she can do without.
When B2B companies ignore sales process, here’s what they’re really choosing to live without: data. Data to inform any number of strategic and tactical decisions, to identify trends, to help us answer questions like:
- How well do we really understand our clients’ buying process?
- Where in the sales cycle are we having difficulty closing?
- Is there something we could do differently to push our prospects into the next stage?
- Are we jumping stages therefore finding it hard to close?
- What’s the quality of our pipeline?
- How predictable are our forecasts?
- What danger are we in of elongated sales cycles?
- Where can the cycle be shortened?
- Are we chasing the wrong leads?
- How efficiently are we deploying sales and support resources?
- How can we refine our tactics for better results?
- What customer stakeholders are we failing to convince / convert?
- Do we understand the key moment when a prospect will become a customer?
- Have we become “proposal happy?”
- What skills training do our reps need right now?
- How quickly can we bring new hires up to productivity levels?
Top-performing sales engines utilize well-structured and repeatable sales processes that leverage best-practices and identify true milestones in the buyer’s journey. The process isn’t a baby-sitting tool, though it’s true that the process helps each of us stay focused and disciplined. Rather, it’s because the process provides key data that elevates the performance of the sales person and the entire organization. If you can’t answer the questions above, it’s time to start thinking process.
Build your company to sell it. Seriously. Build it so that it’s worth more than your competition, so that suitors are lining up, so that you can sell at an enviable multiple and never work again. Now that I have your attention, which group of CEO’s are you in? continue reading »