Posted by Bob Apollo on Wed, Jun 09, 2010
BP has been getting a great deal of adverse publicity for the recent massive leak in their Gulf of Mexico oil pipeline. It’s taken an age to address the underlying problem. The clean-up operation is clearly going to take ages and cost billions. The fortunes of the Bubba Gump shrimp company and many others like it may never recover.
Those of us who manage sales pipelines know that they rarely run freely. Many are clogged with deals that are going nowhere and which only serve to slow the progress of more promising opportunities.
But slow-moving pipelines aren’t the only problem. Sales pipelines also leak, as prospects either decide to buy something else or do nothing. Worst of all, many deals leak late in the process – towards the end of the pipeline - after huge amounts of sales effort have been applied.
My observations of high-value B2B sales suggest that clogged and leaky sales pipelines are often the norm and that much of the effort that sales teams expend on trying to move deals forward is wasted. So it’s no surprise that CSO Insight’s annual report on sales performance optimisation has recorded some of the lowest sales win rates on record.
It’s time for a massive clean-up operation – let’s just hope we can do better than BP. But what is it going to take?
Clearly define the key stages in your sales pipeline
Let’s start with the basics. Your pipeline stages must be clearly defined, consistently applied, and reflect meaningful steps in your prospect’s decision making process. The progress of each opportunity must be based on observable evidence of your prospect’s behaviour and intent, and not just on your sales activities. These are the essential foundations for any successful sales pipeline clean-up operation.
Carefully measure flow and leakage
Once you’re sure that the contents of your sales pipeline are being reported accurately, your attention should turn to measuring flow and leakage. Flow is about measuring how long it takes for successful deals to pass from one stage to the next in the pipeline, and using this as a benchmark to identify deals that have been “stuck in stage” for too long. This is important because of one simple fact: it inevitably takes you longer to lose a deal (or recognise it is lost) than it does to win.
Leakage is the other key metric. At what stage do deals fall out of the pipeline, and what is the real percentage of deals that ultimately convert to wins from each stage? I use the phrase “real percentage” deliberately. More often than not, CRM systems apply percentages to stages that have no relationship to reality, have never been reviewed or adjusted, and are precisely and dangerously wrong. It’s no wonder that average forecast accuracy rates (as measured by whether deals close as predicted) is now below 50%. If you’re still using the percentages that came out of the box with your CRM system – or if you haven’t reviewed them against reality recently, deal with it now. You can’t afford to wait.
Establish benchmarks
Once you have good underlying data and good metrics, you can establish benchmarks and start comparing the performance of your sales team members. Look at recent sales successes. Establish the cadence of their progress from stage to stage. Set deal flow benchmarks. Isolate deals that are taking longer than these winning benchmarks, and carefully re-qualify them to make sure they are real. If not, remove them from the pipeline. Review your sales strategy for deals that still seem promising but are stuck in stage. What can you do to help the prospect move forward to the next stage with you?
Look at the shape of your sales team’s pipelines. Are they qualifying out early, or losing late? Winning sales people seem to follow a consistent pattern – they take time over qualifying, qualify more deals out early in the pipeline, and successfully close the remaining opportunities faster than their also-ran peers. Conversely, average sales performers often have a habit of “losing late” – deals are either lost or qualified out late in the journey, after huge levels of effort have been wasted. You need to understand why, and take remedial action to help them embrace the winning behaviours of your top performers. But most important, if you’re going to lose, lose early!
Qualification should be a continuous process
Another common reason for opportunities getting stuck in the middle of the sales pipeline is that the prospect’s circumstances have changed. Even if the deal appeared well qualified initially, something’s happened – maybe the prospect now has other priorities – and progress has stalled.
Qualification is not and cannot be a one-time event. In fact, I recommend that at each stage in the sales pipeline that you identify and assess key qualifiers that are relevant to that stage in the buying process and which can alert you to these changing circumstances and either give you the chance to react to them or to qualify out before any further sales effort is wasted.
Avoid putting rubbish in your pipeline in the first place
My final recommendation is to avoid filling the pipeline with rubbish in the first place. Make sure that you establish “ideal prospect” profile, target your marketing towards them, and qualify inbound enquiries against them. Be careful to distinguish between interesting, important and urgent needs, and ensure that you are working on opportunities where the problem is already urgent or can be elevated to an urgent need.
Resist the temptation to add more poorly qualified prospects to the pipeline – you’ll only make matters worse, and have an even more expensive clean-up operation to perform later on. Focus on managing quality, velocity and leakage and encouraging winning behaviour, and you’ll have the foundation for a smoothly flowing sales pipeline. And by eliminating all that wasted effort, you’ll be doing your bit for the environment as well!
Posted by Bob Apollo on Tue, May 25, 2010
Alec Baldwin’s performance as Blake in the film Glengarry Glen Ross immortalised the “Always Be Closing” attitude that for many has come to exemplify everything they hate about pushy, predatory sales people.
In any sort of complex, high-value sale, particularly one that involves multiple stakeholders, decision makers have become immune to this sort of Neanderthal behaviour. But what are we to replace the “Always Be Closing” mantra with?
Vote with your wallet, or vote with your feet...
Pushing aggressively for the close at least had one advantage: it may have caused many buyers to vow never to deal with the vendor again, but at least it forced a conclusion. In an ABC world, prospects quickly vote with their wallet, or vote with their feet.
I come across many situations where the opposite is true; sales pipelines that are clogged up with deals that are going nowhere. As my friend Donal Daly has pointed out, it takes 150% longer to lose than win. So clearly just waiting and hoping for nature to take its course isn’t a great alternative.
The discipline of winners...
From what I’ve observed, top-performing sales people rarely suffer from clogged pipelines. They have the discipline to qualify accurately, and the confidence to politely turn away from deals that are never likely to close or they have a slim-to-no chance of winning.
Contrast that with the behaviour of all too many middle-of-the-road people: they hang on to opportunities that are long past their sell-by date in the mistaken belief that abandoning them will reduce the value of their pipeline.
Of course, the opposite is true: the real-world value of their pipeline, and their chances of beating quota, is diminished rather than enhanced by holding on to these non-win deals. Better to set them aside, and go looking for better qualified opportunities.
From Always Be Closing to Always Be Qualifying...
In fact, I’m going to suggest that the new mantra ought instead to be “Always Be Qualifying”. And by that I don’t mean just the classic BANT criteria (Budget-Authority-Need-Timescale) which is hardly relevant in many opportunities where the need has to be created before it can be satisfied.
And I don’t see qualifying as a one-time act at the start of the sales process, either. My observations of top-performing sales people suggest that for them, qualifying is a continuous process rather than an event.
The art of continuous qualifying...
Let’s accept that the status quo rarely prevails. Opportunities that looked promising to start with can fade away. Leads that seemed poorly qualified can be nurtured into winning deals. But at the end of the day, I’ll suggest that you need to keep on top of two things above all: will they buy, and can you win?
Will they buy is all about whether the problem they are facing is so painful that they have to act. You need to be continuously qualifying for the economic impact, who else might be affected, and what the consequences of inaction might be. If the problem turns out to be merely irritating, can it be elevated to important? And is resolving the problem still a top priority - or has it been overtaken by events? What would it take them to move forward to the next stage? And what might hold them back?
Whether you can win is about whether they trust you, more than any other option (including “do nothing”), to deliver them the results they need. Have you got the support of the people who matter when it comes to making the decision? How can you elevate your value, and mitigate any risk? And are you sure that you know what sets you apart – and why it matters to your prospect?
Coffee is for qualifiers...
According to Alec Baldwin, “coffee is for closers”. But I’d be happy to buy a coffee (or send a Starbucks gift card) for anyone who contributes to this thread with their ideas about great qualifiers.
Posted by Bob Apollo on Thu, Dec 17, 2009
The past year has proved challenging for some sales and marketing organisations, but others have seized the opportunity to rethink their plans, out-execute their competitors and win market share. Our own observations, backed up by the latest research from the likes of McKinsey, Stanford, the HBR, CSO Insights and others, have identified 5 strategies that seem to be particularly relevant as we enter 2010.
These strategies are already enabling top-performing teams to eliminate wasted effort, increase revenue predictability, and improve the return on their sales and marketing investments. We're pleased to share them with you here, in the hope they might prove relevant to your own situation:
How do these strategies align with your own priorities for 2010? We'd love to hear from you. By the way, we've captured some of the key implications in a 15-point checklist which you can download here.
Let me know how you get along...
Posted by Bob Apollo on Tue, Nov 24, 2009
Recent research from the Stanford University Graduate School of Business suggests that companies that eliminate bonuses for achieving sales quotas generate more revenues. According to Professors Nair and Misra, the benefits can be significant – in one case stimulating a 9% uplift in revenues.
As 2010 approaches, that sort of sales uplift could make the difference between achieving your revenue goals for the year - or falling short. It’s a powerful argument for reviewing your sales compensation plans now, so that you’re ready for the new business year with a set of principles that can optimise your sales performance.
If you’ve run a sales force for any length of time, you’ll probably be familiar with the principle that compensation drives behaviour. As Nair and Misra point out, quota bonuses can result in sales people gaming the process. If they have already made their quota for the period they may defer or “sandbag” deals, whilst sales people who see no chance of achieving their quota may instead defer their efforts to the next period.
Removing these quota-related bonuses can help to remove the inefficiencies caused by the sales people’s attempts to game the system. In the example quoted in the research, they worked with an organisation to redefine their compensation plans for FY2009. The results were impressive - the new structure resulted in a 9% improvement in revenues, translating to an additional $1m a month. What’s more, the new plan proved extremely popular with the sales people.
Of course, removing quota-based bonuses may not be the answer in every situation - but the research draws our attention to the need to carefully define the desired sales behaviour, modelling the desired outcomes, and tuning the compensation plan accordingly.
Most organisations want their sales force to be encouraged to maximise profitable revenue, and to do so as early in the business cycle as possible so that end-of-quarter and end-of-year surprises can be eliminated. This can be achieved through careful design of targets and accelerators. Similar principles can apply to incentivising certain elements of the product mix.
As the end of the sales year approaches and you prepare to hit the ground running from the very start of 2010, I suggest you reflect on how well your current sales compensation plans stimulated the desired sales behaviour. Even if you did well, is there room for improvement? And if it looks as if you may end the year short of your original goals, how can you change the situation for next year?
An external perspective may help. We’ve worked with a number of clients to help them structure and tune sales compensation plans that drive the desired outcomes, and eliminate the opportunity for sales people to game the system. Drop me a line at bob.apollo@inflexion-point.com if you would like to learn more.
Getting it right is worth it. On average, organisations spend more than three times as much on sales compensation as they do on advertising. Careful planning can make sure that the money is well spent.
Posted by Bob Apollo on Tue, Jan 20, 2009
Deals seem to be taking longer, more decision-makers are getting involved, and more deals just keep slipping from quarter to quarter without ever coming to a decision. As a result, many sales pipelines are getting clogged up with deals that are going nowhere fast - and have been for ages.
At first glance, it might appear comforting that at least the deals haven't gone away or worse, been lost to a competitor. But all these go-nowhere deals are hardening the arteries of sales pipelines and making it difficult to move the fast-moving deals through to completion.
Most organisations would benefit from a rigorous re-qualification of every deal in the pipeline based on a evidence-driven evaluation of their true potential. What should we be looking for? Evidence of buyer intent, expressed through actions that take their buying process forward, and clear championship within the buying organisation.
Establishing evidence of buyer intent is a key element of proactive pipeline management. In these risk-averse times, one of the most powerful signs of buyer intent - in addition the their observed behaviour - is an identified and acknowledged "cost of inaction": what would the potential costs, consequences and risks be to the buyer if they made a decision to do nothing at this stage?
If it's proving difficult to get your champion to articulate this clearly both to you and to their colleagues on your prospect's buying team, it may be time to focus your energies on others that show greater promise.
Almost every pipeline would benefit from moving the faster moving deals into the middle of the flow - where they can enjoy the best attention - and gently moving the slower moving projects to the side where they are less likely to stand in the way.
Posted by Bob Apollo on Tue, Jan 06, 2009
The dust has started to settle on 2008, and from what we hear, a number of organisations ended up below their initial Q4 forecasts. Fewer end-of-year "bluebirds" seemed to have come in, and a number of apparently solid deals ended in "no decision".
I've spoken to a number of sales leaders about their resulting New Year forecasting resolutions, and I uncovered a common theme - they all expressed the desire to know when the status of deals have changed sooner rather than later, when there may is enough time to do something about the situation - rather than discovering that circumstances have changed after the event.
This is going to put a big spotlight on pipeline data quality, completeness and accuracy - but simply extolling sales people to do a better job isn't going to be enough. Unfortunately, things which are not inspected, cannot be expected - and most CRM tools do a pretty poor job of highlighting "what just happened".
As a result, sales managers or sales operations professionals often end up spending an inordinate amount of time trying to work out what just changed in the pipeline. What's required is an ability to track changes in close to real time. Finding out that a deal is likely to slip after the event gives managers little chance to react.
The flip side, of course, is being able to identify where things haven't progressed as you expected in deals you might have been counting on for the quarter.
So if the need to know what's changed in the pipeline has assumed even more importance in 2009, what tools can sales leaders or sales operations professionals turn to? Well, the traditional approach would be to run spreadsheet extracts even more frequently and go through a mind-bending "stare and compare" routine to try and get to the facts - but that's awfully wasteful and inefficient.
The better approach would be to be able to manage by exception - and to be able to immediately see what has or hasn't changed. We've seen great success from pipeline analytics tools - but don't let the analytics word scare you off. I know that the idea of analytics and BI conjures up visions of projects that take too long, cost too much and are complex to administer, but it does not have to be that way.
In the same way that salesforce.com and other SaaS vendors have transformed CRM as a sales tool, so vendors like Cloud9 Analytics are transforming CRM information as a management tool. I'd suggest you check it out while there's still time to positively impact Q1!