Sales Benchmarking
I have been reading about shrinking pipelines, questions by sales management and trainers on how to focus development efforts, and a number of other general ailments in sales teams. For each one, there are many different ways to approach solutions, but the central question when things are going wrong is, where do I start in order to fix the situation? Without good data on what is currently happening, it is hard to determine what you need to fix in order to achieve what you do want to happen. In my experience, starting with the metrics and numbers is the first place to go. Let me tell you a story...
There was a sales team that I had set out to provide some training for, quite a few years ago. They were all grossly under-performing. They seemed to know the product and were all really nice people, but the revenue numbers weren't good enough to support their office.
The reps were complaining that there were not enough leads. Common comment. So, I wanted to get their focus onto what they could do within the realm of their own responsibility to offset the "lack of leads". On top of that, the culture of the office resulted in about a 4 to 5 hour work day at best with a lot of really bad habits thrown in for good measure. They had had no sales leadership at all up to that point. They were winging it and most of them had never sold before.
So, we went throught he exercise of working out the metrics of their sales process. This was a matter of calculating their success rates from one stage of the process to another. At that time, at least there was a consistent milestone method for the whole company that this group was somewhat following. Working backwards from their target, I wanted them to see how many calls they needed to make in a day to hit their target. Clearly it would be larger than what they were currently doing. On top of that, I knew it would highlight other underlying problems.
The math looked something like this (this is an artificial re-creation of the situation):
Annual Target $500,000
Avg Sale $3,000
# of sales required to hit target 167 per year
% that convert from Stage 4 90%
# of opportunities needed at Stage 4 185
% that convert from Stage 3 50%
# of opportunities needed at Stage 3 370
% that convert from Stage 2 45%
# of opportunities needed at Stage 2 823
% that convert from Stage 1 60%
# of opportunities needed at Stage 1 1371
% of first calls that move to Stage 1 10%
# of 1st calls needed in a year 13,717
# of 1st calls needed each day (13,717/220) 62
That bottom number of 62 first calls per day (it really was actually quite a bit higher) of course simply blew them away. I don't recall exactly how many they were making, but 5 cold calls and 10 other calls per day was probably around the quantity for some of them.
Once this was on the table, we had something to talk about other than lack of leads. We investigated ways to get the average sale size up (their average was low in comparison to the rest of the company). If they doubled their average sale size, they could cut their workload in half. This then led to the discussion of who they are selling to (why call the small companies when you sell more to the larger ones????) and what they were selling (full implementation by selling to the VP rather than a single license sold to a practitioner) and add-ons they could add into the sale.
In addition, it forced them to look at their own individual skills with respect to the conversion from one milestone to the next.
One person might be good at getting people into a true evaluation stage but really bad at relating the capabilities back to the original goals of the customer, so their later-stage conversion rates would be way down. So, how do they fix that? That became a major part of the training.
Or another person might be really poor at cold calling, which makes all the rest of it really difficult. So, what script is needed, who/when/how should they be calling and so on then became another part of the training.
When all was said and done, they determined for themselves that by making some very pointed changes in what they were doing, they could get that "first calls" number down to a manageable quantity and still hit their targets. The complaint of "not enough leads" became immaterial because they could almost hit their targets just with the leads they were getting if they sold differently to those leads and supplemented with some very targetted prospecting of their own.
In the few months following this training, the pipeline for the group grew exponentially. They were making more calls (they were more excited and could see the possibility of success which drove them to work harder at the same time as working smarter), adding more to the solution value and talking to different people (higher up the chain). Their actual sales also began to trend up (shortening the average cycle was also part of the discussion). Unfortunately I can't trend the success any further than that because my followup training meeting with them was the week of 9/11 and shortly thereafter the tech bubble burst and the company shut that office down completely. But that is not what the point of the story is.
The real bottom line: I learned two very important lessons from this exercise:
1) Training is of no value if the trainee doesn't think they are part of the problem. They will resist and simply not change their own actions. By doing this benchmarking, it was abundantly clear that each of them had something they could work on to help themselves, and the result was a very engaged training week.
2) This benchmarking focusses attention on the spots where help and development are needed. Without the benchmarking, the training would have been a shotgun approach with "everything including the kitchen sink". On the way over to the office, I was thinking I would need about 3 weeks to get through it all. But once we did the benchmarking, it was very clear where the first efforts should be to get the greatest return on their development. The training became shorter and far more focussed. The return on investment was immediate and extreme and very clear in their pipelines.
There was a sales team that I had set out to provide some training for, quite a few years ago. They were all grossly under-performing. They seemed to know the product and were all really nice people, but the revenue numbers weren't good enough to support their office.
The reps were complaining that there were not enough leads. Common comment. So, I wanted to get their focus onto what they could do within the realm of their own responsibility to offset the "lack of leads". On top of that, the culture of the office resulted in about a 4 to 5 hour work day at best with a lot of really bad habits thrown in for good measure. They had had no sales leadership at all up to that point. They were winging it and most of them had never sold before.
So, we went throught he exercise of working out the metrics of their sales process. This was a matter of calculating their success rates from one stage of the process to another. At that time, at least there was a consistent milestone method for the whole company that this group was somewhat following. Working backwards from their target, I wanted them to see how many calls they needed to make in a day to hit their target. Clearly it would be larger than what they were currently doing. On top of that, I knew it would highlight other underlying problems.
The math looked something like this (this is an artificial re-creation of the situation):
Annual Target $500,000
Avg Sale $3,000
# of sales required to hit target 167 per year
% that convert from Stage 4 90%
# of opportunities needed at Stage 4 185
% that convert from Stage 3 50%
# of opportunities needed at Stage 3 370
% that convert from Stage 2 45%
# of opportunities needed at Stage 2 823
% that convert from Stage 1 60%
# of opportunities needed at Stage 1 1371
% of first calls that move to Stage 1 10%
# of 1st calls needed in a year 13,717
# of 1st calls needed each day (13,717/220) 62
That bottom number of 62 first calls per day (it really was actually quite a bit higher) of course simply blew them away. I don't recall exactly how many they were making, but 5 cold calls and 10 other calls per day was probably around the quantity for some of them.
Once this was on the table, we had something to talk about other than lack of leads. We investigated ways to get the average sale size up (their average was low in comparison to the rest of the company). If they doubled their average sale size, they could cut their workload in half. This then led to the discussion of who they are selling to (why call the small companies when you sell more to the larger ones????) and what they were selling (full implementation by selling to the VP rather than a single license sold to a practitioner) and add-ons they could add into the sale.
In addition, it forced them to look at their own individual skills with respect to the conversion from one milestone to the next.
One person might be good at getting people into a true evaluation stage but really bad at relating the capabilities back to the original goals of the customer, so their later-stage conversion rates would be way down. So, how do they fix that? That became a major part of the training.
Or another person might be really poor at cold calling, which makes all the rest of it really difficult. So, what script is needed, who/when/how should they be calling and so on then became another part of the training.
When all was said and done, they determined for themselves that by making some very pointed changes in what they were doing, they could get that "first calls" number down to a manageable quantity and still hit their targets. The complaint of "not enough leads" became immaterial because they could almost hit their targets just with the leads they were getting if they sold differently to those leads and supplemented with some very targetted prospecting of their own.
In the few months following this training, the pipeline for the group grew exponentially. They were making more calls (they were more excited and could see the possibility of success which drove them to work harder at the same time as working smarter), adding more to the solution value and talking to different people (higher up the chain). Their actual sales also began to trend up (shortening the average cycle was also part of the discussion). Unfortunately I can't trend the success any further than that because my followup training meeting with them was the week of 9/11 and shortly thereafter the tech bubble burst and the company shut that office down completely. But that is not what the point of the story is.
The real bottom line: I learned two very important lessons from this exercise:
1) Training is of no value if the trainee doesn't think they are part of the problem. They will resist and simply not change their own actions. By doing this benchmarking, it was abundantly clear that each of them had something they could work on to help themselves, and the result was a very engaged training week.
2) This benchmarking focusses attention on the spots where help and development are needed. Without the benchmarking, the training would have been a shotgun approach with "everything including the kitchen sink". On the way over to the office, I was thinking I would need about 3 weeks to get through it all. But once we did the benchmarking, it was very clear where the first efforts should be to get the greatest return on their development. The training became shorter and far more focussed. The return on investment was immediate and extreme and very clear in their pipelines.
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