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Sep 19 17

Trust, Your Commission Plan, Making Money

by David Brock

I’m ashamed to admit it, every once in a while I get sucked into mind numbing discussions on LinkedIn.  This one was posed by an individual pretending to want to become a “trusted advisor” to his customers.  He posed a scenario, “I can propose A to my customer and this is my commission.  If I propose B to my customer, my commission is more.  B is a better solution, but I’m afraid my customer will think I’m being deceptive since I’m getting paid more for it….”

The conversation devolved, for the most part, from there with people discussing various alternatives, primarily focused on maximizing commission.

Wrong, wrong, wrong!

There is so much wrong with the premise and the resulting conversation (I don’t want to embarrass people by giving you the link, but search through my activity history for a few days, you’ll find it.

Starting the conversation with, “How do I do the right thing for my customer,” combining it with “How do I maximize my commissions,” is simply the wrong starting point.  The mindset this comes from is not one that focuses on building a long term trusted relationship with the customer.

It’s a transaction oriented mindset.  It looks at customer relationships transaction by transaction, trying to determine what’s best—for the sales person, while in some twisted way trying to think, “am I doing the right thing for the customer?”  This will never get you the “trusted advisor” status you want, and over the long term, it actually minimizes the revenue and earnings you get from customers.

Great sales people always play the long game.  They realize building relationships with customers requires consistent focus on creating value with the customer in every interaction over the course of the relationship.

They are always driven by doing the right thing for the customer.  Sometimes that may mean backing away from a deal or doing something that doesn’t maximize their commission.

They aren’t naive or “charitable” in these decisions, they recognize the way they maximize the return on their investment in the customer is to focus on the long term relationship.

Some of you may be a little confused at this point, thinking, “We’re in business to make money–for our companies and for ourselves.”

Top performers are ruthlessly focused on this.  They don’t waste time on customers they can’t create value with.  They won’t waste time on customer who don’t value what the sales person can do in helping them achieve their goals.

They invest in customers and deals that enable them to grow the business relationship.

They are business focused, they know that optimizing their performance transaction by transaction never enables them to maximize the lifetime customer value.

Becoming a trusted advisor, maximizing your ability to create value with the customer you choose to work with is simply smart business!

 

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Sep 19 17

Principle Based Selling!

by David Brock

Are you training and coaching your people “principle based selling?”  No I’m not announcing a new sales methodology or trying to infringe on a few companies calling their methods “Principle Based Selling.”  We often use the word principle to describe values we hold, for example integrity, honesty, respect for others.  Those are important, but not the subject of this post.

What I’m referring to when I use the term “principle based selling,” I’m focused on identifying the fundamental things that drive sales success for your organization.  Do your people understand those base principles, can they leverage them in situations they haven’t encountered before.

What are some of the fundamental principles that drive sales success for your company?  Here are some thing to think about:

  1. What problems are we the best in the world at solving and why?  (The why helps you understand your value.)
  2. Who are the people (personas) and organizations that have those problems and why are these important issues for them?  (This guides your prospecting and qualification.)
  3. How do we help them recognize the problem, commit to change, define what they want to do, and engage others in determining the solution/solving the problem?  (This drives the insight we provide, understanding their buying process and aligning our sales process to that buying process in a manner that allows us to collaboratively solve the customer’s problem.)
  4. How do we hold and value those customers/prospects?  (This drives the customer experience we want to create, both in through their buying process and in their implementation.)
  5. How do we get things done in our own organization-particularly when we don’t know how to get things done?  (This deserves its own post but, but it really is about “Where do I get help when I encounter something I don’t know?”)
  6. Why we do things the way we do them?  (This helps us understand both how to get work done in our company, but, more importantly, what we stand for and how we want to be positioned in the markets/community.  It’s part of what differentiates us and drives our value.)
  7. How do we maximize our own personal performances to achieve our goals?  (This has to do with our ability to focus on things that produce results and to stop doing things that don’t.)

There are probably a few principles you can add, but there don’t have to be many.  You might, fairly, argue that 7 is way too many.  In truth, I probably could combine 4, 5, 6.

Think of it, the whole universe of physics and mechanics is guided by only a few underlying principles/laws.  So we don’t need many to guide our sales people.

But why is this important?  Why am I even bothering to write this?

The issue is, our people will always confront situations that aren’t described in a playbook or covered in a script.  They will face things they haven’t encountered before–though they may have encountered similar situations, “this one is different.”

Grounding our people in these basic principles gives them the ability to figure things out, to be able to address each situation with higher odds of success.

Ironically, most of the trend in sales enablement and programs is exactly the opposite.  We are leveraging tools, technologies, content, metrics, organizational models in ways that actually “dumb down the sales person.”  They become so specialized, so scripted, so process focused that they can’t deal with situations that don’t match what they have been trained to do.

Perhaps this is part of what underlies the plummeting data on sales performance.

The problem is, every sales situation has common patterns, but at the same time every sales situation is unique because our customers are unique.  They are people, human beings, who don’t act logically, rationally, or consistently.  They change on a day to day basis.

Couple the challenge of dealing with individuals, who may be constantly changing, with today’s consensus decision-making for complex B2B sales, and the number of possibilities skyrockets, just for that deal.  Then look at all the deals across all our sales people, over time–the number of possibilities we have to “design for,” becomes infinite.  (And infinity is a pretty big number.)

Clearly, it’s impossible for us to design processes, develop playbooks/scripts that handle even a large number of those situations.  Moreover, since they are constantly changing, the life cycle of any script becomes very short.

The reality is, we cannot succeed by being totally prescriptive with what we train/enable our sales people to do.  We cannot keep up with the pace of change or the variability in each deal/situation.

We have to have sales people with the critical thinking/problem solving capabilities to figure things out.  We have to train them in basic principles, so they have the tools to develop the best answers to drive success in every situation they encounter.

Have you developed the basic principles that underlie your company’s ability to generate revenue and create value with customers?

Are you teaching your people how to leverage those principles in helping them figure out what to do in every situation?

 

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Sep 17 17

“Amping Up” Your Pipeline Reviews

by David Brock

Managers spend an inordinate amount of time in pipeline reviews.  Largely, I think this is the result of lack of clarity of what they want to accomplish in pipeline reviews or too great a focus on the numbers and not what produces the numbers.  (but these are topics for other articles.)

Probably 95% of all pipeline reviews I sit in are wasted efforts.  The manager will start reviewing the pipeline, immediately finding a deal that catches her eye, deciding to deep dive into that.  Guess what, all of a sudden the pipeline review has become a deal review!

The conversation goes on, eventually, the manager has finished harassing the poor sales person about the deal, they go back to the pipeline review, the conversation continues, she finds another deal and the cycle starts all over.

In the end, the key question we have to answer about the pipeline is never answered:  “Do we have a healthy pipeline that enables the sales person to make their numbers.”

I spend a lot of time on Pipeline Reviews in Chapter 23 in Sales Manager Survival Guide.  It focuses on the fundamental things we want to understand in the review:

  1. Do we have a high quality, high integrity pipeline?  I’ll let you review the detail in the book, but the net is:  If you have crap in the pipeline, deals that are only wishful thinking, then everything else is wasted effort.  The pipeline has to be high quality–regardless how bad it looks after you clean it, now you can figure out what to do about it.
  2. Do you have sufficient volume in your pipeline?  Simply, do you have a sufficient quantity of deals and dollar volume of deals to achieve your goals?
  3. Do you have sufficient velocity in your pipeline?  Having the right volume is meaningless if those deals are stuck.  It’s critical to look at flow.  Generally, things like total sales cycle, days in stage, movement from stage to stage are great indicators of velocity.

You may be scratching your head at this point, thinking, “OMG, to understand the pipeline we have to have a sales process that our people are using!”  That’s the funny thing about the pipeline, if you don’t have a sales process that your people are using rigorously, it’s impossible to build a pipeline that is meaningful.  All you have is meaningless data based on individual opinions and wishful thinking.

But let’s assume you have these basics in place, what are some things you want to look at to get more insight into the pipeline and help coach your people to improve performance?  Some thoughts:

  1.  Product mix:  If your company has a wide product mix (i.e you have more than a single product line), you want to make sure the sales person is selling the entire product line.  Think about it, if you have two product lines, and two sales people each making their numbers at $5M, but one sells only one product line, and the other has sold $2.5M of each, which is doing better?  It’s the second, because she is executing the company strategy, selling the entire portfolio.  The first, in fact, is under performing–even though he is making is number.  He’s missing all the opportunities for the other product line in his territory.  You want to make sure there is a good mix across your product lines and the sales person isn’t just selling his favorite product.
  2. Customer mix:  This is similar to the product mix concept, is the sales person focusing only on a few customers, selling to them, or are they covering a large number of customers in their territory?
  3. New qualified deals:  This may be similar to customer mix, but what is the sales person doing to bring new deals into the pipeline?  Too often, we focus on the bottom of the pipeline and what’s exiting (hopefully won) and not on the new opportunities coming into the pipeline.  It’s important to look at what new deals are entering.  Are their enough?  Are they the right kinds of deals?  Are they the right quality?  If this is a problem, you need to look at the sales person’s prospecting activity.
  4. Balance in $ Volume and Deal Volume.  I’ll pose this scenario.  The healthy pipeline volume for each of your 3 people is $1M each, your average deal size is $100K, which would mean the healthy pipeline would have 10 deals.  Lets say sales person A has 10 deals with a total value of $1m or more.  Sales person B has 1 deal, but it’s $1M.  Sales person C has 50 deals at an average of $20K each.  You can probably see where I’m going.  while all the pipelines are “healthy” from a $ value basis, there are some real challenges with the pipelines from sales people B and C.
    1. As a side example, you’ll want to look at win rates on a deal volume and $ basis.  Recently, I was doing a review with a very excellent sales person.  His win rate on a $ basis was more than 3 times his win rate on a deal basis.  What’s that mean?  Well, he’s very good at winning the high value deals, but not great at the low value deals—which represents a coaching opportunity.  The win rates are unlikely to match (other than in a theoretical world), but if there is a huge difference points to some challenges and opportunities for the sales person.

I’ll stop here.  Get the fundamentals of pipeline management right with your people.  Make sure they understand their own healthy pipeline metrics—it’s different for each person.  Make sure they have healthy pipelines or you are helping them figure out how to build healthy pipelines.  Over time, look deeper into the pipelines to make sure they reflect the core priorities and strategies of the organization.

Again, if you want to brush up, it’s in Chapter 23 of Sales Manager Survival Guide.  Other chapters address how you deal with some of the problems you discover in these pipeline reviews.

 

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Sep 15 17

Can Revenue Be Predictable?

by David Brock

I saw an interesting question on LinkedIn, “In SaaS businesses, can revenue still be predictable?”  My reaction to this question, not just limited to SaaS, is “Absolutely—-sort of………”

Building predictable revenue streams is nothing new to sales.  The creation of SaaS companies with a high volume, high velocity model for acquiring customers wasn’t the inception of predictability in revenue generation.

For decades, perhaps centuries, organizations have built models to predict revenue, all with varying degrees of accuracy.

In some businesses, there are highly predictable revenues based on highly sophisticated trend analysis.  These models take into account seasonality, economic conditions, market factors, phases of the moon (well, maybe not that).  For example North American retailers and anyone involved in Consumer Products, know the majority of revenue at retail occurs in the October-December period.  Forecasters can look at orders placed on manufacturers in the summer months, making reasonable guesses about revenue in the 4th calendar quarter (barring unforeseen events).

Every business, has models of some sort that are leveraged to predict revenue.  Whether it’s trend analysis, pipeline/forecast analysis, or knowing a very good fortune teller.

Revenue, even in SaaS companies, can never be predicted precisely, even the most advance AI algorithms can’t predict that this quarter’s revenue will be $3,798,231,456.34  plus or minus a few cents.  But we can have reasonable estimates of revenue.

A more interesting question is, “What drives unpredictability in revenue, and what can we do about that?”

There are any number of things that drive unpredictability in revenue—some, unfortunately, are outside our control or even our ability to predict the impact.  Acts of nature, like the recent hurricanes, create great disruption and unpredictability.

There are other areas of unpredictability, where we are likely to have very little ability to guess revenue.  Early stage start-ups, disruptive new product offerings, entirely new markets create great difficulty in predicting revenue.  Where there is no established model, no comparative and relevant data, it’s virtually impossible to predict it—consequently, trying to do so is a massive waste of time and usually results in nothing more than wishful thinking.

Massive changes in our markets, or our methods of going to market will impact the predictability of revenue.  For example, in many of the old line SaaS companies with a high volume/high velocity sales model, traditional methods of predicting revenue failed as they started attacking enterprise sales–SaaS companies developed new models for predicting revenue in these types of sales.

But there are areas of predictability that are completely in our control or ability to learn.  Having a sales process that’s tightly aligned to customer buying process–and making sure that our people are using the process rigorously drives great predictability in revenue.  After all, the process is designed based on our best experience of generating revenue.  Everything else held constant, if we keep executing the process with some level of discipline, we will be able to predict revenue within some band of confidence.

Leveraging customer validated buying signals is another way to drive greater predictability in revenue.

Without belaboring the point, the things that drive unpredictability in revenue, at least the things that are in our control, are when we stop consistently doing the things we know produce revenue.   It may seem like a “Duuuggghhh” point, but too many organizations are operating in this space—and it’s their fault they can’t develop greater predictability in revenue.

We will never perfectly predict revenue, and too many of our forecasting approaches are irrelevant and unhelpful in predicting revenue.  However, within certain ranges of predictability, we know the things that work and the things that don’t work.  We know if we execute consistently and with discipline the things that work we will are more likely to produce the outcomes that produce revenue.

Look at your own business–whether it’s your organization or your own personal territory.  Are you consistently focusing on the things you know produce revenue?  Are you stopping those things that don’t produce revenue?

Predictable revenue–at least for those things within our control, isn’t much more complicated than that.

 

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