It’s the end of the month, end of the quarter, end of the year…..
I’m looking at the pipelines of several clients (sometimes, I think they regret giving me access to their CRM systems) and I see a flurry of activity. Yes some of it is deals coming in and being closed, but too much of it is slipping the target close date. Move it out a month, a quarter…..
I look at the history of some of the deals, one has moved 11 times in the past 11 months, you guessed it, every month the sales person slips the deal another 30 days. Others are almost as bad. These are all simply wishful thinking. my guess is few of these are real deals, mostly wishful thinking. Shame on the sales people for wasting their and their customer’s time with dreaming about rosy futures. Shame on sales management for letting these stay in the pipeline.
Others are slipping, there seems to be good rationale, after all, we aren’t in control, the customer is. Things happen and deals slip.
Deal slippage frustrates everyone in sales. It’s what makes forecasts inaccurate, it’s what causes us to miss our numbers, it drive uncertainty in everything we do.
We try all sorts of systems to minimize deal slippage, better guessing–maybe through better hedging. We look at analytics to try to help. We even talk to customers and get their input on when they think they might be ready to buy.
But deals still slip.
Perhaps it’s time that we consider an outrageous idea. What if we made the target close date sacred? What if we did everything we possibly could to, first, identify a reasonable close date, then constantly worked to avoid slipping that date?
Deal slippage bothers me, it makes me feel really bad—not because the forecast has been missed, not because of the impact on our numbers. I feel really bad about deal slippage because of the damage it does to our customers.
Every time we miss a target close date means the customer is losing. The problem they are trying to solve, the opportunity they are trying to address remains. The damage, whether lost revenue, rising expenses, bad quality, poor performance persists. It is something lost forever, never to be recovered.
One customer for a client needed to have a manufacturing line in place, producing products by a certain date to meet the Christmas shopping demand. If they missed that date, they would lose $100’s of millions in seasonal sales. Everything in that project was driven by having the manufacturing line in production by a certain date.
Another client’s customers needed to have solutions in place by a certain dates to comply with regulatory changes–otherwise they would have to shut down.
While it’s a little different, once a client was bickering over a few $100 in projected fees for a project. As a result, things slipped—at least until I reminded the client that for every month slip, his company was losing $40M in revenue. As you might guess, we closed the deal and started the project very quickly.
We can make target close dates sacred by making the timing of the results the customer expects to achieve sacred.
We need to start getting the customer to think, “When do you need to start seeing the outcomes you expect?” “When do you need to see results?” “What is the impact to your business if this slips?”
The reason we are engaged with a customer in a buying/selling relationship is to help the customer solve a problem and begin to achieve results. Once the customer agrees this is an important issue, that they can no longer accept the current situation, then we have to get them to declare, “This is when we need to start seeing the improvements we expect!”
This cements the situation in both the customer’s minds and ours. Once we know the date they need to start seeing results, we work backwards from that point?
Once they have a solution in place, how long does it take to produce results? Knowing this, working backwards from the “When do we need to start seeing results,” we can lock in the “go live” date for the solution.
How long does it take to implement the solution to go live? Now we walk backwards from the “go live” date to when we have to start implementation.
What’s the lead time from getting an order to shipping the product or starting to deliver the services we are committing to? Once we know this, we work backwards to the Target Close Date.
The customer is a part of this project planning process. Setting these dates or milestones is all driven by when they need to start seeing results.
If the Target Close Date, the date the customer makes a decision, slips, then everything else slips out as well. The result is the customer has lost something–revenue, profits, missed product launch, missed commitments to their customers……
We can continue the same thinking looking at the customer buying process. Working back from the Target Close Date, we can identify milestones for delivering final proposals, completing the evaluation of alternatives, locking in needs/requirement.
Many of you will recognize this as classic project planning. Setting goals, establishing milestones, identifying critical activities. All done by working backwards from the goal.
Project planners know things slip. Some tasks take longer than expected, some delays occur, some commitments are missed. Great project planners keep adjusting their plans and milestones–still keeping the project goal/end date sacred. They do everything possible to hit that date, because they know if they miss the date, it will cause the company to miss a critical opportunity. Yes, sometimes the target completion date slips, but great project planners do everything possible to minimize this.
Target Close Dates can be sacred. We can minimize deal slippage. The basis of this can’t be when we want to see the deal closed or our best guess of when we think the customer will make a decision.
It all starts by getting the customer to answer the question, “When do you need to start seeing results?”
Another post from you that got me thinking…
Recent CEB research and similar from others all point to the clients wanting help getting through their decision making process more quickly – without the help it takes them longer to get to a decision, and often the decision is ‘status quo’ or the outcome is unsatisfactory.
So in the early stages of a deal, establishing a pretty sacred close date should be in the client’s interests…
Which means talking to the ‘right’ people.
So if you are having trouble with a client getting or keeping such a sacred close date, maybe this is another indicator you’re not talking to the right person for this aspect… somebody with little control or influence over the close date is not likely to be a high influence person, by definition, no?
Martin, I think we treat the issue of Target Close Date far too lightly—not from the point of view of getting the order, but really from the point of view of getting the customer engaged and committed to change. If we and the customer struggle with this, perhaps there isn’t a real problem to solve, a commitment to change, or a need to buy.
I really like leveraging Project Management concepts in this. If you look at really good project managers/teams, they spend a lot of time up front making sure they have a plan in place to achieve the goals by a certain date. Everything they do, the backing and filling during the project is driven to maintain the integrity of the results and target completion date. If we and our customers did the same, we’d both accomplish a lot more. Thanks for always provoking me to think further!
Dave – an interesting parallel – I hadn’t thought of it in quite those terms before. Which got me thinking (bless you for that!)…
Purist project management doesn’t work back from a set date – it works forwards based on available resources etc and states what the earliest finish date is, given resourcing availability etc.
This also can show if putting more resources on the project can make a desired end date achievable or not…
So I wonder if a similar approach can help the client’s key influencers and decision makers become fully aware of what is possible, versus desirable, and how to deal with things if there is a gap between the possible and the desirable – because that gap will represent an opportunity cost to the client…
And if today a desired implementation date is achievable, but if there is a delay of more than say, 15 days and then, according to the project management and planning approach, that end date begins to slip, then we have another tool to help the client get sufficiently motivated and a high enough sense of urgency to go make things happen now – so long as we are actually talking to influencers and ‘mobilizers’…!
I’ll write further about Project Management, Martin. I am taking some liberties with the process. What we are really doing is creating a “compelling event,” and making that as immovable as possible. Think back on other compelling events and what they did to drive decisionmaking. Y2K forced everyone to re-do their Finance and ERP systems by 12/31/1999. Legal and compliance regulations regularly force customers to have something done by a certain dater or risk legal/compliance violations.
As much as we can drive the same kind of thinking with the results the customer wants to produce, that high sense of urgency/commitment, then we and the customer can overcome all sorts of buying/selling hurdles.
Dave;
Another great read. Deal slippage, and its first cousin ‘No Decision’, are the bane of seller and buyer alike.
You said, “It all starts by getting the customer to answer the question, ‘When do you need to start seeing results?’”
How great would it be for the sales rep to articulate, with specificity for that prospect, the quantified economic value of those potential results? The President of one of our customers said “you know, numbers just make the conversation more interesting”.
It’s not that hard to whip Deal Slippage and No Decision. It does take intentionality. Thanks for another great read.
Happy New Year!
Jim
Jim also raises a good point about communicating value.
There is communicating the value you have already created for the client ‘up until now’, which can serve to differentiate you more, as well as also point out what is potentially at risk if the client goes with an alternative simply on the basis of price.
There is the value you can create in future for the client, presented also in terms of what they are missing out on with every delayed day on their decision.
There is also the value to be created from fixing CURRENT problems, again presented in terms of most opportunity & ongoing costs & risks for every delayed day in making the decision.
We utilize what we call the Client Value File, with a calculator, that enables us to quantify the value created up until now, or that could be created, by selecting us and out solutions. As a general rule we don’t share the inner workings of the calculator, not because it is secret so much as to ensure the conversation doesn’t get in to a focus on how the calculator was put together – it’s a distraction that brings little if no value to anybody…
It is just there to create credible numbers that can help provoke and maintain the client’s engagement in the conversation.
And we’re utterly OK initial values being wrong. For example, we may calculate a development cost for a new product at say, $45K per month, and an estimate of 5 months development. The client may well turn around and say “no, those figures are wrong. Our development cycle is likely to be closer to 8 months, but we do a fair bit of development in India and the Philippines, so the monthly cost is closer to $35K a month…”
This is great! This is a conversation! This response tells us several things:
1 – That the cost is not zero for the client!
2 – That their development cycle is longer – that is gold dust – every 3 months delay in getting to market could be say, 2-15% of the total revenue for a product, depending on the market – usually orders of magnitude greater than any discount on parts they may be pushing us on…
3 – That they do some significant development overseas – which means communications and culture issues that add to the risk and may increase overall costs or value detractors, ones the client may not be aware of or has under-appreciated…
THIS is the kind of information coming out of the conversation that enables us to zero in on helping the client create value with us… THIS is what helps us differentiate us in the minds of the client… THIS is what helps us win business, even when we are clearly not the lowest PRICE option, but typically are the best VALUE/RISK option…
This kind of approach has resulted in interesting client behaviours on occasion – for example, a CTO telling the head of procurement to shut up in a meeting with us because they (the client) gets way way way more value from us helping them with their engineering then they would ever get from squeezing out a few pennies here and there from the parts we supply them with…
It helps to have the right people in the room, and it is not at all unusual during early conversations like this for the client to say something like “This is good stuff – I had no idea… We need to get involved in this conversation – it is likely to impact them too… they’ll want to be involved…”
… and then we are ‘off to the races…!’
Happy New Year everybody!
Great add on to Jim’s comment Martin. What Jim is too shy to say is Decisionlink enables sales people to start having those conversations in the very first call! I really like your point that the initial value don’t have to be right, but they provoke the right conversation in settling on the right values and start the customer down the path to change.
Mitch, Jim and I had a talk about DL awhile back, perhaps you and I should reassess that?
Great observation Jim! I think the earlier we engage the customer in conversations about potential outcomes, the more engaged and interesting the conversation becomes. As a result, it becomes easier for the customer to commit to go forward! Watch for a post, “Numbers make the conversation more interesting” 😉 Thanks for all your support Jim, best wishes to you and the family for the New Year!
Good one Dave.
A common-sense best-practice that is not widely adopted or practiced.
Top salespeople ask this question.
The rest don’t.
When 60+% of the business comes in the last week of the quarter – as it did 30 years ago, we have a behavioral problem… in both buyers and sellers.
End of quarter is hardly a compelling event for a buyer. It’s an opportunity to grind more concessions in return for the PO.
As Martin points out and as you pointed out in a prior blog… when the true costs of delay are known – if you did your homework on ROI and the “right” people are engaged, then deals don’t slip – much.
Deals slip because salespeople let them and the #1 error is timing the close for quarter end.
Thanks Mark. I think managers need to be focusing on this issue much more strongly. They need to help sales people get the customer to the issue of “Why are we doing this, when do we want to see the results?” Great comment!
I completely agree with you that a lot of it could be saved by asking the initial question of: by when do you need this?
I also believe that many times sales people use it to “push away” the failure of not closing the deal. I think a lot of companies could use harder rules about changing the expected closing date of deals.
Ludovic: You make a great point. It’s really a management problem. First, that sales people can’t be honest about a deal being bad, second that they permit funnels to be filled with wishful thinking. Managers need to do a better job coaching and maintaining the integrity of the funnel. Thanks for contributing to the discussion. Regards, Dave