Over the past few weeks, I’ve published a number of posts on pricing, value creation, walking away. They’ve stimulated some interesting comments and discussion. As I’ve read many of the comments, it struck me that we need to talk about whether we really want to chase after every opportunity.
Too often, we’re driven to win business–at any cost! We chase deals, get emotionally attached to them, are desperate to close them because we need them badly. We end up discounting, to painfully thin margins, sometimes entering into unprofitable deals. We do everything we can do get business–any business–even bad business.
Too often we celebrate winning the business, only later to find it’s a bad deal. The customer has unrealistic expectations, we’ll never be able to make them happy. We can’t make money off the deal. We can’t deliver to commitments. Whatever the reason, the good news, we won the business, the bad—we won the business business.
As sales professionals, we are taught to qualify customers—do they have a real need that we can satisfy, do they have a sense of urgency around doing something, will they seriously consider our solution, do they have a realistic budget or funding? If we get resounding “Yes’s” to all these we chase after them to win.
But it seems there is one other element we miss—Is this good business for us? If we win–can we service the customer, support the customer, keep the customer delighted, and make money? Is this the right kind of business, or does it cause us to divert critical resources and attention?
An important part of qualification but something I don’t see in qualification criteria is: Is this business we want to win and deliver on? We need to make a critical assessment of this as early in the sales process as possible. We need to look at, all aspects of the deal, what it takes to win, the likely profitability, our ability to deliver a business, and so on. We need to make those tough decisions, to we really want to go after the business. If we choose not to, we need to disqualify as soon as possible.
Are you qualifying opportunities based on the quality of the business? Or are you chasing everything?
Part of the difficulty lies in the divide between those who broker deals and those who agree to them in your organization.
The time element and reporting structure can leave a gap between what we want and what ultimately a closed deal will look like.
To keep everyone happy- the boss and the soon-to-be partner, sacrifices can be made which might appear minor each time they occur but at a certain point they become significant enough to turn the deal to not so good.
The reason this is acceptable or rationalized as acceptable is that senior management has certain expectations during the opportunity part of the process and don’t necessarily move off those expectations as negotiations progress.
Mike, interesting observations. Great deals can turn bad as we move through the buying/selling process. We have to have the discipline and courage to refocus these deals so they are good, or walk away from them.
There’s another effect of chasing bad business, particularly for small companies. If you are chasing and winning business that’s outside your “sweet spot,” you’re always inventing/customizing/modifying your product for each deal. That means you’re not building expertise and references in your sweet spot. Worse, very few of these deals will be profitable, so you’re also not generating profits and excess cash you can re-invest in your business. If you do much of this, you will find yourself in a downward spiral and will run out of money before you make your company successful.
Great point Andy. Focusing on your sweet spot, building from there is critical The bowling alley concept is critical in building profitable business.
Dave and all,
Good news or great wins starting, from my experience, with knowing your ideal and consequently your worst customers.
Using well established criteria, e.g.
(!) fit within market segments, targeted applications, products focus;
(!) unique strengths translate into value and win/win commitments;
(!) potential $/year compared with historic orders < 10%/year;
(!) historic relationship and ideally many coach(es) established;
(!) access to higher-management, incl. C-level.
With clearly defined criteria start ranking/grouping your customers. As a result you are focusing all resources on ‘winning big’ in your ideal customers and ‘losing fast’ in your worst customers.
This is a great starting point to make sure we are chasing good business! Thanks for sharing it with us Klaus.
Great post David, as usual. It seems that I see this phenomenon more and more. Companies chasing that “marquis’ deal that ends up sucking all of the life and energy out of their sales force, and providing meager returns or even losses in the long run. The other element to consider is the opportunity cost to the sales organization and to individual quotas. How many truly profitable deals could have been worked to close utilizing the same amount of time and resources that were expended on the seemingly more glamorous or “larger” opportunity?
Vaughn: It’s great to see you commenting here! Your point is one of the most critical but poorly recognized aspects of chasing/booking bad business. It takes a lot of time—time that can be better spent by finding great opportunities in our sweet spot. Everything about bad business is bad—sales cycles, margins, sales time spent in post sales support and problem resolution. All this has a tremendous productivity and dollar drain. We need to focus, at qualification on identifying high quality deals, win them, and waste as little time as possible on bad deals.
Thanks for keeping us focused on this! (Hope things are going well) Regards, Dave
David,
Thank you for the article.
The replies also cover a multitude of issues that the sales person will face if the opportunity is not qualified correctly during the identification and evaluation process.
From my experience working with sales teams across the Asia Pacific Region these situations are not always the fault of the account team. There seems to be a growing trend from management to chase monthly- quarterly revenue results thus placing additional pressure on the sales teams to meet that monthly target instead of recognising the advantages a more strategic approach to each client investment could bring.
I would also point out that in many cases management leadership and a continued development program for the sales teams in the areas of Business Development has been lacking.
Reading the comments, good business evaluation is a complex process with many aspects and can’t be learnt in short timeframes.
Best Regards
Mal.
Mat: Thanks for the comment. No doubt sales management may be a source of much of the problem with this. Some in putting pressure on sales people to close any deal–which causes sales people to chase possibly bad deals. More importantly, it is management’s responsibility to define good and bad deals up front, defining the sweet spot, focusing sales people on deals with more good characteristics than otherwise.
One of the biggest organizational failures we see is poorly defined sweet spots–or relaxing these criteria in tough times. Management must provide strong direction and keep tight focus on this, otherwise deal quality, pipeline quality decline.
Thanks for pointing this issue out Mat!