Are You In Group 1, 2, Or 3?

(Note:  If you happen to be a mentor or sales manager, please do your “mentee” or team a favor and pass this along.)

Sometimes, stating the obvious is nothing more than that; merely verbalizing what everybody in the audience already knows.  Sometimes, something is obvious to the speaker/writer, but is genuinely a novel concept for the audience.  Sometimes, everybody already knows, but only a few actually practice the best practice.

Plan every sales call in writing.

Are you in group 1, 2 or 3?  Most are in group three.  If you’re a seasoned veteran, humor me, and plan the next few calls in writing.  The exercise of creating a call plan that can be read and revised is a valuable, BIG deal.  No…  The exercise of creating a call plan that can be read and revised is a valuable, HUGE deal. Something written, can be revised and improved.  Something written screams to be revised and improved.

Following  is a simple outline.  (Right click here and “save link as” for an MS Word version.)

August 30, 2010 (today’s date)

  • Who: The attendee(s) of the meeting)
  • What: (In general, what the meeting is – e.g., First call, status meeting, etc.)
  • When: (Day, start time, end time, extra slack time available before and/or after)
  • Where: (Location & setting – e.g. prospect’s office, conference room, restaurant, etc.)
  • Why:
    • My objective – What I want the other person to agree to do
      • The best than can happen
      • The worst that can happen
      • The most likely outcome
    • Each of the above must be a brief, clear declarative statement – one sentence max
    • This is the most important component of the Call Plan
  • How: (e.g., Verbal only one-on-one call, PowerPoint presentation, review documents/proposal, fill out a questionnaire, etc.)
  • Major Points: (Normally should be limited to a maximum of three major topics all of which contribute directly and substantively to the “Why” of your call plan)

Simple outline?  Yes.  Easy to do?  Most times, yes.  Sometimes, no.  Now and then, a real challenge.  When completed, a  powerful contributor to a better call?  Always.  JUST DO IT!!!

Think About It… Week of 8/29/10

“What is written without effort is in general read without pleasure.”  Samuel Johnson

Make the effort when you write an e-mail, a proposal, a meeting summary, whatever.  Writing is permanent.  It’s your reputation.  It’s your credibility.

The Weapon

There is always a danger in focusing on the tools used to get a job done. (We all know the cliché about the six-year old with a chain saw…) That said however, a robust CRM system just might be the most powerful tool a sales team can have.

A highly functional CRM system is not the only tool required by a modern sales team (or more precisely an effective, modern sales team), but it is certainly the most central. Without one, it’s not really possible to get the most out of the other core sales tools or the professionals using them. Thinking about your CRM as “The Weapon,” that is, the key supporting infrastructure for a sales team’s process, metrics, knowledge, skills and experience can have a dramatic impact on results produced – both short and long term.

Consider the accompanying diagram starting with reports “The Weapon” can produce using “Open Opportunity” data combined with year-to-date actual performance. (down & left from The Weapon in the diagram) With that information, a valid, supportable forecast can be developed. That forecast will tell me in a heartbeat if I do or do not have enough in my funnel to reach my targets.

If I don’t have enough to get there, the “A” items in my Prioritized Action Plan will be aimed at finding more opportunities. If I do have enough, those actions will be focused on advancing deals through the pipeline.

Concentrate on those 4 boxes at the top. (Do it!) Think through and follow your work flow. Seems like exactly what the mythically ideal sales rep/manager/executive should be doing every day doesn’t it? What the heck else could be more important? (…except, of course, actually executing the action plan!)

Well OK, that takes care of the tactical stuff, but what about the more strategic & long term issues? With other reports from “The Weapon,” a sales manager (or conscientious rep) can quickly and clearly identify skill deficiencies and use your Sales Knowledge Mine to help plug those gaps. (You do have a keyword-searchable Sales Knowledge Mine that stores all of the “tribal knowledge” accumulated by your sales pros over the years, right?)

Concentrate on those 3 boxes at the lower left. (Do it!) Seems like a no-nonsense, disciplined approach to self-improvement and sharing best practices, doesn’t it?

And of course your regularly conduct Opportunity, Territory, Win and Loss Reviews to beef up action plans and peg down what works and what doesn’t. Everything you learn from these reviews – the good, the bad and the ugly – gets translated into action and also stored in the Sales Knowledge Mine. The actions that “sound great, but don’t work” get avoided and the “counterintuitive gems” get implemented again and again. Concentrate on those 3 boxes around the lower right hand corner. (Do it!) Removes all the fluff from the concept of “coaching,” doesn’t it?

At the risk of going too “liberal artsy intellectual,” I’ll quote Oliver Wendell Holmes. “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” I think this flow chart qualifies as one that made it to “the other side of complexity.”

Think about it…

How many metrics does a sales manager need?

As a group, sales managers are not big on “managing by the numbers.” Only a very few use more than a half-dozen or so measurements to monitor the quality and effectiveness of sales performance. Most rely on two, revenue and profit. They are the ultimate indicators of success, right? Why would anyone need to know any more?

Consider this… Assume that you just “volunteered” to manage a little league baseball team. One of the first things you need to do is come up with a batting order. Lacking any information, your only choice is to list the names in random sequence. In other words, the success of your first management decision will be based purely on luck.

Now assume that you find a list of each kid’s batting average from last year. You now have a metric and can make a better batting order decision. For example, put the kid with the highest average first, second highest second, etc.

Next assume you also find each kid’s on-base percentage from last year. (This is different than batting average. In addition to actually getting a hit, a batter can get on base by drawing a walk, getting hit by a pitch, or due to error made by a fielder on the other team.) You can now make an even better batting order decision.

For example, put the kids with the three highest on-base percentages up to the plate first, second and third. Put the kid with the highest batting average up fourth. Doing so increases the odds that your best hitter will go to bat with three runners on base, thus increasing your odds of scoring more runs. One metric yields a better decision than no metrics. Two metrics yield a better decision than one.

The scenario can continue to change. What if you also knew each player’s stolen base percentage, runs-batted-in, extra-base-hit percentage, etc., etc., etc… Each additional metric enhances the manager’s ability to make a better decision.

Shift gears and look at the big leagues.  Since the Oakland Athletics pioneered the use of metrics and statistical analysis back in 1999, their use has skyrocketed.  Over a 7 year period from ’99 through’05, Oakland won 658 games.  That’s 22 fewer than New York Yankees over the same period – essentially equivalent results.  In the same time frame, Oakland paid out a total of $295 million in player salaries.  The Yanks?  $965 million!!! Each win cost Oakland $448K.  Each win cost New York $1.4 million.  For the math challenged, a win for the Athletics cost 1/3 of what win cost the Yankees.  No wonder every Major League Baseball team now has a statistician on board.

Maybe there really is something to this managing by the numbers stuff… Maybe it even applies to sales… Maybe my competitors will continue to mange like little leaguers…  Sadly, maybe you will continue to manage like a little leaguer.

Think about it…

It Frustrates You And Annoys The Pig

As a guy who helps organizations design, implement and execute a sales process, I hear it all the time; “Don’t tell me how to do my job.”  It’s a hoot to watch the reaction when I reply, “I have no intention of even trying to do so.”

There’s no way an outside consultant, or even a VP of Sales for that matter, can tell an experienced rep how to do his or her job.  It’s like the old joke about trying to teach a pig to dance.  It frustrates you and annoys the pig.

Start with “what” and continuously improve the ‘how.”

There’s a better way to approach implementing a consistent sales process across an entire sales team and constantly making it better.  Start by defining the “what.”  It’s surprisingly easy to get a group of fiercely independent, strong ego sales types to agree on it.  It takes two or three serious debates, but group after group in industry after industry agrees on the same basic core process:

  • Identify An Opportunity – Identify a specific individual in a specific account that might maybe someday buy something from me
  • Gain Attention – Get some sort of meeting or conversation scheduled with that individual
  • Earn Interest – Maybe you’d prefer to call it “qualify.”  Earn enough interest in your stuff to convince the prospect to actually do something to help advance toward an possible purchase
  • Conduct Discovery – Learn, learn, learn.  Clearly define and quantify the customer’s objectives and/or pain, and understand the decision process and criteria.  Paint the “Before” picture.
  • Recommend – Tell ‘em what you recommend they do, why and the $$$ impact.  Paint the “After” picture.  (I used to call this “Propose,” but that’s another story.
  • Close – Get the order

The terminology might be different and maybe there are a few more or less steps, but what needs to occur is fairly universal.  It’s the reps themselves that fill in the blanks about how.  Stated differently, “how” is the set of best practices to accomplish each “what.”  These practices vary a lot more from company to company and industry to industry, but usually not as much as folks expect.

In fact, the degree of uniqueness really doesn’t matter.  What matters is measuring the effectiveness of each “best” practice. Over time the pretender best practices get dropped and replaced with better ones.

This continuous improvement of your sales process thing really is that simple.  The hard parts are getting started and sticking with it.

Think About It… Week of 8/22/10

Wisdom from a race care driver:  “If everything seems under control, you’re just not going fast enough.”  Mario Andretti

What Does A Price Concession Really Mean?

Scenario 1:

Sales Rep: “With a 3% price cut, they’ll buy.  Without it we lose.  It’s a $100,000 deal and we cannot risk losing it for a paltry $3,000 of the company’s take.  We must give them the price decrease they want.”

Sales Manager: “No.”

Sales Rep: (after leaving the manager’s office)  “That @%#&* idiot!  How can he possibly be so dumb.  I’m going back in there tomorrow to straighten him out.”

Scenario 2:

Sales Manager: “We’re going to cut your commission rate by 10%.  It might sound like a negative thing at first, but you’ll easily be able to more than make it up on volume.”

Sales Rep: (after leaving the manager’s office)  “That @%#&* idiot!  How can he possibly be so dumb.  I’m going back in there tomorrow to straighten him out.”

Scenario 3:

Sales Manager: “We’re going to increase your sales quota by just a bit more than 11%.  It might sound like a negative thing at first, but you’ll easily be able to more than make it up on volume.”

Sales Rep: (after leaving the manager’s office)  “That %#&* idiot!  How can he possibly be so dumb.  I’m going back in there tomorrow to straighten him out.”

The rep’s response is not the only thing that’s identical about the three scenarios.

Avoid thinking through the following math at your own peril!  It doesn’t matter if you’re a rep or a manager.  You’ll need to adjust the assumptions according to your own situation, but that won’t affect the fundamental message.  Here are the assumptions for example above:

  • The rep’s sales quota is $2,000,000
  • The average gross profit margin is 30%
  • Commission is 20% of gross margin

Here’s the math for a 3% price decrease vs. a 10% commission cut:

  • $2,000,000 sales minus $1,400,000 cost = $600,000 gross profit (a 30% margin)
  • $600,000 gross profit X 20% = $120,000 in commission
  • $1,940,000 sales minus $1,400,000 cost = $540,000 gross profit (a 3% price cut)
  • $540,000 gross profit X 20% = $108,000 in commission
  • ($120K – $108K) / $120K = 10% commission cut (or, another way to look at it, 90% of a 20% commission on the original $600K gross profit is $108K)

The 3% price cut that the rep demands is exactly equal to a 10% commission rate cut that the rep decries.

Here’s the math for a price decrease vs. a sales quota increase:

  • $2,000,000 X 30% gross margin X 20% commission = $120,000 in rep earnings
  • $2,222,222 X 27% gross margin X 20% commission = $120,000 in rep earnings
  • ($2,222,222 – $2,000,000) / $2,000,000 = 11.1% quota increase

The 3% price cut that the rep demands is exactly the same as an 11.1% sales quota increase that the rep decries.

If you’re a rep, beware of what you ask for!  If you’re a sales manager, beware of doing “favors” for your reps.  If a price cut is a smart thing today, it’s a smart thing tomorrow, …but then a 10% commission rate cut is just as smart; …and so is an 11.1% quota increase.  What is it that you want?  What is it that you need?

Is a price cut the right tactic?  Or is it just an easy way to avoid the hard work of crafting a compelling value proposition?  When is a price concession a good idea?  When is it a bad idea?  I’m just asking you to…

Think About It…

Forget One & You Fall Down

It’s quite instructive to examine the nature of offerings from the hordes of sales consulting and training firms.  The overwhelming majority of them are focused on developing sales skills.  Clearly, what sales managers are demanding is precisely that.

All well and good.  I’m the first to violently agree that selling skills are fundamentally and critically important.  Ya’ gotta’ have ‘em.  Without ‘em, you’re dead meat.

What concerns me is the near total lack of training regarding sales process and metrics.

Every business school known to mankind and virtually every consulting/training firm for other business functions  teaches with a three-legged stool philosophy.  It’s skills, it’s process and it’s metrics.  Tools supplement and help with the coordination of the three essential legs.

Lets’ say you make your living managing a baseball team.  Let’s also say you have the world’s greatest living all-around athlete signed to a 10-year, no-way-out contract.  Now let’s say that athlete takes the field and does all the things required to win a basketball game.  In other words executes a basketball process.  Let’s measure the athlete’s performance in the context of what wins basketball games; by counting rebounds, percentage of shots made and defensive steals.  Goofy to even consider, right?  That awesome set of skills is so badly misapplied, that it’s totally useless.

Let’s say you make your living building cars.  Let’s also say you have the world’s greatest living plant manager signed to a 10-year, no-way-out contract.  Now let’s say that plant manager goes into the factory and does all the things required to build laptop computers.  In other words executes a laptop manufacturing process.  Let’s measure the plant manager’s performance in the context of profitably building laptops; by counting percentage of hard drives correctly installed, number of copies of Windows sold and number of machines built with more than 2 USB ports.  Goofy to even consider, right?  That awesome set of skills is so badly misapplied, that it’s totally useless.

Let’s say you make your living selling stuff.  Let’s also say you have the world’s greatest living all-around sales rep signed to a 10-year, no-way-out contract.  You want that rep selling your stuff right?  Not doing the things that make a great baseball player or get a bunch of high quality cars built.  You want that rep executing a sales process; your sales process.  Not a basketball process or a laptop production process.  And you want to measure performance in the context of revenue generation; things like sell cycle, close rate and average deal size.

Time to state the obvious.  A sales rep – even the greatest in the world – cannot execute a sales process that doesn’t exist.  And, by the way, if the process is not written down, agreed to and executed by the entire sales team it does not exist.  And if the process does not exist it cannot be measured.

Please do me a favor.  Promise yourself to be totally objective, hard-nosed and honest, and re-read the previous paragraph.  Are you solidly based on a three-legged stool?  Or are you more like The Great Wallenda, balancing precariously on the skill leg only?

Your Numbers Might Be Off A Bit

This is the seventh post in a series about selling with Finance, the Universal Language of Business.

The examples used throughout this series of “Selling With Finance” posts show a five year time horizon.  Does anyone actually think a financial projection stretching out that far could possibly be accurate?  Frankly, even financial professionals find making accurate one-year forecasts to be a challenge.  As sales reps, therefore, we need to be careful about implications regarding precision.

Fortunately, there’s a very simple technique that can further polish your image as a financially savvy rep, generate more conversations regarding your recommendations (which crowd out customer time wasted on conversations about your competitors) and create yet more differentiation.  Just multiply your financial analysis by three.

To illustrate, consider one of the sets of numbers from Part 2.  The post doesn’t explicitly say so, but the following chart shows the “Most Likely” scenario that will result from following your recommendations.

“Multiply by three” means create not one, but three scenarios.

  • Worst Case
  • Best Case
  • Most Likely Case

Think of it this way…  Assume one of the expense items in the analysis is contracting for professional services, and right now it’s $100K annually.  It would be reasonable to use $100K for each of years 1 through 5 in the Best Case.  In other words, holding that expense steady is the best that can happen.  It would also be reasonable to assume at most a 5% annual increase.  In other words, I’ll use $100K, $105K,$110K,$116K and $122K for my Worst Case.  Most Likely falls somewhere in between.

Bracketing the highs and the lows has very powerful intuitive appeal.  Think about the difference between the following value propositions:

  1. The team’s analysis shows an Internal Rate of Return of 67% for the recommended investment
  2. The team’s analysis shows a worst case IRR of 59% for the recommended investment.  Best case is 74%, and 67% is most likely

Doesn’t it seem like a LOT more work went into the detailed analysis for the 2nd?  You get a sense of thoroughness and rigor from it, don’t you?  It also conveys the fact that living, breathing humans are behind all numbers doesn’t it?

All true except for the “lot more work” part.  The hard part is building the spreadsheet model.  After that it’s only a matter of plugging in different numbers.

How are you doing with your Universal Language of Business lessons?

Risk vs. Calculated Risk

This is a story about risk, but a bit of background is necessary, so please bear with me through the first paragraph.

Eleven years ago, when The YPS Group was launched, “we” made a strategic decision to focus on serving small to mid size customers, from $5 to $500 million in revenue.  “We” also decided to stay small ourselves; to be a boutique consulting business; to not hire any employees and to use contractors sparingly.  “We” are still here.  (OK, OK, “I” am still here…), proving, at a minimum that the strategy is at least valid.

Landing some business with a $30 million integrator late last year was therefore exactly according to plan.  That’s when Risk reared its ugly head.  At the time, I was about 60 days into my new and big time commitment to using social media as the primary YPS sales and marketing tool.  For whatever reason, the customer CEO was quite intrigued with what “we” were doing.  (See E-Rep, and if you’re interested, search for E-Rep on this blog for more info.)

Of course I was happy to talk about it for as long as he wanted.  Problem is, he kept asking questions I couldn’t answer.  Risk #1:  Have a meeting with the CEO and the two guys who were mentoring me on social media for B2B selling.

Risk or Calculated Risk?  These two guys (Stone Payton & Todd Schnick) were and are having success.  In two months, “we” had landed three deals (one of which is for “us” a big deal) as a direct result of integrating their recommendations.  On a personal level I like this pair.  The C-word fits the scenario.  Sure some risk, but a calculated one.

Fast forward a bit.  CEO likes what he hears and concludes he needs YPS help to implement his E-Rep.  So YPS needs not one, but two contractors to pull it off.  Off the YPS strategy?   Yep.  Risk?  Yep.  But this stuff worked for me, the trust is all there, it’s a small project.  C-word fits.

CEO very pleased with what we do.  (Notice now it’s we vs. “we.”)  Invites us to a meeting with his new $3 billion (that’s billion with “b”) alliance partner.  They all like what they see.  The small, short term project is now a medium size, long term project.  Risk?  Not much of one, and the C-word absolutely fits here.

Fast forward again.  CEO demos what we built for the partner’s VP of Marketing who loves it.  The scheduled one hour meeting spills into the third hour.  As my customer CEO tells me about this, I instinctively ask him to broker a meeting for YPS with the partner.  He replies, “I’m way ahead of you on that.”

Yikes!  A successful decade plus of avoiding projects with large corporations, no employees and only occasional dabbling with contractors for miscellaneous help and YPS is gonna’ try to sell what?  To whom?  Regardless, we (without the quotes) are going for it.  Risk?  YES!  C-word appropriate?

Well, the new E-Rep stuff as we’ll recommend using it works for me and my two cohorts.  It’s working for the first customer in this story.  It’s working for the folks managing the alliance for the big partner.  The VP marketing is very intrigued with the underlying concepts & with what’s been accomplished so far and knows we’re just three random guys.  The three of us trust one another.  Ergo, Dreamland Interactive.

Calculated risk?  Or just risk?  What do you think?