Think About It… the e-book version

by Todd Youngblood

Have you heard the one about the sales manager who started learning and using statistical analysis? His sales team was convinced that he had finally lost his mind. Correlation coefficients? Regression analysis using the least squares method? Are you serious? But then the revenue growth kicked in…

Most of us in sales instinctively run the other way when confronted with a task that involves statistical analysis. We’re convinced that it’s just not a necessary part of our skills repertoire. Maybe we shouldn’t be so sure…

Maybe a few statistics can provide some really powerful insights into how we can sell more in less time. Maybe today’s spreadsheet programs can remove most – even all – of the mathematical mystery.

Consider the first “scatter chart” here that was created back in 2003 using data for the six reps in a distribution company. Each dot represents one of the reps and shows the current value of that rep’s funnel vs. revenue from that territory over the past year. (For example, the dot in the lower left shows a funnel value of about $250K and revenue of about $425K.)

What can you learn from the chart & what questions does it raise? Here are few possibilities:

• The slope of the purple “best fit” line is 0.14, meaning that a dollar added to the funnel will produce 14 cents in revenue. Hmmmm…
• There really isn’t much of a relationship between how much a rep has in the funnel and how much gets sold. (A “perfect” correlation is a 1; a 0 means no correlation at all.) In other words, what is a “long shot” for one of these folks is considered a “well qualified opportunity” by another.
• The rep in the lower right has a lot going on – lots of opportunity but not much revenue. Is this person a weak closer? Is she chasing a large number of un-qualified deals? Or, is she running a lot of pilot tests that will pay off big-time next year?
• What about that guy in the upper left? More than $1.4 million of revenue and a $200K funnel… Is he a great closer? A phenomenal deal qualifier? A genius? Or, is he just plain lucky? He is a new guy. Could he just be reaping the rewards of effort expended by his predecessor?

Stare at the chart for a while. What else do you see? What other questions does it prompt? What actions would you take?

Now take a look at the second chart. Same data, but from 2004. What has the sales manager accomplished? What new questions come to mind?

• First of all, total revenue is up almost 21%!!! (…in an industry that grew less than 8%)
• The correlation between funnel value and revenue skyrocketed from 0.2 up to 0.82! That means all the reps have gotten MUCH, MUCH better at qualifying opportunities. Far less time is being wasted on long shots.
• The slope of the “best fit” line jumped way up too. Now I get 73 cents of revenue for every new dollar added to the funnel. (Also due to better focus on the right deals.)
• What are those two reps out to the far right doing to find new opportunities? (I think I’d find out and get the others doing the same things.)
• Does the the rep on the far left have what it takes? Same revenue as last year, less in the funnel. (I think I’ll show him these charts and ask him why he’s the only one not improving.)

Stare at this 2nd chart for a while. What else do you see? What other questions does it prompt? What actions would you take?

SERIOUSLY… Every sales manager I’ve reviewed these charts with comes up with at least 5 more insights and at least 15 more questions. Every one of the insights and questions have the potential to help sell more in less time.

It will take you less than 15 minutes to read the Excel spreadsheet help sections for scatter charts and the “CORREL” and “LINEST” functions. That will provide enough statistical knowledge to produce charts like those above.

I know this isn’t traditional sales management stuff, but the numbers don’t lie. You can improve your funnel quality dramatically. You can increase your kill rate dramatically. You can apply these scatter charts to all kinds of sales best practices.

You might not make time to learn these techniques… But what if your competitors do?