I cannot state this loudly or emphatically enough; your prospects don’t care about your end of the month, end of the quarter, end of the year.
You might be able to load up incentives and bake in the fat like a country grandmother sending her grandkids back to the city, but if your prospect isn’t in the buying phase of their cycle, it just won’t (colorful metaphor) matter.
The worst thing that can happen to you if you pressure a deal to close early is that you ACTUALLY close the deal.
Why is closing a deal early bad?
Simply stated your prospect isn’t ready. Your prospect won’t invest the time required to learn how to use whatever you’ve sold them, and most importantly for subscription based companies, their subscription start date and their actual start date will be off, making renewals and upsells much harder. They will argue to death that your accounting start date is not their start date.
On the flip side, if the customer has moved through their process and is ready to buy, those incentives and pork bellies will help sweeten the deal and get them to cross the finish line closer to your schedule than theirs.
Ok, if your prospects don’t care about your end of whatever, how do you make sure you hit if not crush your quota?
Crushing your quota is two-step process, the first step requires you having the ability to forecast accurately. Once you can predict your closing revenue appropriately, then you can move to step two and load your pipeline.
Forecasting requires that you know your metrics.
The first step in crushing your quota is knowing your metrics, once you know them, even if you don’t optimize them just knowing what they are will help when you want to load your pipeline.
For me, I want to know three key metrics;
1. Average days to close,
2. Average sales price (ASP), and
3. Conversion rate
These metrics are not new, this is not rocket science, or brain surgery, this is, however, the most often neglected step in missing quotas. I believe the sales trainer to the stars, @JohnMBarrows, never gives a talk without mentioning that the funnel numbers need to be known and socialized.
Everyone from VP Sales down to teleprospector should know what the numbers are. Not only know the numbers, but work diligently to optimize and crush those numbers. The goal of any sales team to make it even tougher on themselves the next month, then crush their quota again.
Ok rant over, let us dive into the specifics.
Average days to close is an easy one. If it takes on average 60 days to close a deal, then anything that starts in the funnel today will close in 60 days. Do I want to make more commission in 60 days? Add more leads. The tricky part here is when do you start the clock ticking. If your clock is too fast or too slow, you run the risk of missing your quota. In essence, it doesn’t matter where you start the clock, as long as you know are consistent on when you launch the clock.
For me, I start the clock when someone agrees to a date when we can book a demo. Stopping the clock also has some nuance as well. Naturally, when the prospect buys, I halt the clock, no brainer. If the prospect chooses another vendor, again no brainer, stop the clock.
If they push, however, well that opens the door to if or when you halt the clock. The issues can be that when someone pushes, if they continue to push, or they push to some date that is far outside your average days to close, and you keep them in your pipeline, you will increase your average days to close while concurrently increasing your conversion rate. It is a better stop the clock, close the opportunity as a lost opportunity, then open a new opportunity when they come back.
Why is closing an opportunity when the prospect pushes a good strategy?
First off it will create a more realistic value for your average days to close. Secondly, when a prospect keeps pushing and you close lose the opportunity, you will get a more realistic conversion metric, they probably shouldn’t have been in your funnel at all. Finally, and importantly, when a project keeps pushing or moves too far into the future, you will need to go back to first base, re-qualify, and explain your value proposition. If you are a startup, your value proposition may have changed, so starting back at stage one may allow for increasing the ASP on your prospect as you are bringing more value to the table.
The second metric is the average sales price (ASP). This metric is an important metric since it will determine the number of deals you need to close to make your quota. Again this is a pretty straightforward metric, granted there is a bit of nuance here as well; are all your customers very similar? If all your clients are similar, then you will have one ASP. If your clients can be segregated into different buckets, then you might have multiple ASPs.
While at Duo Security, we started with one aggregated ASP. As we grew and gained more and more clients, we broke out into several different ASPs, after five years of business we had six different ASPs. The final metric is conversion rate. Again, not hard, hopefully, you see a pattern here that none of this is particularly difficult but all of will help you.
With these metrics, you can easily forecast.
Here’s a pretty basic example.
If I have a $100,000 monthly quota, my average days to close is 60, my conversion rate is 0.25, and my ASP is $15k, then I need to book 28 demos two months before hit my target.
Better start working on building my pipeline!
I visited the Marketo office a while back. What impressed me was written on several white boards; “Prospect every day”.
There are umpteen articles on why athletes make great sales reps. The underlying reason is that an athlete knows that the way they perform on game day is directly correlated to how consistent their training is.
Sales is no different.
How well you’ll perform concerning your quota is directly correlated on how consistent your prospecting efforts are.
Sales reps that consistently prospect, always crush their quota. It is that simple.
Again, not rocket science.
Prospecting doesn’t have to be that hard or that time consuming. If you want to spend as little time as possible, I’d recommend researching no more that two companies a day.
Research two companies, that’s it. You can do it!
Sure you can outperform and do more but let’s imagine you have a life, some inbound leads you need to deal with and accounts you need to close, so you only have time to research two companies a day.
Ok, you research those two companies, find a couple of leads for each business.
Wait what? Find a couple of leads per company? Why?
Thanks for asking! If you limit your targets within a company to only one person, you are only increasing your chances wasting your time.
Once you’ve identified your target list, email everyone you’ve found.
The next day research another two companies find a couple of leads in each company. Then call the ten people you emailed the day before, and email the ten new prospects.
On the third day, research another two companies, find a couple of leads in each company. Then call the twenty people you called or emailed the day before, and email the ten new prospects.
On day four guess what you do? Repeat!
With this process, eventually, one of three things happens;
1. You reach someone, and they direct you to the appropriate target, reducing your dials into that company,
2. Someone you reach agrees to a demo, or
3. You hear NO from more than two people.
The last point is the most important. More often than not when you reach someone the first time, that person will say no for one reason or another. That’s fine. When your prospect says no, get some other information from them that you might be able to use to get a yes from someone else at the company.
If you consistently hit the wall, either everyone saying no, or months of no responses, then you know you gave it the old college try, and you can confidently drop that company from your prospecting list.