Understand your metrics
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Introduction

This series tells stories about frequent errors in Startups and growing companies. In case you haven’t read the previous post about the right timing for bigger expenses, you can do so now.

This chapter will help you understand the threat from believing in your sales funnel.

Chapter II: When the brightness in the sales funnel dims out

Another case, another company. Here, we are dealing with a company selling flexible software solutions to bigger customers.

Hi, I am Toni, a smart sales guy. I really care about my customers. I prefer to deal with customers directly. I am a true handshaker. Well, at the age of 58, experience and personal network are more important than social networks. And who shall write all these conversations down in the CRM? In the end, it is about the pipeline, not about what I talk with customers.

Hi, I am Jane, I am a Junior Sales. And I love cold calling and social networks. Sure, as a digital native I grew up with Facebook. And LinkedIn and XING are not too different from that. Even though Toni is my boss, I do not always agree with his working model. But I want to learn from his experience.

Hi, I am Stan. I am the business owner and before hiring my sales staff, I did sales myself. An easy job to do. You talk to other executives, listen to their daily burdens and you naturally come along to the question, if they would appreciate your help to get rid of some annoying stuff on their desk.

As I have other tasks to do, I delegated this easy sales business to Toni and Jane and started tracking their activities in my CRM dashboard. Currently, we have a pipeline of 2.8 Mio USD, which is not too bad, but must grow.

6 month later the funnel has grown to 4.4 Mio USD, but there seems to be a slight issue with closing deals. We have about 85% of deals short before closure but not ONE deal closed in 6 month. 13% are in stage “Offer” and 2% are in stage “Qualification”.

What do these stages and numbers mean in detail? I think, as the boss I have to ask my sales people what their understanding of those opportunity stages is.

Stan: “Toni, Jane, may we have a meeting about our sales funnel?”
Stan: “Toni, we had no deals closed in the last 6 months. Can you explain?”
Toni: “Well, about 30% of the deals are short before closure. The others need some more discussion.”
Stan: “If you say 30%, is that the 30% of 4.4 Mio value? And what do you mean with short before?”
Toni: “No, ahm.. I mean.. 30% of the number of deals. I am not absolutely sure, but I don’t think that the value of those short before closure deals is more than 0.5 Mio USD.
And short before means that our customer contacts tell us, that we are in the round of the last 3 candidates.”
Stan: “And who are your contacts? Do you talk to the decision takers and budget owners directly? Or are you discussing with the assistant of a friend of a guy in another department?
Toni: “Listen, Stan, I am not the business owner like you are. I am the sales guy. Decision takers do not naturally talk with me. But I have my contacts that represent us at those guys….”.

I stop this part here as you should already see the problem..but I will dive into another scenario:

Stan: “Jane, please delight me after this frustrating discussion. Tell me your view on our pipeline.”
Jane: “Well, according to my experience, it is not that heavy to get in touch with decision takers over social networks. Of course I do not have much experience, but I am still connected to about 135 decision takers in about 80 companies that we deal with or that are interesting for us.”
Stan: “Jane, what are you doing with these contacts?”
Jane: “Well, I start with existing contacts in our CRM and ask them to connect on a social network because they are already in touch with us. This works out in 90% of the cases. Then I write messages to their contacts with shared interest and ask for a social network connection, too. Typically, I ask for reference from the first level contact, if we have a good business story in our closed deals overview. ”
Stan: “Jane, sounds like a good start, but what are you doing then? ”
Jane: “I ask if they would be interested in updates about interesting topics, events etc. And if a conversation starts, I enter an opportunity with the value of 1 USD in stage qualification in our CRM. Then I track the conversation until I understand matters and send a short offer dedicated to the person’s issues and put the opportunity in stage offer. ”
Stan: “Is that where the 2% in stage qualification and the 13% in stage “Offer” stem from?”
Jane: “Yes.”
Stan: “Do you know anything about the expected volume in stage “Offer”?”
Jane: “Sure, I know with an accuracy of about 80% because of the discussions with the potential clients, but Toni as my boss did tell me not to do the estimate to not ruin the funnel, because only he knows about the value of an opportunity. ”

Short pause. Killing eye contact with Toni. A small sign with the hand of Stan to make Jane proceed.

Jane: “After I turn an Opp to stage “Offer”, I hand it over to Toni, as he is the experienced sales person able to close the deals. ”

I stop here. Be assured that I could tell dozens of pipeline stories, but the essence always is:

Lesson 2: Lacking quality metrics in the sales funnel let the opps pipeline turn to a worthless instrument. If the sales process is not clear, if KPIs are not clear and if the understanding of the manager is different from that of the sales people that fill the pipeline, it is not possible to control the outcome.

I recommend: Don’t overestimate experience. Know what you measure. Check that your staff UNDERSTANDS the meaning of what they enter into systems. Ensure that your sales really understands relationsship management.

Summary


Sales is not only an art itself. Sales management and controlling as well as defining and living good metrics is not easy. And can be a killer for your company, if things start working out bad. Keep a close eye on your pipeline.

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Rüdiger Gros

Reader, Writer, Tester, Customer, SocialMedia Engagor, Cloud Lover, Software Nerd, Disruptor, People Connector, Trailrunner, Mountainbiker, CEO.
Thrilled about social topics, innovation, tech and leadership. To get rid of all that stuff in my head, I blog, tweet and write.

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