A couple of friends of mine asked me to help them improve their sales close rate. Sometimes another set of eyes brings a fresh perspective to the problem. One person is the CEO for a small software company and was spending a lot of time developing presentations, proof of concepts, and proposals yet was closing very few deals.
His company like many others has a five step sales process. The steps are introduction, discovery, presentation, proof of concept, and proposal. I asked him how an opportunity moves from one stage to another and when he is transferred to another person. In most cases, when you’re sent to another department – it’s the kiss of death. He usually targets senior executives, pitches his solution, and in many cases the executive sent him to someone in IT.
After examining a couple of deals, the problem became very clear. He is talking to executives about a solution before the executive understood the problem his solution addressed. For example, he was pitching a solution that allowed sales reps to enter orders via their PDA which saved them 2 hours a night. While most sales executives want to make their sales reps more productive, he probably didn’t understand how saving his reps 2 hours would really benefit him.
The key to sales is defining problems in manner that hits home with the decision maker. This company has about 2,000 sales reps and an annual churn rate of 25% – each year they lose about 500 sales people. Let’s assume an experienced sales rep sells about $100,000 more a year than a new sales rep. Recruiting and training costs are about $2,000 per rep. Based on these numbers, the VP of Sales has to find $5,000,000 of new business to make up for lost sales due to new sales reps. Annual training costs are $1,000,000 which directly impacts the bottom line. These kind of numbers would get the attention of most sales executives.
Giving sales reps tools that enable them to enter orders at the customer location and eliminate 2 hours of “homework” each night should reduce churn. Obviously, no one knows what the actual reduction will be. Let’s assume that churn is reduced to 20% (I would argue this is conservative) or 100 less people leave each year. By implementing this solution, the sale VP would generate $1,000,000 more in revenue each year and lower training costs by $200,000. If the solution is $250,000, it’s a great ROI. The sales VP will be very interested and remain involved rather than passing you off.
All sales processes have something similar to a discovery stage and this is the most important stage. All sales opportunities should remain in discovery until the problem is quantified and your solution demonstrates a clear ROI. If a prospect is unwilling to quantify the problem, you haven’t gained their trust and you are unlikely to win anyways. You gain trust by demonstrating value. In the example above, the sales VP may not even realize the cost of losing sales people. That’s huge value.
Your sales management tool should allow you to track this information and I recommend that you require each sales rep to document the problem, cost of the problem, and your solution’s ROI before spending time presenting solutions. Doing this will reduce false positives in your sales pipeline improving accuracy. Most sales VP would love a pipeline that reflects what is “real” rather than wishful thinking.