Workplace2Go blog

Cold calling is a definitely a challenge especially with the advent of caller id.  It’s harder than ever to get through to a prospect.  And when you do get through, generating interest can be just as tough.

Over the past few months, I’ve been researching the probability of success when cold calling.  According to Chet Holmes, author of the “Ultimate Sales Machine”, only 3 – 10% of the companies you contact have an immediate need for your product or service – they are ready to buy right now.  This is especially true for companies that focus on their product’s features.  Now consider only 5 – 10% of the people you call will pick up the phone (source: Honest Selling).  The latter statistic seems generous to me, but let’s use it to determine how many calls a sales person needs to make to get one appointment.

• Best case:                1/(0.10 answer * 0.1 interested) = 100 calls
• Worst Case:            1/(0.05 answer * 0.03 interested) = 667 calls

The numbers get even more interesting when you consider the following sales people’s statistics:

• 44% of sales reps quit after 1 no
• 22% quit after 2
• 14% quit after 3
• 12% quit after 4 (total is 92%)
• 60% of customers say no at least 4 times

Let’s incorporate these numbers into our calculations.

• Assume 40% say “No” on average 2 times before buying
  • (100/(/0.4 * (1 – 0.66)) = 735 calls to get 1 deal for 40% of the companies you target.
• 60% say no at least 4 times
  • (100/(0.6 * (1 – 0.92)) = 2,083 calls to get 1 deal for 60% of the companies you target.

Multiple the number of calls by the average length of a call and you’ll discover it takes days of continuous calling to get 1 deal.  Not a great use of time for most people.  Cold calling is part of the job for many sales people, especially new sales people.  There are a couple of things you can do to generate more deals.

Let’s examine the numbers that are in your control – the percent of companies that have a need for your service and the number of times a customer says no before buying.  It is possible to increase the percent of companies that need your service which requires you to re-think how your sales team sells.  When sales people focus on features, prospects are sold to which everyone hates.  Turn the tables and help your prospect buy a solution that addresses high priority problems.  In other words, don’t pitch your solution until the prospect has described the problem as well as the cost of the problem.  To get in the door, design a pitch that increases the percentage of companies likely to be interested in your product.  A good pitch will educate your target market about problems in their industry that they are not aware of.  Focus on educating prospects not selling.

Focusing on educating your prospects, helping them identify problems, and the cost of the problem before pitching your solution reduces the number of objections sales people face.  Identify all your prospects objections before describing your solution and you’ll significantly reduce the number of times prospects say no.

I was talking about sales forecasting with a friend of mine and he posed the question – “What’s the problem with significantly exceeding your forecast”?  I answered his question with another question – if you are a golfer this analogy will hit home.

Would you rather hit a 5 iron consistently 190 yards give or take a few yards or would you rather hit randomly between 170 – 210 yards.  The obvious answer is consistently hit it 190 yards.  If you’re not a golfer, the figure below illustrates the point.

If your company is having a hard time predicting sales, you’re not alone.  According to The Hackett Group, only 1 in 6 companies (16.7%) regularly predict sales within 5% of forecast.  The selling power did a great job explaining the problems associated with over and under forecasting sales.  The following summarizes his points.

Forecast Greater than Sales

Let’s use an the Selling Power’s example to illustrate the problem associated this situation.  If a company has $50 million in revenues, a 10 percent over-forecast represents $5 million.  What is the impact of this forecasting error?

1. If you’re company produces a product, it needs to carry an additional $5 million in inventory.  If you’re a service company, you’ll need to increase your staff to accommodate your forecasted demand.  Let’s focus on companies that sell products at 50% margin.  That’s $2.5 million in cash flow that the company could invest in other opportunities.  The company could put the $2.5 million into tax-free bonds and earn $250,000 on that money per year.
2. The company has to finance that inventory. At a 6 percent interest rate, the cost is $150,000.
3. Excess inventory is likely to inflate the company’s payroll by 10 percent, which translates to about $500,000 in additional payroll expenses.

In this case, the financial waste of a 10 percent over-forecast translates into $900,000, which means that for every percentage point by which the company’s sales forecasting is improved, the company could save $90,000 a year.

Forecast Less than sales
Many companies would love to have this problem.  However, missing the mark in the other direction can be more costly because it could result in a poor customer experience.  People love to share stories about bad experiences.

1. If there isn’t enough inventory, the order may be lost. If your product has a fairly long lead time, let’s assume 50% of your customers cancel their orders. For a $50 million dollar company, that’s $2.5 million in lost revenue.
2. For companies with little excess capacity, the orders that do ship have a higher cost of goods sold due to overtime and express shipping costs.
3. It’s likely that products will have a higher defect rate if the company is pushed to its capacity limits.
4. If customers receive their orders late or with defects, customer satisfaction will drop.  If you’re lucky, they will only tell 5 or 6 people.

The cost of exceeding forecast is difficult to quantify as it may take months for all the associated costs to surface.  Exceeding forecast beyond a company’s capacity can be more damaging then missing your forecast.

What’s the Solution

Sales is a process just like order to cash.  The better you understand and manage your sales process, the closer your forecast will match actual sales enabling your company to improve profitability.

I’ve made the mistake of submitting a proposal because I believed our solution addressed the client’s problem.  Notice the word “I”.  That was my first mistake.  Before pitching your solution, understand how your prospect feels about the problem.  In some cases, the problem is not costly enough to warrant their attention.  You must also remember a prospective customer will not buy from you until they know, like, and trust you.  It’s difficult to get all three in a meeting or two.  But, that’s another topic.

Before you submit a proposal, follow the 4.5 steps outlined below to increase your proposal win rate.  Following these steps will also help you gain a prospects trust because you are putting their interests before yours.

1. You must find out the value of solving the problem and in many cases you need to help prospects determine the value.  It’s imperative your prospect understands how much it is costing them to do nothing.  Help prospects determine the value, but don’t do all the work for them and don’t use the proverbial ROI calculator.  ROI calculators are a waste of time in most cases because they assume every business is exactly the same and uses the same approach to solve a problem.
2. After you’ve determined the value, you need to understand what’s stopping them from solving the problem.  If you’ve done a good job in step 1, they may not have realized that the problem was significant.  If they already understood the value, take the time to figure out why your prospect hasn’t addressed this problem.
3. This is really step 2.5 because it is another way of finding out why they haven’t fixed this problem.  Ask them to list the top 3 priorities for the organization.  If the problem you are addressing is not on the list, ask them if they have the resources to implement a solution for this problem.
4. Assuming your prospects responses to the first 3 points are in your favor, it’s imperative that you understand the organization’s decision-making process.  Most mid-sized to large organizations have several people involved whereas smaller companies have 1 or 2 people involved.  You should meet everyone involved and confirm the information you gathered in points 1 – 3.
5. Even though multiple people may be involved, 1 person ultimately makes the decision.  Before you submit a proposal, do your best to meet with this person.  If they won’t meet with you, what is the likelihood that they will implement your solution?  Decision-makers want to meet with people offering solutions that will impact their business.

Preparing proposals is a time consuming task.  Before spending the time to put together a proposal, follow the steps above to make sure your company has at least a 50% shot at winning the business.

It amazes me businesses focus so much energy on acquiring new customers and very little time growing their business through existing customers.  Telecommunication companies are famous for doing this because for the most part all they offered their customers was network services.  In their mind, there was nothing left to sell after the initial sale.

Chet Holmes, Author of The Ultimate Sales Machine, describes how a carpet cleaning business doubled sales in 6 months by implementing new recurring services (i.e. semi-annual carpet cleaning gold service) as well as a more effective marketing approach.  Analyze your services to determine what else you can offer your customers that add value and drive sales.  The key is, and this is very important, your sales team needs to focus on helping customers rather than driving sales.  Develop messaging that describes how your service benefits a business rather than describing your service.  Do you care how a car works?  I doubt your customers care how your service works.

Companies can also drive more business by leveraging relationships with existing customers.  A recent poll of businesses showed that nearly one third of businesses receive less than half of their business from referrals, while 14.1% of businesses surveyed got 100% of their business from referrals.  Close rates vary by industry, but warm referral close rates are significantly higher than cold-call closing rates.  If you’re looking for some ideas to help improve referrals, click here for 10 tips to improve your referrals.  I also recommend Endless Referrals by Bob Burg.

Here is the good news for those of you that decide to implement a referral and cross selling program, 80 – 90% of your competitors do not have the discipline to implement these programs effectively.  Many quit after a few months because they don’t see immediate results or something “more important” pops up.  You need to give these programs 6+ months and you must manage it closely.  Everyone hates change and will fight you for a few months.  Don’t give in.  Larger commission checks will win over your sales team.

The Hackett Group published an interesting research study about cash flow and sales forecasting.  According to their study, 1 out of 6 (16.7%) companies’ sales forecast is within 5%.  Some of the companies may have a pleasant surprise of sales exceeding forecast by more than 5%, but I’m guessing the majority come up short.

Many executives I’ve talked to mentioned that they have no idea what’s going on in their sales organization.  While these companies implemented structured processes for other aspects of their business (i.e. order – cash), sales tends to be ad hoc.  It’s common for each sales person to have their own process for managing sales.  This approach not only makes it impossible to forecast sales, prospects have an inconsistent experience across sales reps.  Existing customers are leery of referring other businesses when your customer isn’t confident you’ll deliver a consistent and positive experience.

The objective of sales predictability is not to just improve accuracy.  The goal is to ultimately increase sales.  Implementing a structured sales process followed by passionately managing and improving it will drive more sales.  You need to learn how to better predict sales before you can increase sales.

If you are passionate about improving sales predictability, these five steps will help you get there.

1. Determine attributes of a good/profitable customer.  Analyze your current customers and identify attributes of profitable customers.  These are the customers you want your sales team to target.  Add these attributes to your CRM system and require your sales team to get this information for each prospect.
2. Define a sales process and require sales reps to follow it.  Defining the process is a team effort – avoid doing this without your sales team’s input.  Work with your top produces and document the process they follow.  Your other sales reps will push back (most people don’t like change) so be prepared.
3. Define criterion for moving an opportunity from one stage to the next and manage this religiously.  Do not allow your sales team to move a deal to the next stage until they collected the information that helps you evaluate the opportunity.  Keep in mind, your organization spends much more time on each opportunity as it move further through the pipeline.  Don’t spend a lot of time pursuing deals that you have little or no chance of winning.
4. Determine sales management metrics that make sense for your company and set targets for each metric.  For example, track the percentage of deals won when your company submits a proposal and set a goal of 50%.  For each opportunity that your company submits a proposal, track why you won or lost.  This feedback will help you improve your sales process.
5. Conduct weekly sales meetings with your entire team.  These are mandatory meetings for everyone so no excuses for missing the meeting.  These meetings should be educational; the objective is continuous improvement.  Listen to your sales teams’ ideas to improve the process and trial those ideas that make sense.  You want your team’s input because their feedback not only improves the process; it also creates buy-in.  Your team is more likely to follow a process that they helped create.

Follow these 5 steps and you’ll not only improve your sales forecasting, your company will significantly increase sales.

People love to write about bad experiences.  Software implementations have given writers plenty of content.  Customer Relationship Management (CRM) projects experienced failure rates that range from 18% – 70% since 2001.  However, the same data indicates success is as high as 82%.   The 8 steps outlined below will increase your probability of success.

Since 1990, I’ve been involved with several large and small scale software implementations and learned a great deal along the way, sometimes I learned the hard way which is invaluable.

Successful projects all share a similar process.  Follow this process and your success rates will be significantly higher.

1. Why is your company implementing CRM?
2. Get the right people on the project team.
3. Document existing processes and management metrics.
4. Define target management metrics (expands on the first point)
5. Document what the system needs to support.
6. Evaluate CRM solutions based on point 5.
7. Detailed evaluation of top 2 – 3 CRM solutions
8. Review the evaluation results and go.

Why is your company implementing CRM? – This is the most important step.  Successful projects have a powerful “why” behind them which is compelling enough to keep the team motivated throughout the evaluation and implementation process.  Without a strong sense of purpose, projects often flounder.

Get the right people on the project team. – Borrowing a line from Jim Collins, get the right people on the bus.  Each person on the team must buy-in to the “why” and share a strong passion for doing what is necessary to achieve success.  People that don’t buy-in are likely to derail the project.

Document existing processes and management metrics. – Before you can get to where you want to go, you have to know where you are.  This step can also further strengthen the “why” as existing processes are likely more convoluted than anyone imagined and management metrics are usually lower than expected – in many cases metrics are undefined.

Define target management metrics. –  This step further expands on step 1 and is the definition for project success.  For example, the team expects sales close rates to increase from 10% to 20% as a result of the project.  Make sure your management metrics are designed to drive revenue.  I’ve seen several sales organizations manipulate data so they hit the metric, but miss revenue.

Document what your CRM needs to support. – Focus on the “what” the system needs to do rather than the “how.  CRM systems have been around long enough so that many incorporate best practices.  At this point, you want to make sure you capture important functions.  Also, do your best to eliminate anomaly functions.  I’ve seen many teams spend a lot of time on things that rarely happen.

Evaluate CRM Solutions. – Most companies skip over the previous 4 steps and go right to step 5.  Not surprising, most of those companies end up with a failed project.  The Internet has made this step much easier as CRM providers include a list of features on their web site that you can use for your initial evaluation.  Evaluate 6 – 8 solutions (i.e. Google, top CRM for small business) based on the functions you identified in the previous step.  During the evaluation, you may find features you want to include on your list.  The top 2 – 3 make it to the next round.

Detailed CRM Evaluation. – I’m a fan of hosted CRM because the implementation is much quicker, no capital, and short term contracts.  Hosted CRMs typically offer a free month trial.  Use the trial to test how well the system supports your high priority features and ease of use.  Ease of use is important, especially for sales people.  You want your sales team selling rather than entering data.

Review the results and go. – Make sure the team supports the top rated CRM solution.  Good teams will debate the results, many times in a heated fashion.  You want this to happen because the team is passionate about doing the right thing.  It’s common for a team member or two to be disappointed because their solution was not recommended.  That’s fine as long as they are supportive of the team’s decision.

If you follow these 8 steps, the implementation process should go smoothly.

During a recent meeting with a president of a telecommunication company, we discussed his company’s marketing activities.  I asked him how marketing is supporting sales. He said, “We’re working on a couple of PDFs our sales people can send to their prospects”.   Uncovering opportunities is tough enough, but when marketing consists of nothing more than PDF documents, the onus is completely on sales to fill the pipeline.  That’s a tall order for any sales organization.

I’ve discovered most business-to-business companies struggle with marketing.  They don’t understand marketing’s role and how to measure the program’s success.  For many B2B companies, marketing should fill the pipeline or provide a significant percentage of your early stage opportunities. There are so many online marketing techniques; it doesn’t cost an arm and a leg to implement a marketing strategy as opposed to old school marketing techniques – Newspaper ads, Yellow Pages, Radio, TV, etc. – which are costly and difficult to track.

The key to online marketing is patience and starting small.  There are numerous articles and blogs that recommend online marketing strategies using tools such as blogs, Facebook, SEO, Twitter, email, etc. I’m not recommending one approach over another, the point is find an approach that you are comfortable with and get started.   Once you get in a rhythm with your initial program, add to it.  In no time, you’ll have a full blown online marketing program.  Remember to give it time (i.e. 60 days) to determine if the program is paying dividends.

Getting started is the first step, but don’t wait to determine how you are going to measure your program as well as set targets.  Your targets will change as your program matures.  For example, your 90 day goal may be to triple the traffic to your web site.  The next step is converting visitors to customers. Your next goal should be focused on a call to action – 10 inbound phone calls per week or 30 people per week register for your newsletter or download a white paper.  Lastly, you want to track the number of calls/registrations that convert to sales.

Tracking metrics is the key to anything – you can’t manage something if you can’t track it.  Pick the marketing metrics that make sense for your business and review metrics during your weekly or monthly meetings.   Tweak your program as necessary, but remember it takes time to get the ball moving. When I started blogging, it took Google a week to pick up a new blog entry.  After 8 weeks, it was less than 1 hour.  Google juice is always a good thing.

A good friend of mine, Larry Turner – CEO Roundhouse Advisors, has helped several organizations turn around their business and significantly increase sales.  One of his success stories involved a technology company generating about $150 million in revenue.  Prior to Larry’s arrival, sales were flat for the previous 3 years and future growth projections weren’t good.  Eighteen months later, sales increased $90 million.

I asked Larry about the keys to his success expecting some magical formula.  He attributed much of the turn around to his involvement with sales.  Having worked with CEOs before, I assumed he took control of the sales call whenever he went out.  He surprised me when he said he rarely took over the meeting.  He usually listened letting the customer and his account executive do most of the talking.

While Larry didn’t say much, he was very engaged during the meeting asking clarification questions to ensure he understood the current situation as well as the client’s/prospect’s expectations.  If his team committed to resolving an issue, he ensured his team lived up to its commitment.  After a few months, existing clients noticed a significant improvement in service which strengthened the relationship.

Clients and prospects appreciate senior executives actively engaging in the sales process.  Larry learned a tremendous amount about his team, company, and client needs which he couldn’t get sitting in the office.  Larry’s advice to senior executives frustrated with sales – Get out of the office and visit clients and prospects.  Unfiltered feedback is priceless.

Many executives search for the elusive silver bullet to grow their business.  Fortunately, it is pretty simple.  Get involved by supporting your sales team and clients.  Consistently doing the little things will pay off if you give it enough time.

It’s not surprising sales performance is top of mind with executives.  Many are tired of the recession excuse as a reason for lack of growth.  Excuses or blaming someone or something is the kiss of death because you no longer believe you are in control of your own fate.  You need to take control and don’t accept excuses.  Executives also need to help sales improve and yelling is not an effective improvement technique.

Recession can be a positive.  Many of your competitors stick their head in the sand and wait for good times to come – if they survive that long.  Identify cost effective marketing techniques to keep your brand in front of current customers and prospects.

Building a quality pipeline and closing sales is about doing the little things well and providing a consistent experience (positive as well) for prospects.  Keep in mind prospects are evaluating how your team handles the sales process.  They assume you are showing your best hand at this time.  Prospects believe once you close the deal, attention is likely to degrade.  Since you already have their money, they assume you’ll move on to the next deal.

Sales follow a process just like fulfilling an order.  There are steps your team needs to go through and you need to ensure they follow the steps.  Also, apply best practices within each step – the old adage garbage in – garbage out applies to sales management as well.  When the heat is on, sales people will show deals progressing even when they aren’t.  Surprises are sure to follow as projections don’t even come close to what actually happens.  It’s imperative that your company not only implements a sales management tool, but requires sales team to record relevant information about the deal as well as key contacts.  If they haven’t identified how your product or service can help a prospect, the opportunity is not qualified.

I’m not saying implement a rigid sales process and never change, but it’s impossible to manage sales if you don’t track and analyze the process.  Identify your top sales people and determine what makes them more successful than the others.  Use this as your starting sales process.  Resist the temptation to alter sales management until you’ve given it enough time.  Silver bullets don’t exist.  Do the little things well and sales will come.

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.