3 Simple Ways to Measure the Return on Your Sales Ops Investment

How does a sales organization justify an investment in sales operations? By proving the return on that investment in measurable terms. This article provides simple methods for measuring the return on your Sales Operations investment. Let us begin by examining the purpose of Sales Operations as a function.

At a high level, Sales Operations exists to bring insight and optimization to a sales organization driving continuous improvement in effectiveness and efficiency. The measurement of that continuous improvement can therefore be attributed to Sales Operations.

Sales effectiveness relates to the organization’s ability to achieve its targets. Such metrics may include % Effective to Total Revenue Targets or % of Sales Reps at Quota.

Sales efficiency relates to the organization’s ability to lower the cost of sales while achieving targets. Listed below are examples of metrics that indicate sales efficiency:

  • Average Sales Price
  • Average Sales Cycle (# of days it takes to close a deal)
  • Close Ratio (% of qualified deals that close)

Let’s take a deeper look at these metrics and examine how to calculate your sales ops ROI.

Average Sale Price

Consider a simple example where you are selling products at an average of $20,000 per sale, with an annual target of $5,000,000. Now suppose that by investing in Sales Operations you can increase you average sale price by 5% to $21,000. That’s an annual revenue increase of $250,000. If your annual sales operations investment is $100,000 then you have a 150% return on your investment every year. That brings you to a total annual sales performance of $5,250,000.

The following sales ops activities may help to increase your average sale price:

  • Providing training on how to sell value and how to negotiate.
  • Creating an ROI calculator to estimate the value of the product to your prospects.
  • Establish an approval policy for discounting sales.
  • Compiling an easily accessible source of materials to prove value, such as case studies, surveys or testimonials.

Average Sales Cycle

Continuing with the example above, suppose your average sales cycle is 180 days. If effective Sales Operations can shorten that by 5% to 171 days, you should be able to close 5% more deals in a given year. That increases your overall sales performance from $5,250,000 to $5,512,500.

The following sales ops activities may help you shorten your average sales cycle:

  • Establishing a content management system so reps can access materials needed through the sales cycle quickly and easily.
  • Training your sales team to establish a plan with the prospect to ensure increased predictability and joint accountability to that plan.
  • Optimizing internal processes to increase selling time vs. administration.
  • Creating visibility into deals that have been ‘stuck’ in one stage of the sales cycle for more than 90 days (or any appropriate period) and addressing those deals directly.

Close Ratio

Continuing further with our example, suppose that 30% of deals that enter your sales pipeline actually close. If you can improve that close ratio by 5% to 31.5% then you should again be able to close 5% more business in the year. That brings your overall sales performance to $5,788,125.

You can increase your close ratio with the following sales ops activities:

  • Assess why deals are lost and addressing those areas directly. For example if deals are lost due to price, then you may want focused sales training on selling value and negotiations, or you may need to examine your pricing structure.
  • Assessing from which stage in the sales cycle deals are being lost and focus sales training to address those areas directly. For example, if deals are being lost based on price early in the sales cycle, then it’s possible that reps are communicating price too early. Train them on how to navigate those discussions and the proper timing thereof.
  • Working with your marketing department to define clear criteria for qualifying leads that enter the sales pipeline.

We can see that proving minor improvements to multiple measures can help you realize a compounded effect on your revenue increase. In this example improving 3 metrics by 5% has yielded a revenue increase of 15.8%, or $788,125. That a 688% return on your Sales Operations investment annually.

While these examples are highly simplified they demonstrate a method by which one can justify investment in the Sales Operations functions. The unique advantage to investing in Sales Operations is that it impacts your entire sales organization, not just one rep.

It is important to note that all of the above assumes you are able to capture these metrics. If you do not have an effective CRM system and processes to do so, then you definitely need a Sales Operations resource!

Once you have made your initial Sales Operations investment, it’s up to you to measure and prove the return on that investment. Having proven this value with measurable results your organization will have greater faith in Sales Operations, thus opening the door for more potential future investment.

The TRE3 Group helps companies optimize their sales operations organization, through best practices, processes, and tools. Visit www.tre3group.com to learn more about our sales ops solutions.

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The Lost Art of Lost Metrics: Turning Past Losses into Future Wins

Unless you expect a 100% win rate, a lost deal is not a bad thing. In fact, if you are capturing the right information about your lost deals, then you can turn past losses into future wins! You can identify exactly where to focus your sales training, competitive strategies and positioning. Many sales organizations track the reasons why their deals were lost, but this only paints part of the picture. Let us examine one highly valuable lost metric that is often overlooked…

Lost the Deal

Based on the manager’s response in the comic strip above, it may seem that while the sales rep lost his deal, the manager lost his mind! The manager, however, is asking exactly the right question: “Where did you leave it last?” In other words, “Where was your deal before you lost it?” It is important to capture in which stage of the sales cycle a deal was lost. I call this the “Lost Stage”, the stage where deals disappear.

The Lost Stage, coupled with the Lost Reason, together provide a more complete understanding of your sales challenges. Consider the following two scenarios:

Scenario 1:
70% of deals lost in a given year were lost due to price. The company doesn’t know where in the sales cycle they were lost, only that they were lost because of price. To address the problem, the VP of Sales invests in negotiation training for the sales team and increases the threshold for allowable discounts from 10% to 20%.

Scenario 2:
70% of deals lost in a given year were lost due to price, 90% of which were lost during discovery. Now the VP of Sales understands that reps are disclosing cost even before the pain is quantified and the solution is understood by the prospect. He therefore directs his training efforts to the front half of the sales cycle.

In the first scenario above, the VP of Sales would have invested significant resources on negotiation training, but to no avail. Decreasing allowable discount thresholds was likely to also decreased the value of deals won. This would have yielded the opposite result from what was intended because of the false assumption that the problem was in the latter parts of the sales cycle. Worst of all, they would never have known it!

Knowing why deals were lost without understanding when they were lost can sometimes be misleading. Capturing both the Lost Reason and the Lost Stage provides a more complete and accurate picture. This leads to wiser, more informed decisions, which ultimately leads to improved sales effectiveness.

Capturing the Lost Stage metric can help turn past losses into future wins!

How to Inspire End User Adoption

If your organization struggles with end user adoption for new processes and technologies then this post will help. The practical insights provided below have been proven to work whether deploying a new CRM system or a new process within existing technology.

The seeds of end user adoption are planted long before implementation. The secret is to create a sense of ownership and positive anticipation leading up to deployment.

Consider the foundational meaning of the word “adoption”. When a parent “adopts” a child, they take one that belonged to another and makes them their own. By this definition, true adoption goes beyond meeting the minimum requirements to a sense of personal responsibility and expected value.

To create a sense of ownership, create a committee (whether formal or informal) that is to actively participate in shaping the process or technology being deployed. This team should have at least one representative from each role being effected. Guide them to provide input at pre-established milestones.

Be sure to listen carefully and value their input. Give them a sense of ownership. Only the true owner of a project can offer a sense of ownership to selected others. If you do this well, they will advocate the new process to their peers well before implementation. You will have actually effected the culture, which will not be easily changed.

Now, what if we still have an issue with adoption; what if 100% of your sales team members are not passionate evangelists of your process (imagine that!)?

This is where the stick comes in. The stick is to be used only when the carrot doesn’t work. Willful adoption is always more effective than forced adoption.

The following guidelines will help you to continuously increase adoption:

1. Establish metrics to measure adoption AND the expected results of adoption.
2. Use the metrics you established.
3. Acknowledge those who are adopting well and highlight their positive results to their peers.
4. Point out those who are not adopting well.
5. Managers, hold your team members accountable. Manage beyond metrics. Interact with each member.
6. Executives, hold your managers accountable to holding their team members accountable.

How do you drive adoption? You don’t. You inspire adoption!

“Weighted BANT”: A Simple Lead Qualification Methodology

If you have any experience in Lead Generation, then you are familiar with “BANT”. Budget, Authority, Need and Time frame are commonly used criteria for qualifying leads. If all four criteria are confirmed, then the lead is considered “qualified” and it enters the sales pipeline.

The Common Challenge:
Here’s the challenge that many companies will admit: “If I hold to all four criteria, then I will not qualify enough leads. But if I remove any one criterion, then I will qualify too many leads. Either way, I can’t win!” Yes, you can win. There is another way…

The Simple Solution:

The following lead qualification methodology is easy to deploy and can be quickly configured in most SFA or CRM systems.  I call it the “Weighted BANT” methodology:

Apply a weighting to each of the BANT criteria (0, 1, 2, 3 or 4) and define each weighting. Below is a sample set of definitions for Authority:

0 = Has no authority and has no access to the decision maker(s).
1 = Has no authority, but has direct access to the decision maker(s).
2 = Has influence and has access to the decision maker(s).
3 = Is one of several decision makers.
4 = Has complete authority as the sole decision maker.

Define a similar scale for Budget, Authority, Need and Time frame.

Now qualify your leads based on the sum of all four scores. For example:

0-4 = Unqualified (don’t waste your time).
5-8 = Slightly Qualified (nurture it).
9-12 = Qualified (follow-up).
13-16 = Highly Qualified (follow-up immediately).

The “Weighted BANT” methodology provides enough flexibility to customize for your sales organization and enough simplicity to deploy and train quickly and easily.

If you choose to adopt this methodology, please share your results with me.

Enjoy!

Character Over Talent: “What talent can build over a lifetime, bad character can destroy in a moment” – Roger Gushway

Three years ago I heard Roger Gushway speak these words: “What talent can build over a lifetime, bad character can destroy in a moment.”  Immediately I thought of various people who had reached great heights of success after a lifetime of hard work, only to see it all tragically destroyed because of one pivotal moment’s decision.  I had to ask myself, “Am I prone to the same tragedy?  When I achieve my desired success, will I have the character to sustain it?

As we aspire to achieve our goals in business and beyond, let us maximize every opportunity to build character.  Character is not acquired through learning or reading.  There is no “Character 101” course or “Character for Dummies” book.  Character is established through a series of daily decisions where the rubber meets the road.

When we choose not to compromise our morals, even if it results in loss, character is built.  When we insist on the betterment of someone else in stead of ourselves, character is built.  When our patience is tested in the fires of daily life, character is built.  When all odds are against us but we do not quit, character is built.  And as our character is built, so is our legacy.

Character does not have a time and a place.  It is always relevant, always appropriate.

In the business world, when I evaluate a vendor, a partner, an employee or a customer, I always look for character first.  I’ll take character over talent any day.

Can Top Sales Performers Be Duplicated? (Sam vs. Jen)

Moderator:
Can top sales performers be duplicated?

Sam:
Top performers always carry two qualities: a positive attitude and strong discipline. These two critical qualities cannot come from reading a book; they must be developed through experience and by overcoming challenges. So the real question is whether you can duplicate attitude and discipline. I believe that they can be influenced. They key drivers of attitude are vision and motivation. Good sales managers will identify ways to communicate a compelling vision and keep their team motivated. The key driver for discipline is accountability. This comes with regular communication and visibility of the right metrics. In short, top sales performers cannot be duplicated, but good sales performers can be inspired to be their best.

Jen:
Top sales performers must possess a combination of talent and skill. You can teach skill, but you can’t teach talent. I have seen many sales managers try to turn average performers into superstars. It’s like trying to turn a chicken into an eagle! You can teach it to flap its wings, but it still will not fly. You can teach a sale rep a thousand skills, but they will not compensate for a lack of talent. Managers struggle with this, because you cannot measure talent. So when you build your sales team hire people with talent, then you can teach them the skills they need to become top performers. If they lack talent to begin with, then they will become average at best.

Readers, what do you think? Can top sales performers be duplicated? Post your comments.

Does Automation Automatically Mean Efficiency? (Sam vs. Jen)

Moderator:
When you hear “automation” as a sales person do you think of efficiency or of losing control over your sales process?

Jen:
I love automation if it means I can keep my boss happy and do less.  I hate automation when it tries to do the thinking for me.  Given that sales is primarily an art, I welcome anything that will free up my time to sell; that is to deal with people.  I must admit that when management speaks of “automation” I wince, because it usually means they are introducing a new tool that actually requires me to do more.  They want me to spend more time learning a new system – which means less time selling – and expect that as a result my sales will increase because something is being “automated” for me.  When I hear “automation”, I think of losing control over my sales process.  I’m a professional.  Tell me what to do and let me handle the how.

Sam:
I actually have to agree with Jen on this one.  Save me time, but don’t try to think for me!  Now, given that sales is primarily a science, there are components that are repeatable and therefore can be automated.  I’d love a system to automatically log my calls for me, so I don’t have to.  But I don’t want it to draw presumptive conclusions from those calls.  For example, fewer calls in a day may not be a bad thing if they are longer calls with meaningful conversations.  I welcome automation, but sometimes I think the wrong things are trying to be automated.  When I hear “automation” I hope for efficiency, and sometimes I get it…sometimes.

Readers, what do you think?  Does automation automatically mean efficiency?  Post your comments.