A Sales-Cycle Acceleration Framework

I’ve written quite a bit about the topic of creating a sense of urgency in a sales process. See here, here and here. This is an enormously important issue for high growth startups as the timing of when sales will close impacts, among other things, investor expectations and perception, salesforce efficiency, financial performance, cash management and when sales commissions are paid. Sales pipeline review meetings often include more discussion about when specific deals will close as opposed to if specific deals will close. 

Before any discussion of creating urgency can happen, two things must occur: 1.) the seller must understand the buyer's priorities and how those priorities line up (or don't line up) with the seller's product and 2.) the seller must have a detailed understanding of the buyer's buying process and all of the stakeholders that need to be involved in getting a deal to closure. Once these things are understood, sellers can begin to think about how to create urgency and shorten the length of a sales cycle.

Good sales organizations will use a variety of tactics to accelerate a sales process; from the use of detailed ROI documents to help the buyer prioritize one project over another to offering discounts in return for a speedier close. There’s really no end to the number of tactics that can be used to create urgency and more predictable sales results. I’ve created the framework below to help sales organizations brainstorm solutions to this problem and come up with new tactics.

Here's how to think about the framework. On the X-axis are seller focused versus buyer focused urgency tactics. In most cases, a seller wants to align urgency with what’s important to the buyer. That is, the seller wants to help the buyer understand the cost of the problem of not having the seller’s product and quantify the impact of not having that product. Good sellers will frequently remind the buyer of the value being missed by not having the product in place. It’s also ideal for the seller to line up a close date with a particular event that's important to the buyer (e.g. a life insurance seller lining up their close date with the buyer’s benefits open enrollment period). These are generally the most effective ways to drive urgency.

That said, while a seller always wants a buyer to be moving fast because it’s inherently good for the buyer, this doesn’t always have to be the case. The seller and buyer are on an equal playing field. The seller may have reasons why they want to move a deal faster than the buyer. Obviously, in some cases, the buyer may not care about the seller's priorities but I would encourage sellers to be transparent about them anyway. Recently, a salesperson was trying to sell me more software for my sales team and he told me he’d give me a substantial discount if I bought sooner rather than later. I asked him why he would sacrifice a lot of revenue for an earlier close and he was very transparent about the fact that his company's fiscal quarter was coming to a close and they had a revenue number to hit. As the buyer, I genuinely appreciated this transparency and he was able to get his sale. I don't support the use of tricks or dishonesty to get sellers buy quickly, but I absolutely support sellers being extremely transparent about their priorities.

The Y-axis outlines qualitative versus quantitative tactics. 

Quantitative tactics are those tactics that are driven by a financial impact to the seller or the buyer. On the buyer side this is the revenue that will be gained or the costs that will be reduced from buying the product; e.g. every day that goes by that the product isn’t in place the buyer is losing X dollars. On the seller side, this is about the value to the seller that comes if the deal closes sooner rather than later. This can be the ability for the seller to use idle resources, or the importance of hitting a sales target, or simply the fact that revenue today is worth more than revenue tomorrow.

Qualitative tactics, on the other hand, are more art than science. These are things like the quality of the relationship between the buyer and the seller, the emotional components of the product (e.g. the seller will 'look good' to certain stakeholders if they buy) and the fact that a competitor is using the product and the buyer is not. Qualitative urgency is fun to talk about because it’s a place where sellers can get really, really creative.

Two final thoughts:

First, there are dozens of hooks that will drive urgency within this framework. Those listed above aren't appropriate for every organization. And when brainstorming it's important to get multiple stakeholders involved to come up with as many hooks as possible. Many of them may be totally unique to an individual organization.

Finally, I generally believe that sellers want to spend most of their time focused on the top-right quadrant. Ultimately, quantifiable, buyer-focused value is the most scalable and sustainable way for an organization to grow. But it doesn’t work every time on every deal. Selling into large organizations can get incredibly complex. The best sellers combat complexity with creativity. I hope the framework above helps sales organizations do just that.

Sales Commission Principles

Sales commission plans are a crucial part of a company's sales organization. They can be really complicated and difficult to get right. And for earlier stage companies they'll often change quite frequently. Managing this change can be really difficult as a sales leader has to balance several different components and several different stakeholders. Because of that, I think it's important to have a set of principles that guide the formation of your commission plan. I recently put these down on paper and thought I'd share them here. 

1. Commission plans should value and prioritize impact over individual compensation. While the best reps should be very highly paid, the goal of the plan is to benefit the entire organization as opposed to individual reps.
2. Potential earnings from commissions should be competitive+ and commission should be a large percentage of overall compensation. The percentage will vary depending on the role in the organization. The closer the individual is to the actual transaction the higher the percent of compensation will come from commission.
3. Commissions should be paid out to reps quickly to ensure that they can easily connect the value they've added to the business with the financial reward they receive. 
4. The plan should employ things like clawbacks and true-ups/down to reduce risk to the company when paying commissions ahead of cash collection.
5. The plan should include consequences for customer churn and incentivize high-quality sales and smooth hand-offs. 
6. The plan should be fair so that there's an equal playing field across territories and customer segments.
7. The plan should be iterative and updated regularly to ensure that it remains competitive and consistent with the principles above. 

Using Incentives In Enterprise Sales

The 'daily deal’ boom and bust, if nothing else, taught us that consumers will respond to incentives. Deep, short-term discounts are extremely effective with consumers because the consumer generally has full autonomy and decision making authority to make the purchase.

This is not true in enterprise sales. When a seller offers a large enterprise an incentive if they agree to buy on a certain date, the work has only just begun.

I’ve written in the past that, very often, the most difficult part of an enterprise sale isn’t getting an enterprise to buy, it’s getting the enterprise to buy now, or to buy on the seller’s timeline. 

To help with this, here are four questions a seller can ask themselves to be sure that the incentive they’re offering is going to work:

1. Does the buyer believe in the incentive? Gimmicks don’t scale. Incentives must be legitimate and make sense. There are all kinds of legitimate reasons why a seller wants a buyer to buy sooner rather than later. The seller should communicate these legitimate hooks to the buyer in a sincere and logical way. If it doesn’t make sense to the buyer then they won’t respect the seller’s timeline. 
2. Does the buyer care about the incentive? Incentives that sound great to the seller may not always sound great to the buyer. Sellers should take the time to dig in and discover how impactful the incentive is to the buyer. It's helpful to say something like, “if this deal closes by the end of the quarter I can offer you a 20% price reduction. I understand that it may be challenging to move this through your process on such a short timeline, so is this something that’s important enough to you to accelerate this deal?"
3. Does the buyer understand their own buying process? A buyer’s job most likely is not to buy things. They have their own set of priorities to worry about and they may have no idea what it takes to get a contract signed within their own organization. It’s hard for big companies to buy things. Sellers should be aware of this and push their buyer to be sure they understand their own buying process. A buyer can’t agree to buy on a seller’s timeline if they don’t understand what it takes.
4. Does the buyer have the capability to drive their own buying process and stick to the seller's timeline? While buying decisions are often made at the top, the actual execution of the ‘buy’ often happens at lower levels. Sellers must make sure that the individual that is agreeing to the incentive has the authority to drive the accelerated timeline.

Of course, sellers should always strive to have their product’s core value proposition line up with their buyer's problems to create inherent urgency. But in many cases an incentive may help. Sellers should answer the questions above before they get comfortable that the incentive they’re offering is going to accelerate the deal.

Bottom-Up Enterprise Software Is Now Mainstream

Back in 2012 I wrote about the 'bottom-up' approach to enterprise software distribution. Bottom-up happens when a product is initially procured by an individual employee or group of employees and then, once a critical mass is reached, a seller upsells the product across the organization with additional features, bulk pricing, etc. This has now become a mainstream approach to enterprise software distribution. I recently attended a Go-to market conference held by a prominent venture capital firm and they advised everyone that the first question an enterprise startup should ask before designing a go-to market strategy is: are you bottom-up or top-down?

With successes like Atlassian and Slack and others the bottom-up model has come a long, long way in recent years. 

However, bottom-up doesn't work for every industry -- at least right now. Take healthcare as an example. To sell a product into a large healthcare organization you must get IT approval, work with compliance, promote workflow changes, train staff, potentially integrate into an EHR, address HIPPA concerns and do lots of other stuff before the first user can log-in. The top-down model can be a requirement.

That said, I believe we’ll start to see this change. The bottom-up model will only become more mainstream and will take market share from vendors that don’t adapt. Traditional enterprise vendors should take note and start to evolve.

Some specific implications:

Software vendors need to prioritize the user of their product over the buyer of their product (they're quickly becoming the same person). Engagement and user satisfaction metrics should be equally important as sales metrics. Employees are increasingly demanding that the software they use at work function at an equivalent level to the apps they use on their phone. And switching from vendor to vendor continues to get easier. If a product isn't adored by its users its ripe for disruption.

This change also means that product must play a much larger role in distribution. The product must be remarkable so people will talk to their colleagues about it and it must be easy to spread the word about and nearly effortless to access. If you look at the fastest growing enterprise startups (see below) the one thing you’ll find is that nearly all of them make it extremely easy for a new user to sign up.

Finally, this trend will bring big changes to sales and marketing teams. Marketing (messaging from one to many) will play a larger role in the selling process as it'll be responsible for acquiring the product's early users. This changes messaging and use of channels in a big way. When any employee within a company is a potential buyer your marketing starts to look a lot more like Apple's than Oracle's. And salespeople will need to increase their selling competence to represent both the user (human factor data insights, workflow changes, usability) as well as the enterprise buyer (product context, integration, ROI).

The line between enterprise software and consumer software is continuing to blur. And while there are industries where top-down will continue to thrive, the processes and systems and beliefs that have enabled this approach are beginning to crumble.

In the end, the real threat that bottom-up startups present to top-down vendors isn't just that they may have a more effective way of getting a product into market, it's that their approach requires them to build something that's very unique in enterprise software: a product that people love.

Buyers Aren't Rational

Perhaps the biggest challenge in enterprise sales is getting a large organization to act and act quickly. Because of size and complexity and bureaucracy it can be very difficult for large organizations to make quick decisions. When an enterprise becomes a certain size it inevitably creates a series of checks and balances to protect its assets and competitive position. This protects shareholders but also makes it difficult to innovate and to make decisions to invest in innovative technologies.

Selling into these organizations requires one to find an external champion that is willing to break through blockers and jump over walls. One of the ways to do this is by helping the buyer see a future positive state. This is what great sellers do. They get a buyer to see a future state that is better than their current state that will require a relatively small investment. If the buyer is rational then they will buy.

Of course it's never that simple.

Over the holidays I had the chance to read Michael Lewis’s new book, The Undoing Project, and it shined some light on some of the many reasons why it's never that simple. The book takes on the issue of “decision theory” and tells the story of two Israeli psychologists and their mission to better understand how the human mind makes decisions. They found that people are absolutely not rational decision makers. I thought I'd capture some of their ideas here.

One of the most interesting ideas discussed in the book is the notion of 'loss aversion'. People will irrationally avoid losing what they have -- even if it could result in a much larger gain. Here's a summary of one their experiments.

When you gave a person a choice between a gift of $500 and a 50-50 shot at winning $1,000, he picked the sure thing. Give that same person a choice between losing $ 500 for sure and a 50-50 risk of losing $1,000, and he took the bet. He became a risk seeker. The odds that people demanded to accept a certain loss over the chance of some greater loss crudely mirrored the odds they demanded to forgo a certain gain for the chance of a greater gain. For example, to get people to prefer a 50-50 chance of $1,000 over some certain gain, you had to lower the certain gain to around $370. To get them to prefer a certain loss to a 50-50 chance of losing $ 1,000, you had to lower the loss to around $370.

People’s desire to avoid loss significantly exceeds their desire to secure gain.

This is the reason insurance companies make money. They take margin from our irrationality. For most people, the happiness involved in receiving a desirable object is smaller than the unhappiness involved in losing the same object.

Not only do people act irrationally (from a probability perspective) to avoid loss, they'll also make decisions based on descriptions of probabilities.

Another useful example from the book is a study done with lung cancer patients:

Lung cancer doctors and patients in the early 1980s faced two unequally unpleasant options: surgery or radiation. Surgery was more likely to extend your life, but, unlike radiation, it came with the small risk of instant death. When you told people that they had a 90 percent chance of surviving surgery, 82 percent of patients opted for surgery. But when you told them that they had a 10 percent chance of dying from the surgery — which was of course just a different way of putting the same odds — only 54 percent chose the surgery.

People facing life and death decisions will not respond to probabilities, they will respond to the way probabilities are described to them.

Lastly, the book notes that most people will respond to probabilities using their own context and view of the world, as opposed to the actual probability. Here's a great example. 

Ask yourself the following question:

An individual has been described by a neighbor as follows: “Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.” Is Steve more likely to be a librarian or a farmer?

The vast majority of people would say that Steve is a librarian despite the fact that there are 20 times more male farmers in the United States than there are male librarians. People ignore probabilities and give more credence to “resemblance” or context or experience. We don't make rational, probabilistic decisions.

The lessons from all of this for enterprise sellers are simple:

Most buyers will prefer to buy something that will help them avoid loss (keep their job) rather than increase gain (get a promotion). Sellers need to find a way to appeal to loss aversion or find a champion that's willing to take a risk.

Buyers are not buying your product, they are buying your description of your product. The way you explain what you do is incredibly important and needs to be constantly tested and iterated.

Finally, buyers may not make rational buying choices based on the probability of success. They’ll rely on “resemblances” and their own context. They’re more likely to buy the thing that 'feels' like it will be successful than the thing that has the highest probability of creating a positive future state.

What Qualifies As A "Good" Meeting In Enterprise Sales

What one salesperson defines as a good initial meeting in enterprise sales can often be quite different from another salesperson's definition. This is natural as different people have different perspectives and definitions of success. I've found it useful to standardize the definition of a high quality meeting to remove some of this ambiguity and get everyone aligned on what success means. Here are four simple checks to determine whether or not you had a high quality initial meeting with a prospect. 

1. Did you gain a solid understanding of the customer's buying process (who needs to be involved, where budget comes from, timeline for decisions, potential roadblocks, etc.)?
2. Did the prospect agree to a short, weekly check-in to keep the buying process on track?
3. Did you identify an executive sponsor and project lead?
4. Does the prospect understand and feel some level of urgency to get to closure?

Note that of course you can still have a positive interaction and discussion with a potential customer and not do all of these things. Often it's not appropriate to get through all of this in an initial meeting. But from a pipeline velocity perspective, if you haven't accomplished these four things there's definitely some work to get done.  

How To Diagnose Bottlenecks In A Sales Funnel

When sales aren't moving fast enough, the first thing a sales leader should do is look at the sales funnel to identify the bottleneck. Are we not filling the top of the funnel? Are we not converting meetings to proposals? Are we not getting the contract signed quickly enough?

I've written in the past about how to build and analyze a sales funnel. 

But in some cases the sales funnel might not be granular enough to tell you what's really going on. 

With that in mind, I've come up with a set of questions to ask to help you identify trends and areas where things aren't working. 

Look across the entire pipeline and ask the questions below about each individual deal. if the answer to any question is 'no' put a checkmark next to the question. If the answer is yes leave it blank. If the question isn't relevant because the deal isn't far enough along in the sales process also leave it blank. 

After going through each of these questions for each of your deals you should get a good sense of trends and what's slowing things down and you can now focus on fixing that problem area. Do it again in a month and focus on that newly identified problem area. Repeat.

This is a super simple and quick way to find out what's going on in the funnel. It can be used for an entire team or an individual rep.

1. Is there adequate top of the funnel activity -- are we working hard?
2. Are we getting meetings with people we want to meet with?
3. Do the people we’re talking to have a problem that we’ve diagnosed?
4. Do the people we're talking to believe that the problem they have is a large and important one?
5. Do the people we're meeting with have decision making authority?
6. Is our message (solution) resonating with the people that have the problem?
7. Is there excitement around moving to a proposal?
8. Do we have agreement on a proposal?
9. Are we getting insight into the buying process and the actors that need to be involved in the buying process?
10. Are we executing the closing process at a rapid pace?
11. Are we having weekly check-ins with our project sponsor?
12. Have we identified a contract signer?
13. Is there urgency around the close date?
14. Is there anything preventing our signer from signing?

How To Sell An Innovative Product To A Large Enterprise

Selling an innovative product into a large organization is extremely difficult. The average enterprise sale requires sign off from 5.4 individuals. And when selling something that is novel that the buyer hasn't bought before it can be two or three times that number. In addition, there's no set budget or buying process in place for a buyer to buy. As a result, it falls on the seller to create a process for the buyer to purchase the innovation.  I designed the process below to help address this challenge. The idea is to take the buyer through a set of meetings that generates support for the idea and get an gets them comfortable that they're checking all the boxes they need to check to get a contract signed.

The process requires three meetings (though the second and third meetings could be grouped together for smaller, less complex deals).

1. The Concept Meeting. This meeting is where the seller introduces the concept, gets support from the buyer that the product solves an important problem and that the seller's product might be a good solution to that problem. The goal for this meeting is to ask for the buyer's permission to start a process around examining the potential ROI of a partnership. If the buyer isn't supportive of the concept, both parties shake hands and part ways.
2. The Financial Meeting. If the concept meeting is successful, prior to the financial meeting, the seller should ask the buyer to provide them with some financial inputs that will help determine the return on investment that would come from a partnership. The purpose of the financial meeting is to walk through the financial inputs and an ROI model and allow the buyer to poke holes in the model and to get to agreement on what a realistic ROI might be. If the ROI is compelling and the project is worth prioritizing, move to the next meeting. If it's not, shake hands and part ways. The ROI is going to be the thing that drives the rest of the process so it's crucial to have agreement in this area. It's also crucial that, when possible, the seller is using the buyer's own numbers in the model, rather than industry averages. 
3. The Implementation Meeting. The purpose of this meeting is to determine whether or not it makes sense for the buyer to buy the product now. With a compelling ROI, it will most likely make sense, but there are lots other considerations. Technology resources, leadership changes, budget cycles, competing priorities, etc. The idea is to get the prospect so excited about the importance of the problem and the concept and the ROI that all of these concerns will be overcome. But this meeting should be used to put everything on the table. The meeting should include the appropriate stakeholders from both sides to determine if the project can be implemented and, if it can, what kind of work will need to be done and which resources will be required. A timeline with tasks and assigned owners should also be discussed and (ideally) agreed upon. If successful, the next step is to move to contract and setup a weekly meeting between both organizations to track the deal to contract close and product delivery. If that can't be done, both parties should shake hands and part ways. In this meeting the seller should inventory all of the elements of the customer's procurement process and get all of them down on paper. Those elements should be incorporated into a project management document that will be tracked in the weekly meeting.

One other note: when moving the deal to contract, the seller should setup a short meeting with the attorney on the buyer side. Because the product is innovative, the contract terms may be confusing and non-standard. Walking the attorney through the product and the purpose of the partnership should dramatically reduce back and forth on the contract.

Being disciplined about taking the buyer through these three meetings and understanding exactly what they'll need to do be able to write a check will help sellers accelerate sales cycles and avoid many of the pitfalls that come when selling into a large organization.

So often "selling" innovation is the easy part. The bigger challenge, in many cases, is helping the buyer "buy."

10 Things B2B Startups Need To Know Before They Start Selling

Below is an updated version of a presentation I show to B2B startup teams that are beginning their sales efforts. It's presented here without the context surrounding each of the points but the insights should still be helpful.

10 Things B2B Startups Need To Know Before They Start Selling from Brian Manning

The Attributes Of A Great Strategic Salesperson

Defining the attributes to look for in any new hire is really challenging.

People are complex and every situation and every environment is different. So it's extremely difficult to apply a blanket set of attributes that will lead to success in any job.

I’ve found that this is particularly difficult with “strategic sales” roles in a startup. By strategic sales I mean a role where a salesperson is selling a highly innovative product into a large organization that requires a large investment of time and/or money from that organization.

It’s important to define strategic sales because the skill set required to be able to close strategic deals is very different from the skill set required to close smaller, more defined, "transactional" deals. Often, success in transactional selling comes down to simple hard work and effort. If you analyze a transactional sales funnel you'll see that there actually isn’t a huge difference between conversions for high performing salespeople and conversions for low performing salespeople (by conversions I mean things like 'phone call to meeting set' and 'meeting held to verbal commitment'). Success in that world often comes down to volume. More calls = more sales.

While there’s certainly nothing wrong with good old-fashioned hard work -- in fact, it's a requirement -- strategic sales is almost exactly the opposite of transactional sales. Conversions really matter and lead qualification is even more crucial because strategic deals require a huge time commitment from the salesperson. And there are massive differences between the conversion rates of high-performing salespeople versus low-performing salespeople. A high-performing strategic salesperson can convert 100% of their meetings into an active sales cycle; a low performing strategic salesperson may convert none. Literally zero. Strategic sales is not a numbers game.

Ben Horowitz likes to say that closing a deal with a large organization is like passing a law in congress. And it’s even harder than that when selling innovation — there's no set process for the buyer to buy within their organization or budget to buy the product. And in a startup, you’re small and nobody knows you and you don’t have a clearly defined sales process and you don't have perfectly polished sales materials. It’s really difficult.

I've thought a lot about the attributes that are most closely correlated with success in strategic sales. I've seen a lot of successful strategic salespeople and a lot of unsuccessful strategic salespeople. It's a problem I've been trying to understand for years.

Recently I’ve spoken to a number of people I trust on this topic and here’s where I think I’ve landed. Here are the four key attributes of a successful strategic salesperson.

Insatiable curiosity

In order to solve a complex problem you need to fully understand it. How does the buyer buy? Who has influence in the organization? What value do customers see in the product? What does the customer do during the day? How is the buyer bonused or promoted? What other options does the buyer have?

I could literally write 100 more questions like this. A strategic salesperson must always be wondering about the answers to these questions. They should constantly be learning from their customers, their leadership, their colleagues, the media, their competitors and anyone else that will talk to them. They need to be obsessing about the problem and trying to build a story and a solution and constantly iterating their approach.

A person that doesn’t have this level of insatiable curiosity simply won’t figure it out. They'll get stuck.

Optimistic grit

I’m fusing two attributes together with this one but I think it’s necessary. Any type of sale will inevitably lead to lots of rejection of the salesperson, the product and the company. This sucks. It’s painful. It’s even worse when selling innovation because there will be prospects that think the idea is crazy and will never work and the buyer has no process or defined way to buy the product. In order to get through this the salesperson must be a winner and must have a winning attitude and know that they can overcome. And they must have the grit and determination to keep getting up after they get knocked down. It may sound cliché but it's true. I've never met a pessimist that was good at strategic sales. There will be an endless number of reasons why it won’t work and the only people I’ve seen that will push through have a high level of optimistic grit.

Extreme humility

I used to joke that there are two types of salespeople:

1.) The type of salesperson that flies home from a bad meeting with a prospect and sits on the plane mentally blaming the product, the marketing team, the legal team, their boss or the prospect that just doesn’t “get it."

2.) The salesperson that sits on the plane thinking: How could I have answered that one question better? What else should I add to the presentation? What should I take out? What’s the context of the person that didn’t like the product? Where are they coming from? Does the product I’m selling threaten some of the people in the room? What went well in that meeting and what didn’t go well in that meeting? Who can help me get better?

The second approach requires an immense, almost unnatural level of humility. It’s human nature to point fingers when things don’t go well. It’s also often perfectly reasonable -- because it might actually may be someone else’s fault! But placing energy into #1 is a losing approach. Obsessing about the things that we can control is the way to win. So much energy can be soaked up by complaining and blaming others. Great strategic salespeople transform the energy that most put into complaining and blaming and point it toward improvement.

Ability to educate and inspire

I’ve written before that people buy with their heart and justify it with their mind. This is why I advocate not showing a lot of numbers in an initial sales presentation — the prospect doesn’t know or trust the salesperson yet and they’re generally not buying for ROI anyway. They’re buying because of the way the product makes them feel.

As a result, when selling innovation it’s crucial that the buyer be on board with the salespersons's mission and buy in to their perspective on both the problem they have and the way that the salespersons's company is going about solving that problem. The sale has to be somewhat fun and interesting and educational and insightful. It can’t be boring. I don’t mean that the salesperson has to personally be super charismatic or an amazing  presenter (though that helps), I mean that they have to be intelligent and interesting and insightful. The buyer has to want to get behind the company and the product -- they have to become a true advocate.

It's a lot of work for a company to buy something. It requires security reviews, legal reviews, budget reviews, consensus building and many other activities. It also creates a lot of risk for the champion. If they're going to go on the line and buy an innovative product they have to be excited and inspired.

Great strategic salespeople continuously inspire, excite and educate their prospects.

Managing The Enterprise Deal (Panel Notes)

Earlier this year I participated in a panel for the NYC Enterprise Sales Meetup. The topic of the panel was Managing the Enterprise Deal. It was a great discussion and I thank Mike and Mark for inviting me to participate. Prior to the panel, the moderator provided us with a list of questions that we should be prepared for. In preparation for the discussion I wrote down some rough answers to each of the questions and I thought I'd post my notes here. It's great to see that Enterprise Sales Meetup has expanded to other cities over the last few months. I highly recommend attending one if they're in your area.

Questions:

How many deals do you think a high level business to business professional can manage?

This depends on the salesperson's goal and the average deal size. Generally, salespeople should have a pipeline that is 3x their goal. So if your goal is $1MM and your average deal size is $250k, then you need to be working 12 deals.

What are the best tactics you find to manage a pipeline effectively?

To me it comes down to good stages and good tipping points. I recommend using 4 or 5 stages of a deal, and then for each stage assign actions or things you need to get done before you can move them to the next stage (tipping points). This ensures that there's consistency across deals and ensures the salesperson isn't kidding themselves when they say they have 3 deals 'in contract'. The stages I use are generally something like, Lead, Decision Maker Engaged, Project Design, In Contract, Closed Won. The tipping points for each stage depend on what you're selling, but it could be things like contract sent, legal work completed, technical review completed, etc.

Do you believe in mapping out a process for your company to manage deals?

Absolutely. You need consistency across stages and tipping points. And you need a funnel so you can determine where you're getting stuck.

How do you qualify deals?

Typically I would come up with 3 or 4 elements that I'm looking for from a prospect. Size, revenue, technical setup, management structure, etc. Over time you can iterate on these as you discover what makes a good prospect that leads to good revenue.

How do you find your deal sponsor?

You have to nail down the one or two business metrics that your product impacts and then find the people who are responsible for those metrics.  If X metric goes up at the company you're selling to, who is going to get a bonus at that company? That's the person that should drive the deal for you.

Who else do you need besides a sponsor, what other personas do you see?

Project Managers. You want to push for a strong Project Manager that is totally sold on your product and can get it launched and can help you get the deal done. After the executives are sold, so much of enterprise sales is about simple project management and driving the deal through the prospect's buying process. It's really hard for big company's to buy things. You need a partner at the company that can help you get it done.

How do you build a relationship with your sponsor?

One thing is frequency of communication. I always try to set up a weekly check-in. Those consistent check-ins force you to get to know one another. The other thing is I try to make their job really easy. Keep communications really short and simple and show them how to buy your product. Map out their own buying process and track them on it.

How do you determine the buying cycle and process?

You try to identify trends across organizations on how they buy. Who needs to be involved? Who needs to approve? What kinds of meetings need to happen to get to that approval? And then you start to map out the ideal buying process that works for you. If you don't have one, make one up based on what you do know. And map to that.

How do you map out the decision-making team?

Again, another useful way of mapping out a decision-making team is to show one from another client and get them to react to it. Make sure you show legal, technical, compliance, procurement, business people, etc. so nothing gets missed.

How prevalent do you think consensus decision-making is?

It's huge. I've never seen a large company buy without consensus. You have to tell everyone that is involved in the decision-making process your story. Everyone has to support the concept.

How do you use or overcome the startup stigma?

Use it as an advantage. By definition you're disrupting the old way of doing things.. You're doing something much bigger. Inspire them. I find most people want to get better and recognize that the status quo isn't working. Tap into that. Challenge them. The way they are doing things now is not acceptable anymore. Get them to see that and get them on your side. The size and stage of your company is irrelevant compared to the problem you're solving.

How do you establish an ROI, is it even that important?

It's important, but it's often not as important as you think. I think most businesses buy primarily for emotional reasons, rather than rational reasons (prospects buy with their heart and justify it with their mind). So when you come up with your story, it's important that you focus on how your story makes people feel. Most buyers aren't going to believe your ROI anyway.  It's about emotion. And most big companies aren't as metrics driven as salespeople would like them to be. Your focus should be on getting the team you're selling to a bonus at the end of the year. And you need to understand what are the levers that will drive that bonus.

If you have a brand new offering how do you overcome the need for an ROI? 

The easy answer is a pilot. But the bigger answer is that you have to sell them on your vision and the thing you're trying to disrupt. They have to believe in you, in your company, in your priorities and in your team. That's the hard part. Then you can provide them with a rough ROI that gets them comfortable they're going to make their money back. Use the "what you would have to believe" approach where they only have to believe that you will move the numbers a small amount and they'll still make their money back. Be conservative.

How do you add value in your interactions dealing with other executives?

I like to use what I refer to as "insight selling". Be interesting. Your pitch should be exciting and provocative and short. Like Peter Thiel says, "say things that others aren't". Be exciting. But also use the approach of not "always be closing" but "always be leaving". Have one foot out the door. Look to disqualify opportunities. The prospect is looking to disqualify you and you should do the same thing. You're both trying to figure out if there's an opportunity to help one another. You're total equals in that sense. Act like it. Also, I try to drip prospects quarterly with tidbits of information that might be interesting to them with absolutely no ask.  You're not allowed to ask for something in these drips.  It could be an article, an insight you picked up from another prospect, etc. Stay on the radar but do not ask for anything. You need to preserve that level of trust and the power dynamic you've built.

How Much Should A Startup Charge Its Early Customers?

Last week I had a conversation with a founder about how much they should charge their first few customers. Cost plus a fee? Slightly below the incumbent? The same as the incumbent? Some fraction of the estimated ROI? My answer to this question is pretty simple: charge as much as you can get, charge whatever the market will bear.

At an early stage, a founder's time and focus is the firm's number one asset. Any compromises made in getting less than the absolute maximum amount that a client will pay creates an unrecoverable opportunity cost. Early-stage companies can't afford to not charge what the market will bear.

Pushing for the max more has other benefits. It helps to determine the product's real worth and the real challenges the client is having in buying the product. When pricing makes buying too easy you don't get a good sense of the challenges you'll encounter down the road, you don't get the real story. It also generates a level of respect from the client (we've all heard the stories of people appreciating things more because they cost more regardless of the true value).

Finally, often a startup's instinct will be to charge less because it'll move the deal along faster. This is a myth. The opposite is true. The larger the deal the more attention it will get, the more senior people will need to be involved and it'll move faster as a result.

This post isn't meant to say that you shouldn't negotiate, do a pilot and be flexible where and when it makes sense. You should do all of that. But in lieu of a defined market price, charge a simple one -- the absolute most that you can get.

The Importance Of Relationships In Enterprise Sales

One of my favorite questions to ask when interviewing a potential sales hire is: “given your experience in sales, if you had to write a book about sales, and you wanted to sell a lot of copies, what would be the theme or the thesis or the title of the book, what insight would you bring?” Much to my dismay, the candidate will often sit back and say something like, “that one is easy, relationships, it’s all about relationships”.

This is a disappointing answer. And it also isn't true. I don’t think it is all about relationships. Especially when selling innovation. People buy from a seller because they think they believe it'll move their company forward or, more selfishly, they'll get a raise or a promotion or a bonus at the end of the year after they roll out the product. They don’t buy from a company because they like playing golf with the salesperson.

That said, for some products it's different. For some products, successful selling is driven by good relationships.

This got me thinking about which products are sold based on relationships and which aren't.

I think a lot of it is driven by the life-cycle stage of the product and the level of competition in the product's vertical.  For example, when Salesforce.com when out to sell their first cloud-based CRM product to its first group of customers, it wasn’t about building a relationship. It was about convincing early adopters to completely rethink the way they manage their customer data. It was about getting big companies that were stuck in their ways to make a massive mind-shift. You can't do that with a relationship. You do that with thought leadership and creating a vision and great communication. Of course, it probably didn't hurt if they built a nice relationship along the way but there’s no way that was what was driving their deals at that stage.

On the other hand, when Benjamin Moore sales reps sell paint to a commercial real estate developer, it probably is very much about the relationship. The products are more of less the same, so it comes down to price, and how much the buyer likes the seller.

This chart illustrates my point:

When a product is brand new and innovative, relationships matters less than when the product is mature and commoditized by lots of competition.

Of course, the line is probably not this linear. For the first 1 or 2 customers, relationships typically matter a lot (often these are friendlies) and the importance of relationships probably levels out at some stage of product maturity. But I don't want to over-think the simple point.

It’s worth salespeople taking some time to think about how they sell and whether or not the product they're selling is at the right stage for their skill-set.

You might not want a relationship salesperson selling structural innovation and you might not want a disruptive salesperson selling paint.

The Death Of Enterprise Sales

A few weeks ago I was chatting with a guy that specializes in something called "disruption consulting". Basically he goes into mature companies and works with their management teams to help them think through how they would disrupt their own business. This is a healthy exercise for large, successful organizations and something individuals ought to think about with regard to their own company and -- more importantly -- their own role in their own company. This got me thinking about enterprise SaaS sales and the theory that salespeople have become less of a necessity in this new world. As I've written in the past I actually think the opposite is true. Sales is growing, not shrinking, in importance. That said, here are some of the trends that I've seen out there that are giving the skeptics some ammunition:

1. Micro budgets. With the 'consumerization' of enterprise software, lots of companies are letting their employees directly buy and expense their own productivity tools circumventing the traditional buying process. 
2. Pay-per-use contracts. Traditionally enterprise salespeople have sold large buckets of access to their software -- e.g. Salesforce has negotiable pricing tiers based on the number of licenses purchased. Companies like Slack and others are getting away from this model and are pricing based on who actually uses the system. At the end of a month, they look at how many people logged-in and then send an invoice accordingly. This pushes the revenue responsibility pendulum far away from sales and much closer to product.
3. Freemium enterprise software. This is a model where software can be accessed for free by an individual employee and an enterprise deal gets triggered at some critical mass of employee usage (e.g. B2E2B).
4. Standardized contracts. More enterprise software companies are creating click-through agreements that can't be negotiated by the buyer. And there does seem to be a very slow but steady move towards more consistency across companies in what they want a contract to look like. Corporate attorneys will make this really difficult, but the idea does seem to be gaining momentum. 
5. Data in the cloud. The advent of the cloud has made the old-fashioned, big, CIO-based sale a bit less prominent. Cloud-based software programs require much less of an implementation burden and thus much less of the need to sell the bureaucratic IT department. That said, much of the work these teams do has moved towards integration into the cloud, which still requires a hefty sales process.

There's no doubt that the landscape in enterprise sales has changed. And all of these trends are worth watching. But what the skeptics miss is that this is nothing new. Buyers and sellers always been trying to minimize the cost of their transactions. These are just new variations of that process. It simply means that to stay relevant enterprise salespeople must continue to shift their energy towards larger, more complex deals and higher value sales activity.

When real estate listings became available to everyone on the web, real estate brokers didn't disappear (in fact, there are more of them now). They simply started focusing on higher value activity. Instead of their core asset being access to listings, their new asset is helping someone navigate the process of buying a home (over half of home buyers find their home online, but 90% still use a broker to make the purchase).

Similarly, when employees begin buying their own software, enterprise sales teams will just shift their activity towards more strategic, higher value deals. They'll focus on the things that can't be bought or implemented by a single employee.

In short, enterprise sales drives new and incremental growth. It's the hard stuff. The easy stuff gets automated. And diffusion of the greatest innovations and the highest value deals can't be automated.

Companies that aren't growing their enterprise sales teams are likely either very early-stage and don't have enough product to sell, or they're later stage and aren't trying hard enough.

Why Are Salespeople Paid On Performance?

Andreesen Horowtiz had a great podcast a few weeks ago on the topic of Getting Sales Right.  It was a conversation between Peter Levine, a GP at the firm, and Daniel Shapero, who helped build LinkedIn’s initial enterprise sales team. Levine asked a question about sales compensation, and why are salespeople paid mostly on commission where almost every other role is paid a flat salary. Surely companies care about getting the best out of every employee, why isn’t every employee paid mostly on commission?

Two interesting insights came out of this discussion.

1. Salespeople are unique in that they spend most of their time facing the outside world and are constantly being told ‘no’. They face rejection on behalf of their company all day long. To offset some of this pain, when they finally do get a yes and a big win, it’s something that should be celebrated; both in the form of compensation (commission) and public recognition. The commission helps keep salespeople motivated to go get the next one in the face of all that rejection.
2. There have been studies that suggest that when a person is paid largely on commission, they’ll tend to go after a win at all costs. They’ll look for shortcuts and take the quickest path to success. There are lots of roles where that “win” isn’t so easy to define and measure. Further, for some roles like product and engineering, shortcuts could cause longer term damage and stifle creativity and long term thinking.

For these reasons most of the sales teams I've seen are paid largely on commission. But the other side of this issue is the failure rate of sales versus other roles. In nearly all of the companies I’ve worked with, salespeople fail at a far higher rate than any other role. This also begs the question, why?

Are recruiters just really bad at hiring for sales roles and really good at hiring other roles? Of course not. In my view the reason for the discrepancy is that the performance of a salesperson is easy to measure. If a salesperson is failing, everyone knows it. If an engineer is failing it's not as easy to see. That's why you'll often see 30% variances in termination rates between these roles.

The best companies I've seen are aware of this and take this on as a challenge and expose these numbers and try fix the imbalance.  If the termination rate of a sales team is 40% and the termination rate of other roles is 5% then non-sales managers either aren’t measuring performance or they don’t have a high enough bar for success. Measuring success in non-sales roles is hard (that’s a topic for another day). But measuring the difference in the failure rate of a non-sales team versus a sales team is easy. And an important thing to expose. 

7 Lessons From A Tough Negotiation

Lots of people that know me know that I'm huge fan of Bill Belichick, the coach of the New England Patriots. The thing I like about him more than anything else is that he never, ever makes excuses. When the Patriots lose a close game, the media will ask him about the weather, the referees, the tough schedule, the rules, the player injuries, you name it. And he never acknowledges any of it. He only talks about the things that his team can control. As a result, he's the winningest coach of the last decade. He obsesses about what he can control and ignores everything else. That is the exact approach people should take at work -- especially when negotiating a deal. You can't control the prospect, the prospect's attorneys, the bad economy, your product capabilities, the law, or your executive team. You can only control your own actions. And when you fully take that approach, you'll find that your energy won't go outwards towards things you can't control, but will instead go inwards towards things that you can. That's how you get better. That's how you win.

I recently finished a long, painful and frustrating 3 month negotiation. Thinking back on it, I'm tempted to blame the other side or blame other factors for why it was so long and so frustrating. But that's not helpful because I can't control any of that. I can only control what I do and try to do it better.

So with Bill Belicheck in mind, here are seven tactical things (that I can control) that I'll do better next time:

1. Never assume the deal is done. Make sure you have asked and asked and asked about the other side's approval process. More often than not someone is going to come along to do one final review of your deal. Document their process and track to it.

2. When you've created urgency, continuously validate that the other side values that urgency. Over a long negotiation they may not.

3. In addition to urgency, throughout the negotiation continuously reinforce your value and why the other side should want to partner with you. Don't get too caught up in the weeds and the specifics of the deal and neglect to remind the other side why they wanted to partner in the first place.

4. Have a 'time and energy walk away point'. Most negotiators know the concept of BATNA (best alternative to a negotiated agreement) but don't forget to include your own time and energy in that calculation. Take this really seriously. Focusing on a deal that is too time consuming has an exponentially negative effect. You can dig yourself deeper because you're not focusing on other opportunities and you lose your leverage (you need the deal more now because you have fewer options now because you've been too focused on this one deal).

5. When you're down to the last few items, setup a recurring daily meeting with the other side until it gets done. It's amazing how you can lose weeks if you don't do this. People get busy and each side may use time lags to build leverage.

6. When things get ugly, negotiate in person. Your situation will improve 10x faster in person than it will over the phone.

7. Bring in other people. I tend to be a lone wolf when it comes to these things. It's better to have multiple personalities involved. Two people are harder to read than one and the other person will always think of things you haven't.

Pitching Innovation: Short & Simple

I've never been a big fan of the psychology of sales. I've always felt that if you're challenging a buyer, providing insights, selling efficiently and helping them understand a problem, the psychological side will sort itself out. But the fact is there's absolutely a psychological impact that comes with your approach (hopefully a positive one).

I thought about all of this a few weeks ago while sitting on a plane reading Pitch Anything by Oren Klaff. Early on in the book he talks about the evolution of the human brain. There are three fundamental layers of the brain that have been built on top of one another as the human species has evolved. We started with the 'crocodile brain' and then added the mid-brain and then added the neocortex part of the brain.

The first and most fundamental part of our brain is the crocodile brain. This is basically the thing that keeps us alive. We use it to recognize danger and threats. It's an extremely simple part of our brain. It can't think critically and it can't reason. Its only purpose is to protect us.

When you walk into a room to pitch something this is the part of the brain that your buyer is using. The buyer's crocodile brain is on high alert. The buyer is asking themselves questions like: Is this person going to hurt me? Is this person trying to fool me?  Is buying this product going to get me fired? Should I trust this person?

In that first interaction, these are the things that the buyer cares about. That's their focus.

The problem for you as a seller is that when you're pitching, you're not using your crocodile brain. You're using your neocortex brain -- the most sophisticated part of your brain. You're thinking critically. You're giving insights. You're talking about details. You're probably showing detailed charts and graphs. You're probing, engaging and being thoughtful.

But the crocodile part of the brain doesn't understand the neocortex part of the brain. So you're completely missing the mark. You're speaking different languages. You might as well be speaking German to someone that only speaks English. Being smart, in this case, is actually hurting you.

As I said, I don't like diving into the psychology of sales, but there are some good lessons in here.

This insight is a great reminder that when you're meeting someone for the first time, talk to their crocodile brain. Keep it short, simple, concise and clear and don't try to do too much. Save the fancy charts and data tables for next time. Nobody is going to seriously engage with you until you have credibility and some level of trust. That's the goal of the first meeting: build credibility and trust. And try to get to the next step of your education process. But forget about complex models and detailed financial analysis. They won't listen to it, they won't digest it and they definitely won't believe it. Save all of that for the next meeting, after you've satisfied their crocodile brain.

Also, on the topic of keeping your presentation short, Klaff points out that in 1953 when James Watson and Francis Crick introduced the double-helix DNA structure (e.g. the secret of life), the presentation that earned them the Nobel Prize, was five minutes long. That's right, the most important scientific discovery of our time was pitched in five minutes.

Regardless of what you're selling, something tells me that in your next meeting you don't need to be pitching for the full hour.

Enterprise Software: Sales Still Matters More Than Product

Last week I spoke to a guy that works for a multi-billion dollar, publicly traded company that makes the software that runs a health system's daily operations. The software that he sells is used by thousands of health system employees all day, every day. He told me that, in most cases, when selling his product he does not do a demo. No product demo at any point in the process. So the executive team at a health system buys his software and then forces thousands of employees to use it every day (locked into a 5+ year contract) without ever seeing or testing its usability. As I've written many times in the past, this is why most B2B software is awful. Because it can be.

In big enterprise software, good selling is unfortunately still far more important than a good product.

A Mid-year Gap To Goal Analysis

Today is the second day of the second half of the year. It's worth taking a couple minutes to assess where you are against your goal for the year. This is a great exercise whether you're running a sales team or selling yourself. Below is a sample of a model I've used in the past. Note that to build this for yourself you'll have to fill in the fields in blue to match it to your pipeline (definitions of each field below).

Definitions:

• Goal - 2014 goal
• Actual - revenue closed to date
• Value of late stage deals - deals that are either in contract or just about to be in contract
• Late stage close rate - likelihood that late stage deals will close (in the next 6 months)
• Number of highly engaged deals - number of early stage deals that you're speaking to weekly
• Highly engaged close rate - likelihood that you'll close the average early stage deal (in the next 6 months)
• Average deal size - for early stage deals you very likely don't know how much their worth; go back and look at the last 5 to 10 deals that you've closed and take an average

The number in red should give you a very good sense of where you need to focus your time for the rest of the year. That is, should you focus on executing and growing deals that are already in motion or do you need fill up the pipeline with new opportunities. Based on this number, it's a good idea to write down three things that you're going to focus on over the next six months to ensure that you get to goal.

If you'd like the model in Excel feel free to email me

5 Counterintuitive Sales Tips

To state the obvious, if you want to be much better than the average salesperson then you have to do something much different than the average salesperson. With that in mind, I've picked up a few things over the years that most salespeople definitely do not do but that do seem to improve sales outcomes significantly. I've written about some of these before. Here are five:

1. Never leave an introductory meeting without talking about your product's flaws. If you tell a prospect that your product doesn't have weak areas you're either lying or your product hasn't chosen an area where it can add significant value. Be proud of your product's flaws -- be proud of the areas where you've decided to focus and those areas that you've chosen to deprioritize. Those decisions are what make your product unique. You'll gain much more credibility by discussing those areas with a buyer.

2. Never criticize the competition (because you have no competition). No two companies prioritize the same features and do things exactly the same way. There is no competitor that does what you do. It's simply not possible. So instead of saying, "we're better than the competition", point out the areas where you've chosen to focus and the areas you've chosen to prioritize. Help the buyer line up their priorities with the right seller. If the competition is a more appropriate fit you should tell them that. Again, you're far more credible when you take this approach.

3. Instead of "always be closing" you should "always be leaving". I've written about this before and I think I first picked it up in Mastering The Complex Sale. Remember, you are not talking to a buyer because you're there to close them. You are talking to a buyer to determine whether or not you can create a mutually beneficial relationship. Be laser focused on mutually beneficial relationships. Have a healthy paranoia that the person you’re talking to doesn’t care about what you’re saying. If you don’t know, ask them. Walk away from prospects and people that aren’t interested. You’re bringing value and your prospects are bringing value — if there isn’t a match, walk away. In short, don't be a salesperson.

4. Don't ask too many questions. There's nothing worse than the seller that starts a presentation asking a bunch of questions about the buyer's business. What are your biggest priorities? What keeps you up at night? I get it. Sellers want to be appear that they care about the buyer's business. But don't ask too many questions. It's annoying and insincere. You're there to determine if a partnership makes sense. Get to it.

5. Be confident but not certain. Whenever you get a question from a buyer and you're unsure of the answer don't be afraid to tell them you're not sure. Walk them through your thinking on the issue, but don't be certain when you're not certain. Buyers are afraid of sellers that know everything. Think things through with the seller when you don't the answer.