At the end of last year, I was invited to participate in an all-day discussion with a small group of sales leaders from high-growth tech companies. The goal of the day was to share the challenges we are facing, instigate discussion around potential solutions, and collaborate on best practices we are seeing across the industry.
As a sales leader, it is hard to justify time out of a busy quarter for learning along these lines. However, I have always walked away with groundbreaking ideas after these discussions. This event was no different.
The participants were:
- Jim Steele from InsideSales.com
- Larry D’Angelo from LogMeIn
- Tom Bogan and Scott Parsons from Adaptive Insights
- David Skok from Matrix Partners
- Mark Gally from Zaius
- John Davagian from Salsify
- Steve McKenzie from InsightSquared
- Warren Utt from Placester
- Brian McDonough from Unidesk
Thanks to Tim Bertrand and his sales leadership team at Acquia for organizing and facilitating the event. Below are my notes and a few opinions on the commentary.
1) Incent salespeople to remove friction from the buying process.
Sales leaders are trying to figure out how to get their salespeople to avoid making the first deal with a new customer too big. Big deals unnecessarily increase sales cycle, revenue churn risk, and cost of customer acquisition. They are also not aligned with how the customer wants to start the relationship. However, many salespeople are stuck in a legacy mindset that they should capture as much opening revenue as possible.
My opinion: The old notion that salespeople should be compensated more for new customer revenue rather than upgrade revenue puts salespeople at odds with the customer and the business model efficiency. Experiment with compensation plans that align salespeople more effectively.
2) Compensate SDRs on downstream production rather than dials or appointments.
Most organizations compensate SDRs on the number of appointments they set each month. However, organizations are struggling to align SDRs and salespeople around appointment quality and quantity.
My opinion: Compensate the SDRs on a metric further down in the funnel. If you have a sales cycle of 90 days or less, compensate SDRs on the revenue generation of the salespeople they set appointments for. If you have a sales cycle of more than 90 days, compensate SDRs on their revenue contribution to the pipeline. Enable either strategy by creating small teams of SDRs and salespeople as opposed to having large bullpens of each. This approach will create better alignment and encourage salespeople to mentor SDRs.
3) Preserve salesperson accountability in the new world of SDRs and inbound leads.
The rise of SDRs and inbound lead generation has made it more complicated for sales leaders to hold salespeople accountable to their quota. A decade ago when salespeople were given a quota and a territory, the only excuse salespeople could make for under-performance was the quality of their territory. Today, they can blame inbound lead quality, SDR performance, and other factors. Most organizations are addressing this issue by assigning salespeople a patch of accounts, either through geography, industry, or a list of names. Then they establish best practices that salespeople, even in the world of SDRs and inbound leads, still need to generate demand on their own.
My opinion: I think the industry is still figuring out the best practice here. The key point is to understand that this issue will exist as you scale and to have a strategy for it.
4) Use technology to enable better selling rather than automate bad behaviors.
Everyone is implementing technology to automate the sales process.
My opinion: Exciting! However, avoid automating ineffective behaviors. Technology that helps salespeople understand buyer context is great for everyone. Technology that helps salespeople more efficiently spam buyers with mass emails will likely insult the prospect and hurt the company’s reputation in the market.
5) Leverage team compensation between hunters and farmers.
Smaller initial deals and larger revenue expansion post-sale is good for both the buyer and the seller. However, this dynamic introduces complexity on how to properly compensate hunters and farmers for revenue upgrades. Most organizations are “double comping” hunters and the farmers for any upgrade revenue in the first 12 months of a new customer lifecycle.
My opinion: I agree with the approach, although I would label the strategy as a “team-based” compensation strategy as opposed to “double comping.” In my opinion, “double comping” means the company is over-paying commissions on that account. However, most finance departments can estimate with reasonable accuracy the upgrade revenues from accounts and factor this assumption into the commission rate calculation to make sure the overall pie for commissions is sustainable. Ultimately, this “team-based” approach is crucial to incenting hunters and farmers to work together to maximize long-term customer success.
6) Create a competitive advantage by using SDRs more strategically.
Most organizations pass all leads to and originate all appointments via SDRs.
My opinion: I think the industry is making a mistake here. If a CEO from a perfect-fit company comes to your website and requests a demo, do you really want their first contact with your company to be with a relatively inexperienced SDR? That lead should be passed directly to your best salesperson. SDRs are an opportunity to drive efficiency in the sales cycle but the industry has swung too far. Take advantage of this insight as an opportunity to leapfrog over your competition.
7) Avoid using channel partners too early.
Many early stage CEOs are intrigued by the allure of selling through an external channel sales team, avoiding the cost and headache of setting up a sales team of their own. However, in the early stages of go-to-market strategy development, there are significant learnings the company needs to navigate through, such as the buyer’s journey, buyer’s concerns, ideal sales process, etc. An open communication line between the front-line sales conversations and the rest of the organization is needed to properly learn and iterate on the model. Selling through channel partners too early jeopardizes this opportunity.
8) Prioritize customer success when measuring the success of channel partners.
When selling through channel partners, measure the performance of these partners on the success of their customers, not just the revenue the partners produce.
9) Consider specializing post-sale roles as well.
More organizations are specializing post-sale roles in addition to pre-sales roles. For example, rather than have one team of customer success managers, have separate teams specializing in technical setup versus product onboarding versus long-term account management.
My opinion: We have had a lot of success increasing customer success with this strategy at HubSpot. However, be strategic about how information is passed across each post-sale resource to make sure the customer has a seamless experience. This strategy is better for larger accounts and more overhead than it’s worth for smaller accounts.
10) Specialize by inbound versus outbound leads when diversifying go-to-market channels.
Some organizations have the luxury of scaling to a certain size exclusively through inbound leads. However, due to market maturity or accelerated growth goals, most organizations need to add outbound lead generation into the mix. Under this context, consider creating a separate team that does not receive inbound leads and is expected to produce only with outbound generated opportunities.