The Office Of Financial Research recently studied companies whose stock had tripled over the last six years. It concluded that the stock increase was due to controlling costs rather than revenue growth. These companies delayed hiring new people, and limited investment in new facilities and R&D spending. They benefited from low interest rates in reducing borrowing costs and the fact that for many investors, stocks were the only instruments that offered the potential for significant returns.
The recovery that started in 2008 has been tepid. Few companies are experiencing anything close to the revenue growth of the '90s, but those that grow revenue can distance themselves from the herd.
Here are the reasons many companies will miss their revenue targets this year, from my perspective.
1) Looking in the rear view mirror.
This begins at the sales rep level but can become an enterprise-wide problem. Like major league hitters checking their batting average, so sales staff from reps up to SVPs focus on their YTD positions against quota. However, the only benefit of focusing on YTD is to realize how much of the mountain is left to be climbed.
Salespeople would be better served to look through the windshield with occasional glances at the rear view mirror. Train wrecks occur a month at a time. Projecting a sales cycle ahead of time gives sellers a much better chance of making their numbers. It’s relatively straightforward to do so -- simply take your current pipeline, multiply the gross at each milestone times your historical close rates (actual or estimated), and determine if a seller can reasonably expect to be YTD one sales cycle ahead.
Let’s say your average sales cycle is three months. Having just finished the first quarter, you’d like the projection for the coming quarter plus your YTD achievement through March 31st to equal half your annual quota. If there is shortfall, there should be ongoing efforts to find and bring new opportunities into your funnel.
Ideally, these calculations should be done every month.
2) Not arming sellers to understand business issues.
I find it ironic that companies continue to spend inordinate amounts of time and money on training sellers on products.
Mid- to low-level buyers start evaluating offerings on their own. The plethora of search engines, websites, webinars, white papers, and other marketing collateral fully arms them to do so. The negative stereotype of sellers is alive and well with B2B buyers. These prospects believe sellers will try to manipulate them by influencing their requirements.
Extensive product training can turn B and C players into “spray and pray” sellers. The problem is that few executives have the time or desire to go into gory details about products. A players have the innate ability to uncover executive business goals and focus on how offerings can be used to achieve them.
Sellers that launch into product pitches are likely to suffer poor outcomes, such as:
Premature pricing discussions
Executives saying they’re not interested because they don't see any business value
Getting delegated to lower levels
In my mind, the most important thing competent B2B sellers bring is an understanding of enterprise-wide benefits that can be realized through the use of their offerings. When the cost vs. benefit doesn’t make sense the dog won’t hunt. If, however, sellers can articulate benefits and better yet discuss how the company’s financial picture can improve, the chances of making sales are far better. I wish vendors would look at their product training costs and reallocate some funds to make their sellers more competent business consultants.
3) Confusing activity with progress.
B and C sales players typically initiate opportunities at low levels, view everyone as a buyer, lead with product, don’t gain access to key stakeholders, fail to uncover business issues, and don’t establish value with compelling costs vs. benefit analyses. They will make numerous calls (activity) but aren’t gaining access to stakeholders (progress). They often provide quotes or proposals (activities) far sooner than they should. Sadly, many of these sellers believe opportunities are much farther along than they actually are.
4) Relying upon seller opinions when grading pipeline.
Executives that think seller pipelines lead to revenue forecasts are mistaken. Sellers below quota realize their managers are going to be “in their faces” if it appears there isn’t adequate activity going on in the territory. Some sellers might not even realize their unbridled optimism has no basis in reality as relates to their pipeline health. If you add every opportunity in a C player’s pipeline, the total may exceed the GDP of many small countries! What is a sales manager to do?
Ronald Reagan gave sage advice when he said "Trust but verify." The antidote to relying upon seller opinions is to implement as many verifiable buying milestones as possible to maintain good pipeline management
Within the CustomerCentric Selling® sales methodology, the first significant milestone is qualifying a champion (someone who can provide the seller access to other key players). We show the seller how to draft a champion-qualifying email and give sales managers the ability to edit it. If the seller states the buyer has agreed to the content of the email and is willing to provide stakeholder access, the manager grades the opportunity as “C” (Champion). This is the “trust” part of Regan’s advice. The “verify” is to check an email has been received indicating access has been granted.
If a month goes by without gaining access, a conversation ensues and the opportunity may be kicked back to a prior milestone. This is one of many measurable activities that we tie to milestone achievement.
5) Defining only one set of milestones.
A common mistake I see is companies defining sales pipeline stages for major opportunities and expecting sellers to use them for each and every deal. Sellers working on smaller opportunities soon discover they are being asked for enter far more data and take many more steps than are warranted in the scenario.
No need to use a jackhammer when a tack hammer would suffice. In such cases, sellers rightfully complain or refuse to adhere to the milestones. Most organizations have at least five or six processes that warrant unique milestones (add-on business, renewals, services, maintenance, SMB sales, large accounts national accounts, etc.). First define your most complex sale, but then “water down” the steps needed as opportunity size and complexity decrease.
One of the foundations of CCS® is that people prefer to buy rather than being sold. The same is true of organizations. Transaction milestones should meld the prospect’s buying process with the vendor’s selling process. Failing to incorporate buying steps means forcing your sales process onto the buyer -- not a very customer-centric thing to do.
The recovery limps along. Companies that get wise to the realities of the current buying/selling environment and align with them will have a better chance of achieving their revenue targets.
Originally published Apr 13, 2015 8:00:00 AM, updated July 28 2017