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Improving Sales Performance
This article is aimed at Outlook Ventures' portfolio companies and other startups focused on growing sales and marketing activities. The article has been authored by Michael Cannon, a member of the extended Outlook Ventures family and Founder and CEO of the Silver Bullet Group, Inc., a sales performance improvement consultancy.
If your firm has attained Proof of Concept and is now working to attain or maintain Proof of Scalability, this article is for you. Proof of Concept is market validation of the company's offering by developing 3-5 paid reference accounts. Proof of Scalability is validation that revenues scale in proportion to the number of sales reps. It indicates that you have developed a "just add water" process for growing revenues.
The opportunity to improve your company's sales performance is significant. A simplified equation for sales revenue is often expressed as:
Number of Sales Reps x Quota x Performance Factor
The Performance Factor (PF) is the average percentage of quota attainment across the sales force. Improvements of 5-10% or more in the company's Performance Factor can generate millions of dollars in value for your organization, both directly in increased sales and indirectly in improved valuations.
A software firm, for example, had 18 reps with a quota of $1.5M each and a .74 PF. Thus their expected product revenue was $20M. Raising the PF by 5% or to .78 increased sales by over $1M. The increase leveraged the existing sales force and cost structure, which meant that most of the $1M went right to net income and earnings-per-share (EPS). Increasing the PF by 10% dropped another $1M into the EPS line.
The company also found that improving PF enabled new reps to reach profitability about 50% faster, and the velocity of sales increased. Both these provided further improvements in EPS by reducing the cost of sales.
In venture backed firms, one of the keys to improving performance is to understand the core differences between your sales and marketing teams and their impact on messaging content.
Figure 1: Core Differences Between Sales and Marketing in High Tech, VC Funded Firms
While Marketing and Sales have the same company goal, as Figure 1 illustrates, their departmental focus and skill are substantially different. Two critical differences are Audiences and Perspective, which have a great effect on message content.
Audience is the primary consumer of a department's deliverables. Marketing's audience is primarily investors and analysts. Sales' audience is prospects and customers. This difference is debatable in that Sales "should be" Marketing's primary audience. If your company's investor and customer presentations are built from the same slide deck then the point is truer than you might realize.
Perspective is the angle of thought from which the goal is being solved. Marketing's perspective is describing "what" the product does, "where" it fits in the market and "why" the company is a good idea/investment. Sales' perspective is answering "why" the prospect should buy the product, "why" the prospect should buy from their firm, and "how" to get the prospect to buy now.
These differences between Sales and Marketing usually lead to a messaging gap. Marketing tends to develop investor focused messaging (why invest) or gold bullets to accomplish its team goal of winning investors and analysts. What Sales needs is customer focused messaging (Why Buy™) or silver bullets to win customers.
The problem is that marketing often uses the same investor focused content to create sales collateral. This is why Sales frequently complains that much of Marketing's deliverables are not useful.
Gold bullets are for winning investors. Silver bullets are for winning customers.
Loading the sales gun with gold instead of silver bullets is a major contributor to why most VC funded organizations have a lower Performance Factor and higher sales and marketing costs.
The first step in increasing sales is to calculate your company's Performance Factor. Then calculate what a 5% or 10% improvement in the PF would mean to the company's bottom line. Next map the steps in the sales process and identify the sales tools used to move prospects from step to step. How well do the sales tools/ collateral answer the prospective customers primary Why Buy™ questions?
Why should I buy your firm's product or service?
Why should I buy the product or service from your firm?
To convert the messaging in the sales tools from gold bullets (why invest) to silver bullets (Why Buy™), use Why Buy™ Chains as a technique for identifying and developing customer focused messaging. Why Buy™ Chains represent the links between your company's offering and improvements in the customer's condition and buying motivation. You can develop Why Buy™ Chains by repeatedly asking the rhetorical question, "What is the benefit of that?" where "that" is the answers to the questions above and all the answers developed from the rhetorical question. "What problems do you solve?" is also a good question to use in the development of Why Buy™ Chains.
Summarize the answers to the primary Why Buy™ questions into three main points and their supporting reasons into a Why Buy™ Value Summary and a Why Buy™ Competitive Summary. Then make sure that the messaging in the sales tools reflects these key points and that the sales team is following the sales process.
Lastly, create a system for measuring conversion ratios and velocity between steps in the sales process. Focus on the step with the worst ratio and determine what needs to change in order to improve the ratio. Continuously work to improve the conversion ratios in the sales funnel until you are satisfied with the company's sales performance.
The Why Buy™ Now Selling System outlined above is a proven methodology for increasing sales by focusing on the variables that affect the company's Performance Factor. It also enables your sales and marketing teams to work more effectively together in supporting the company's goal, which is to grow profitably.
Michael Cannon is Founder and CEO of the Silver Bullet Group, Inc. A sales performance improvement consultancy that works with business owners and managers who are not satisfied with their company's sales performance and who are interested in cost effective methods to increase revenue. © Copyright 2003 by the Silver Bullet Group, Inc. All Rights Reserved.
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