Are you Sales-driven or Marketing-driven? Most enterprise B2B Sales organizations are a mix of Direct, Indirect, Installed-Base, New Business and Over-Lay Sales. And every one of them would tell you they are Sales-driven. Marketing does all that fluffy stuff but Sales delivers the goods. Nice! Sounds heroic. I might even have said this at some point myself, but I’d be culturally obstructing my company from achieving breakthrough growth acceleration. Make this mistake and you’ll get left behind.
Next-generation Sales organizations are highly instrumented and intimately connected to the demand-generated process. Marketo, Eloqua and others call it the Revenue Cycle, where Revenue Performance Management is the mandate for the newest member of eStaff – the Chief Revenue Officer (CRO).
Here are 5 questions that every VP of Sales must be able to answer to survive in the new era of Marketing-led business growth.
1. How Many Sales Leads Do Each Of Your Sales People Need to Achieve Quota Expectations?
The formula is pretty simple. In practice or course, there are a lot of moving parts. Here’s the model – you’ll need to know basic conversion rates, your average deal size, the time it takes to convert at various stages and your rep-level new Bookings goals. With these numbers you can easily calculate how many ‘leads’ each sales person will need.
In this example, $50K in May bookings will require signing at least 2 new customers, which is in turn supported by the creation of at least 6 new Sales Opportunities in February, 18 new Sales Ready Leads (SRL) that same month and 180 Marketing Qualified Leads (MQL) in January. Often referred to as the Revenue Cycle Waterfall, it looks something like this…
So, the answer to ‘how many leads do each of my Sales Reps need?’ is… it depends what you mean by ‘Leads’. Most companies define several classes of ‘leads’, this example shows two common definitions – MQL and SRL, you’ll probably want to focus on SRLs, that’s normally where Sales get eyeballs on the contact details. As you can see, the SRLs are required to increase over time as the booking expectation grows – 18, 27, 32.
2. What Are Your Leading Indicators to Future Sales Success?
Let’s agree that ‘success’ means actual bookings exceeds your target. There are two groups of leading indicators to future booking – inputs and, conversions. Think of ‘inputs’ as things added to the mix – in our example, it’s Sales People and Marketing Qualified Leads. Conversions (and conversion trends) captures a notion of effectiveness and quality – how effectively do we convert someone with interest into a paying customer and how much do they value our product/service. Here’s a set of summary charts on conversion trends…
…notice the severe drop in SRL-to-Opportunity conversion rates. All else being equal, this will certainly have an impact on your ability to achieve future sales booking targets.
3. How Do You Affect The Quality of Leads Flowing Into The Sales Pipeline?
This single most powerful control you have over MQL quality is the feedback loop with Marketing. You’re probably not doing this but you should be. Sit down with Marketing and agree on a ‘contract’. They’ll supply you with XYZ% of your required SRLs and you’ll agree to hold the team accountable for speedy follow-up. All it takes is a simple process and agreement on 30-minute weekly face-to-face (or voice-to-voice) meeting between field Sales and Marketing leaders.
As the SRLs come in, the Marketing team communicates the details to Sales in a brief email (perhaps generated by the CRM system), summarizing the opportunity and committed next step, normally a scheduled call. On the night before the weekly meeting, Marketing sends a summary of all SRLs for the week and who they went to. You take the time to gather feedback from the Sales team on the status of each SRL (or at least the highest priority SRLs) from the week prior. In the 30-minutes weekly meeting, Marketing walks you though the summarized list and you’ll have a chance to dig into the nature of these front-line conversations. You’ll report to Marketing on the status of SRL’s from the prior week – how was the quality, any new patterns, etc.
This simple process/meeting will glue Sales & Marketing together at the hip. They’ll learn to empathize with each other and challenge each other to get better and better over time. Before you know it, they’ll consider themselves to be on the same team!
4. What Controls Do You Have Over Scaling Lead Volume From The Various Sources And How Do You Use These Controls?
As described above, your feedback to Marketing will help them adjust demand generation programs for the marketing-sourced leads. What you have immediate control over is how Sales People spend time developing their own territories. Of course, most of these discussions happen in Sales Pipeline building meetings.
You’ll also want to monitor your team’s use of Sales 2.0 tools and technologies for social/business networking and partnering. Those of you with more ambitious plans might also consider services like Mintigo or other non-traditional lead sources to augment MQLs and SRLs coming from Marketing.
5. How Do You Know If You Should Add Another Sales Person?
There are a number of reasons for adding more Sales People – a land grab, defending turf, establishing tighter regional focus or, responding to demand. I’ll stick to this last one for this analysis. Again, the formula is pretty simple. Take the Revenue Cycle Waterfall chart we did for the individual Sales Person, expand it to include Total Bookings, a Monthly Sales Person Quota and Average Deal Size. As you see below, the right number of Sales People (and when to bring them on) is a function of Bookings expectations and conversion rates.
In this example – $350K in August Sales Bookings means 15 new customers, 44 Sales Opportunities and 126 SRLs in May, 1,263 MQLs in April and 4 fully productive Sales People in August with an $86K average monthly sales quotas. The model tells you when Sales People need to be added but in practice, watch the leading indicators (conversion rates and MQL inputs), these will signal the right time to add.
Result – Thrive in This Marketing-Led Business Growth Era
Today’s high-flyers – LinkedIn, Pandora, Jive, Marketo, Eloqua, Hubspot and many others are very much Marketing-led Sales organizations. To survive, indeed thrive in the new world, you need to understand and embrace the entire revenue cycle. You need to know exactly where the controls are over your business and how to use them effectively. If you don’t, you wont last long.
Here’s the complete presentation – shoot me an email and I’ll send you the accompanying spreadsheet you can use to get started.
This article is part of the Sales Pipeline Management Mastery series.
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