The days are becoming noticeably shorter. Summer is winding down, and sellers will soon be in the last quarter stretch to meet or beat quota. Now is a good time to take a hard and realistic look at where your organization is likely to wind up for three reasons:
- You still have four months to reach where you want or need to be.
- If they wait until November or December, salespeople can be overly optimistic in their forecast. Being realistic now can help define accurate projections for year’s end.
- How sellers finish this year can have a great impact on their 2019 achievement. If they feel that they must close everything in the pipeline, they may make 2019 effectively a 10-month year by scrambling in January and February.
Here are five ways sellers can take action now to avoid a scramble at the end of the year.
1. Examine Pipeline Opportunities.
A good place for a salesperson to start is taking a hard look at each opportunity in the pipeline and answering the following questions to determine if your company is a vendor of choice:
- What is the highest level that you’ve had access to?
- What outcomes are they hoping to achieve, and is there sufficient value to justify the expenditure you are asking them for?
- Whose numbers were used to create the budget?
- Who is your competition, and what level have they been able to call on?
2. Remove the Dead Weight.
If a rep has quotes or proposals that have been open for more than 45 days, he or she should consider withdrawing them. Prospects often like to have all their vendors competing so they have leverage when negotiating the best price.
Let’s assume the salesperson has not reached decision-maker levels. The conversation can go like this: “My quote was issued over 45 days ago, and no decision has been made. You indicated Sally Jones would make the decision. Can we meet with Sally, because I’d like to offer a cost/benefit to estimate potential payback. I just don’t want to spin my wheels on this transaction.”
Unlike fine red wines, proposals have half-lives. As each day passes, a seller’s chance of winning that business erodes. It’s better to try to qualify or disqualify the prospect rather than continue to hope it may close.
3. Negotiate Sequence of Events (SOE).
Has the salesperson been able to, or will he or she be able to, negotiate sequences of events (SOEs) with customers and prospects? Negotiating an SOE means allowing the buyer to estimate a timeframe for making the decision and then negotiating a written document with steps and estimated dates that culminate in making a recommendation (providing a written proposal).
4. Look for Hidden Opportunities.
Help salespeople uncover new opportunities. If sales cycles are too long, look for add-on transactions that the rep may be able to close. Typically, when dealing with customers, legal documents are already in place, and sales cycles are considerably shorter.
5. Crunch the Numbers.
Treat each month as a small closing, and track where your reps expect to be in the future. If a salesperson’s annual quota is $1.8 million, their monthly target is $150,000. Next, estimate the typical length of a sales cycle. If it’s four months, multiply that monthly target by four, and you can expect the rep to generate $600,000 over that period.
Now, divide that figure by the decimal equivalent of the rep’s close rate. For example, if they have a 50 percent win rate, then their target is $1.2 million – if they are year-to-date (YTD) or better against their quota. Let’s say in January, a seller was $50,000 short. Then, the revised target would be $1.3 million (double the shortfall and add it to the target). By doing what amounts to 12 small closes during the year, sellers are less likely to scramble at the end of the year. YTD calculations are trailing indicators – effectively, a look in the rearview mirror. The calculations suggested here are leading indicators of the revenue needed to reach or remain YTD in the future.
The two most significant drivers in these calculations are win rate and length of sales cycle. For the example described, increasing the salesperson’s win rate to 66.66 percent and decreasing average sales cycles to three months means their target becomes $676,000. Starting at key player levels and building strong cost/benefit analyses will often mean shorter sales cycles.
Sales train wrecks happen over several months. Many sellers dislike and/or are inept at business development. As soon as their pipelines are full, they stop searching for new opportunities. By looking a sales cycle and projecting what the salesperson will need to be YTD or better against quota every month, both the rep and manager have a clear picture of the levels of activity that are necessary. This approach reduces the anxiety and stress that usually comes with racing toward year-end goals.