Scaling your Sales team

How do you know when to add another seller to your team?

I recommend taking a lesson from hardware/software development teams everywhere:

Reverse engineer the answer.

How do we do that? By working backwards through the following data points:

  1. Bookings Target (E)
  2. Average Sale Price (or avg. TCV) (D)
  3. Opportunity Win Rate (C)
  4. Lead Convert Rate (B)
  5. Total Leads Needed (A)

Going backwards from your Bookings Target to your Total Leads Needed tells you exactly what’s required to hit your goal.

If your head is swimming after reading all that, that’s OK. We can look at all of it in reverse – or really, forwards – to clear up any confusion.

  1. Your Marketing activities generate some number of Leads (“A”).
  2. A percentage of those Leads are converted to qualified Leads, which are more recently referred to as Opportunities (“B”).
  3. Your Sales team wins some percentage of Opportunities (“C”),
  4. …at some Average Sale Price or Total Contract Value (“D”),
  5. …thus you achieve your Bookings Target (“E”).

As long as A x B x C x D equals E, you live to fight another day. So that’s what you plan for.

Going one step further, identifying your Lead Generation Rate and factoring that against your Marketing activities informs your Marketing spend required. I’ll get into that more closely in another post.

Next, determine the following:

  • Number of Leads a Business Development Rep (BDR/SDR) can work per week
  • Number of Opps an Account Executive (AE/”Seller”) can work per week

Now it’s a matter of applying the answers to your headcount plan. For example:

  • # Opps / Opps worked = minimum AE headcount required
  • # Leads / Leads worked = minimum BDR headcount required

Notice I said “number of Leads someone can work per week…”. When identifying this number, I suggest looking only at the top 20% of your sellers. What number of Leads do your top BDRs work per week? What number of Opps do your top AEs work per week? This informs your interviewing and hiring. Tell candidates the hard facts and work together to identify whether or not they’ll be a productive member of the team.

Look forward.

It’s important you look at these numbers based on what’s required to hit goal. You aren’t hiring for what you need to close just to survive the current sales year. Staffing based on the current number of deals in your pipeline doesn’t get you to the finish line if you’ve only got half the pipeline required.

If you plan for today’s goal, the end result may be achieving just 50% of plan and the doors closing behind you.

Update regularly.

Once you’ve gone through the above calculations and determined your basic headcount needs, you need to refresh them regularly. Do it once a month. Update all your inputs.  In a healthy business, the data points from the first section above are increasing all the time. This means you need to update your calculations all the time. Doing this monthly also identifies gaps to plan, letting you know which areas need extra support from your exec staff and other leaders.

Always be testing (your data).

Test today’s output against next year’s goal. Plan forward for hiring, e.g. one lead-to-close cycle. Remember to account for seller ramp time (also known as “rep ramp time” or “rep ready time”).

You’ve got an extremely powerful tool at your fingertips.

Reverse engineering can be used for far more than sales headcount planning. It can take you beyond simply reaching your goal and into dramatic overachievement. Imagine taking the following factors into account:

  • Average quota attainment
  • Sales turnover
  • Sales backfill needed at any given time

Imagine if you could extend this out to recruiting:

  • Percentage of successful hires
  • Percentage of candidates you hire
  • Percentage of candidates who get past screening
  • Number of candidates your Sales leaders and recruiters are bringing in

This latest exercise tells you how many candidates you need per new job opening and whether or not your recruiting practices are addressing your needs.

Want to take this even further? You can reverse engineer your employee development needs. Look at the top 20% of your entire operation to determine rough training plans for your bottom 80% (the Pareto principle). Think about factors including:

  • The number of Leads generated per day by the top 20% of Marketing campaigns. What’s happening with those campaigns that isn’t happening in the rest? How can you get the “tier 2” campaigns up to par with those in tier 1?
  • The proof-of-concept success rates of your top 20% of Sales Engineers. What are those SEs doing that the others aren’t?
  • The hiring rates of your top 20% of managers. How active are they in constantly building their networks of potential future hires?

With each “drill-down” question, it’s critical that you ask with sincerity and respect. You’re looking to break things down and figure out how to reproduce those tactics which have the highest return, you aren’t looking to bring the proverbial hammer down on what (or who) isn’t working.

At first, keep it simple.

You may want to dive right into looking at your recruiting cohorts, market segments, and more, but it’s important to keep things simple at the start. Determine your initial high-level plan and refresh that plan monthly for at least a couple of quarters. Once you’ve got that nailed down, that’s when you want to consider drilling down into real nuts and bolts.

Where do you go from here?

Looking to vet-out your headcount plan, or build one from the ground-up? Head to my Contact page or send me a message on LinkedIn and let’s talk about how I can help.

How to Change Your Sales Team’s Territories

If you’ve ever altered Sales territories or had your own territory broken up, you know that shuffling sales territories can present a major challenge. Changing territory models altogether? That’s on another level. I’ve been through this change twice and lived to tell the tale. I’ve also “inflicted” such a change on others.

For you sales leaders out there, here are my takeaways for a successful territory model change:

Get your Sales Leaders on board

#1  Strategically, all sales leaders at all levels need to be on-board with the plan and the vision. The good ones who aren’t fans of the model will still carry the torch. The ones who can’t get over it and grow as the company grows are good candidates for an exit. Connect them with the people in your network who need great sellers and help them move on to their next adventure.

Communicate, communicate, communicate

#2  Territory shake-ups are one of the many things in business that I find most people treat far too confidentially, or just with “kid gloves”. Rip the band-aid off. It’s a business. You aren’t taking some kid’s toy away. The good leaders and sellers will get it and keep executing. Don’t wait on getting your sales leaders on-board to communicate to the rest of the business. I’m not saying bark out your final plans as orders. Few people appreciate that kind of heavy-handedness. Instead, communicate that change is coming, that territories are going to be changed, and that everyone will see new selling opportunities because of it. All of this is both true and positive.

Execute a planned roll-out

#3  Tactically, this is best done as a “roll-forward” and not as a “flipping the switch”. That might translate to a high-level plan of:

Move all customer accounts to their new territory owners as of (current date), on (future date, say 2 weeks out), except for those with open opportunities in the pipeline due to close either this quarter or 1 quarter following.

As an example: “It’s October 24th. On November 9th, we’ll be moving all the accounts that had no open opportunities as of October 23rd. For every open Opp, you’ll get 2 quarters to close the deal. After that, we’ll roll it to the new owner.”

For all active/open deals, give people two quarters to close them up. This includes the current quarter only if it’s the first month of the quarter. I’ve also seen this done as 2x the average sales cycle. It’s a good buffer against whining over “how unfair this is”.

This tells your sellers they can’t go back in time to set up fake deals as a way to game the system. It also tells them their current deals have some protection but that protection can’t last forever.

Between the “life isn’t fair” conversation and the “it’s 2x the sales cycle” conversation, the good reps will get it. Equally important: don’t forget your Federal and/or “Major Accounts” rep(s). The sales cycles for them tend to be much different than for the rest of the pack. Whatever deals your reps don’t close in that time period probably weren’t real in the first place.

The positive spin? You’ve identified a specific, defined playground to operate in for some defined period of time. Often that playground is “the rep’s home turf” and the defined period of time is “1 full fiscal year”.

When to get moving

#4  A great time to do this is month 1 of fiscal Q4. Especially if your fiscal year follows the calendar year. Why? This lines you up for a perfect start as of Jan 1. Changing the playing field lights a fire under your closers. It challenges those reps who love competing for the top spot (which should be every rep!) It’s also the busiest time of the year for job hoppers who’ll either push harder or leave faster. Either way, your business is better off.

Remember what I said earlier: this doesn’t mean change everyone’s territory and then rip all their sales opportunities away. Announce the plan and the rolling start date and let your sellers know to close out the fiscal year strong.

Account Management is Dead. Long Live Customer Success.

If you’re in Sales, Marketing, or Recruiting, it’s likely you’ve seen Customer Success Managers replacing the more traditional Account Manager role. When I say “Account Manager” I’m referring to the “farmers” in a Sales organization. Their job is to maintain customer relationships and up-sell. What this often boils down to is making sure renewals are processed and then pushing more products and services.

Unlike the more traditional Account Manager, Customer Success Managers get into the mind of the customer. They study the customer’s business and the challenges holding the customer back from professional and personal success.

Customer Success Managers care deeply about customer outcomes. They develop plans to get the customer over the first goal line, then they push the goalposts back and guide the customer to the next level of success.

Because they work to always act in the customer’s best interests, Customer Success Managers become the customer’s trusted advisor. When executing at their peak, Customer Success Managers drive near-100% customer retention. Customers love working with them and naturally buy more of your company’s products and services. Renewals just happen: in the customer’s mind, there’s no question about continuing the partnership.

Meanwhile, Account Managers are rarely thought of as anything more than order takers.

The good news for the Account Managers and Sales leaders out there who manage “farm teams” is that it’s not a big leap to go from “order taker” to “trusted advisor”. It all begins with laying a foundation:

Step 1: Make the success of your customer your top priority. Whether that success is professional or personal, it needs to be priority #1.

Step 2: Always be asking, “How does this help my customer be more successful?” If the answer is ever, “It doesn’t”, ask again. Ask until you’re blue in the face. Then take a breath and get back to questioning!

These are the first principles to get you started. Is there more to Customer Success? You bet. But it all flows from a deep desire to see the customer succeed. Do that and you’re on the right path. Both for the customer’s success and your own.

 

Inspired by the article, “Owning the Number“, written by Jay Nathan, Founder of Customer Imperative. Special thanks to Nick Mehta, CEO at Gainsight for sharing Jay’s article on LinkedIn.