sales operations for early stage companies

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1 Sales Operations for Early Stage Companies Stephen C. Sweeney March 24, 2006

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Developed for the Entrepreneurship and Venture Capital Club at Darden School of Business, The University of Virginia.

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Page 1: Sales Operations for Early Stage Companies

1

Sales Operations for Early Stage Companies

Stephen C. Sweeney

March 24, 2006

Page 2: Sales Operations for Early Stage Companies

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SalesIt is a tough job these days . . .

Buyers increasingly aware, knowledgeable, and discriminating

Sales increasingly cross-functional Sales increasingly team-based Sales increasingly relationship-based Sales remains solution-focused Big competitors have and leverage both relationships

and resources

Page 3: Sales Operations for Early Stage Companies

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Fundamentals of Sales & SellingIntroduction

This presentation is not about . . . Marketing Public Relations Negotiation Sales Organization Sales Compensation Plans

This presentation is about . . . B2B Selling Process & Opportunity Planning . . . but general principles still apply to other products /

services

Page 4: Sales Operations for Early Stage Companies

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Fundamentals of Sales & Selling Is sales important to the life of a company?

Yes.

Is sales important to your career? Definitely.

How many marketing cases were on sales? One.

How many LO cases were about sales (to date)? Nordstrom & the Q2 Exam . . . “kind-of” about sales.

Why so little coverage?

“WE ARE ALL IN SALES. PERIOD.”- Tom Peters

Page 5: Sales Operations for Early Stage Companies

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Fundamentals of Sales & SellingWhy so little coverage? Sales is as much art as science.

Often viewed as a line responsibility, not corporate

Often viewed as a commodity skill, not sophisticated

Prejudice against sales and sales people (used car salesman)?

Moved into FY Entrepreneurship elective

???

Page 6: Sales Operations for Early Stage Companies

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Fundamentals of Sales & SellingThe Reality. Sales is the tip of the spear of your organization.

Prospects will know you (identify you) through the quality of their interactions, which until a sales happens, occur primarily with the sales representative.

The quality, or lack thereof, of those interactions will have a lasting impact . . . and are sometimes impossible to shake.

Our connected world will preserve many of these negative interactions for posterity.

You don’t want to be “that guy” or have “that guy” on your team.

Page 7: Sales Operations for Early Stage Companies

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Fundamentals of Sales & SellingContrast – Negotiation & Sales

Negotiation With an interested prospect, working to agree on price

and terms. Trading concessions.

Could result in win-win Could result in win-lose Could result in lose-lose

Page 8: Sales Operations for Early Stage Companies

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Fundamentals of Sales & SellingContrast – Negotiation & Sales

Sales Process of motivating the prospect to buy your solution

on your price and terms.

Note, however: The goal is to result in a win-win negotiation where both parties

satisfied. Create the value. Capture the value. Sell now, negotiate later.

Page 9: Sales Operations for Early Stage Companies

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Fundamentals:Some Sales Nomenclature

Direct Outside Sales = in the field

Indirect Inside Sales = over the phone, sales support, lead

generation, pooled, call center Channel Sales = pulling product through a channel

Process, Concepts, Techniques largely universal

Page 10: Sales Operations for Early Stage Companies

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Fundamentals:The Funnel The Sales Cycle

Prospect Unqualified Lead (Mendoza Line) Qualified Lead Value Proposition Proposed Verbal Closed (won)

Other Dead Lead Lost

Unqualified Lead

Qualified Lead

Value Proposition

Proposed

Verbal

WON!

Prospect

Dead

Lost

Lost

Lost

Lost

Page 11: Sales Operations for Early Stage Companies

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Fundamentals:Funnel Implications . . . “Put your ops hat on.” Not all prospects advance to the next

stage. Understand why – post mortem. Improve efficiency – continuously.

Not all prospects move through the funnel at the same rate. Understand why. Improve flow rate; remove

bottlenecks – continuously. Process and infrastructure should be in

place to support each stage. Information is collected &

disseminated at each stage. Market intelligence Competitive intelligence!

Funnel must remain full and flowing!

Unqualified Lead

Qualified Lead

Value Proposition

Proposed

Verbal

WON!

Prospect

Dead

Lost

Lost

Lost

Lost

Page 12: Sales Operations for Early Stage Companies

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Fundamentals:The Funnel & The Sales Pipeline

Unqualified Lead

Qualified Lead

Value Proposition

Proposed

Verbal

WON!

Prospect

% Won $ Value Risk Adjusted

3% 15,000,000 450,000

5% 10,000,000 500,000

10% 5,000,000 500,000

25% 4,000,000 1,000,000

50% 2,000,000 1,000,000

95% 1,000,000 950,000

37,000,000 4,400,000

Page 13: Sales Operations for Early Stage Companies

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Fundamentals :Working backward . . . put your QA hat on If Company A wants

to generate $5,000,000 in sales next year instead of $4,400,000, how many more prospects do they need? Assume: average deal

size is $500k Answer: +40 prospects

% Won Deals $ Value Risk Adjusted

3% 30+40

15,000k+20,000k

450k+600k

5% 20 10,000k 500k

10% 10 5,000k 500k

25% 8 4,000k 1,000k

50% 4 2,000k 1,000k

95% 2 1,000k 950k

74+40114

37,000k+20,000k

= 57,000k

4,400k+600k

=5,000k

Page 14: Sales Operations for Early Stage Companies

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Fundamentals :Working backward . . .

If we have 3 Sales Reps and each can manage 25 deals at any given time, how many more sales reps do we need? 125 deals / 25 = 5 5 – 3 = 2 new reps

% Won Deals $ Value Risk Adjusted

3% 30+40

15,000k+20,000k

450k+600k

5% 20 10,000k 500k

10% 10 5,000k 500k

25% 8 4,000k 1,000k

50% 4 2,000k 1,000k

95% 2 1,000k 950k

74+40114

37,000k+20,000k

= 57,000k

4,400k+600k

=5,000k

Page 15: Sales Operations for Early Stage Companies

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Fundamentals :Working backward . . . If we have 5 Sales

Reps, what kind of targets should we set? Trick question. You need each person

to carry a pipeline of $11.5M to close $1M each.

You would want to set the targets higher, however.

% Won Deals $ Value Risk Adjusted

3% 30+40

15,000k+20,000k

450k+600k

5% 20 10,000k 500k

10% 10 5,000k 500k

25% 8 4,000k 1,000k

50% 4 2,000k 1,000k

95% 2 1,000k 950k

74+40114

37,000k+20,000k

= 57,000k

4,400k+600k

=5,000k

Page 16: Sales Operations for Early Stage Companies

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Fundamentals :Working backward . . .

Given the “calls” required to advance the process, how many calls (activity) per week are required per sales rep? 1940 calls 5 reps 50 weeks = 7.75 calls / week

Stage Calls / Deal

Deals Total

Prospect 20 30+40

600+800

Unqualified 15 20 300

Qualified 10 10 100

Value Prop 10 8 80

Proposed 10 4 40

Verbal 10 2 20

74+40114

1140+800

=1940

Aha Moment!Five reps & 1940 interactions (brand impressions) with 114 potential customers and many more different individuals over 12 months?!!

How important is each and every sales interaction? How is your corporate brand being perceived, your message understood? Will marketing collateral or a website make a difference?

Opportunity – Do this right and you create competitive barriers and build a lasting company.

Threat – Screw this up and you create huge obstacles for yourself and/or your successors.

Page 17: Sales Operations for Early Stage Companies

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Fundamentals :Working backward . . . Added Complexity:

Multiple Products / Services Could mean different average deal sizes Could mean different average sales cycles (length & steps)

New business vs. Follow-on Geographic / cultural / country differences

Other questions that can be answered: How many lead generation resources do we need? How many channel partners do we need? Where should we set plan / quota?

Page 18: Sales Operations for Early Stage Companies

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Fundamentals:Sales Processes

Methodologies abound Siebel (Target Account Selling)* – www.siebel.com

*Most of the following concepts are from TAS

Sandler Sales Institute – www.sandler.com Solution Selling – www.solutionselling.com Miller Heiman – www.millerheiman.com Dale Carnegie - www.dale-carnegie.com

And many many others . . .

“If you don’t LOVE SALES … find another life. (Don’t pretend you’re a “leader.”)” - Tom Peters

Page 19: Sales Operations for Early Stage Companies

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Fundamentals:Why a Sales Process? Add structure to a process that is often unstructured and

performed by “gut” or “feel” People go into sales for two reasons: the freedom and the earnings

potential

Repeatability & standardization across an organization Consistent message, consistent service level

But ultimately to . . . Minimize negotiation concessions, maximize profits ($$) Increase sales efficiency (close ratio) Reduce selling cycles (time) Lose early (productivity)

Page 20: Sales Operations for Early Stage Companies

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Fundamentals:Sales Stages

All three are required to generate a sale.

Open

Prospecting

Uncovering Needs

Middle

Qualification

Value Proposition

Close

Competing / Proposing

Closing

“PUT THAT COFFEE DOWN! Coffee is for closers.” – Glengarry Glen Ross

Page 21: Sales Operations for Early Stage Companies

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Fundamentals:Opening – uncovering opportunities

Prospecting Cold Calling Networking Referrals Relationship Equity

Uncovering needs Ear to the street Asking questions Plugged in

Open

Prospecting

Uncovering Needs

Skills Required:No fear / issues with rejection. Disarming.Persistent.Up-front Contracts.Builds lasting relationships.Enjoys meeting new people; sociable.Inquisitive. Likes to learn. Knows how to ask questions.Trustworthy – can be a confidant. Not always out for self.

Page 22: Sales Operations for Early Stage Companies

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Fundamentals:Middle – finding the $$

Qualification Is there an opportunity? Can we compete? Can we win? The value and cost of winning

Value Proposition Stakeholders Business Needs Our Solution Unique Business Value

Middle

Qualification

Value Proposition

Skills Required:Understands customer needs.Understands an organization – 3 x 3.Recognizes influence / decision-makers.Inquisitive – asks the tough (& dumb) questions.Assume, Validate, Triangulate, Obtains Proof – why, why, why? More questions, less talking.Likes to lose early. Values time.Good at marshalling resources.

Page 23: Sales Operations for Early Stage Companies

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FundamentalsQualification To be qualified you must know:

There is a need we can meet – “Solution Fit” There is a decision-maker – “Economic Buyer” There is a reason to act – “Compelling Event” There is money to spend – “Access to Funds”

Take Aways: Lose early. It is very expensive to lose late. No qualification = No opportunity No opportunity = No Proposal.

Close Date implies Compelling Event

“Just say no.” – Nancy Reagan

Page 24: Sales Operations for Early Stage Companies

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Fundamentals:Opportunity Assessment (us & competition)

Is there an opportunity? Project defined? Business profile strong? Financial condition strong? Access to funds? Compelling event?

Can we compete? Formal decision criteria defined? Solution fit good? Sales resource requirements low? Current relationships strong? Unique business value strong?

Can we win? Inside support strong? Executive credibility strong? Cultural compatibility good? Informal decision criteria

defined? Political alignment strong?

The value and cost of winning Short-term revenue high? Future revenue high? Profitability high? Degree of risk low? Strategic Value high?

Page 25: Sales Operations for Early Stage Companies

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Fundamentals:Relationship Strategy

Starts with the org chart What is each person’s “buying role”? What is their adaptability to change? What is our status? What is our coverage? Where do they fit politically?

Influential? To whom? Influenced? By whom?

What are we doing (tactics) to improve our position with each?

Page 26: Sales Operations for Early Stage Companies

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Sales Process:Opportunity Planning Identify Tactics

The steps we will take to build relationships, gather information, and move the opportunity toward closure. Proving value. Retrieving information. Insulating against competition. Minimizing weaknesses. Emphasizing strengths.

What, by whom, and when?

Manage to the plan.

Page 27: Sales Operations for Early Stage Companies

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Fundamentals:Closing – asking for the business

Competing / Proposing Formal decision criteria Informal decision criteria Competitive Strategy Compelling Event

Closing Steps to close Asking for the business Uncovering objections Being creative

Closing

Competing / Proposing

Closing

Skills Required:Recognizes how decisions get made.Builds consensus.Gets creative.Persistent.Inquisitive – asks the tough questions.Not afraid to lose.Not afraid to ask for the business.

“A-B-C. A-Always, B-Be, C-Closing. Always be closing, always be closing.” – Glengarry Glen Ross

Page 28: Sales Operations for Early Stage Companies

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Fundamentals:Competitive Strategy If you have a compelling event

and have inside support: Offensive

Frontal Flanking Fragment

If you do not have a compelling event or do not have inside support: Defensive

Develop Defend

Page 29: Sales Operations for Early Stage Companies

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Sales Process:Five Deal Vulnerabilities Articulating Unique Business Value Decision-Making Criteria

(Formal and Informal) Budgeting and Funds Availability Date of Closure (Compelling Event) Steps to Close

Plus . . . Self-delusion

"Face reality as it is, not as it was or as you wish it to be . . You have to see the world in the purest, clearest way possible, or you can't make decisions on a

rational basis.“ – Jack Welch

Page 30: Sales Operations for Early Stage Companies

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Sales OperationsAreas of note . . . Customer Intelligence

Understand what data should be collected at each stage Understand where that data should live (spreadsheet,

CRM, forms) Pipeline, Forecasting, Management Reports Sales Support

Collateral Templates Scripts / Presentations

Sales Training Practice, practice, practice

Page 31: Sales Operations for Early Stage Companies

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Hiring for Sales Tips:

Maintain high standards Team orientation Personality Assessments “Pitch Me” Interview Customer References Probationary period with specific goals

Page 32: Sales Operations for Early Stage Companies

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Skills for Sales Success

1. Prospecting2. Qualification3. Account Planning4. Pipeline Management5. Opportunity Management

6. Call Planning

7. Relationship Building

8. Forecasting

9. Closing

10. Negotiating

Many of these skills can be learned.But can you teach them?

Page 33: Sales Operations for Early Stage Companies

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Qualities for Sales Success Work Ethic Sense of Urgency Listening – Understanding

Pains and Value Positive Attitude /

Possibility Thinking Teamwork Leadership Knowledge of Solutions and

Value Proposition

Creating Business Value for Prospects / Customers

Communication & Articulation

Intense Customer Focus -Creating Satisfaction

Articulating Business Value of Solutions

Responsibility and Ownership

And having fun WINNING!

Page 34: Sales Operations for Early Stage Companies

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Managing Sales People Hands on is best . . . Weekly focus, not quarterly or annually. “What are we going

to accomplish or even close this week?” Be demanding. Establish & maintain high standards. Coach / mentor / ride shotgun Focus on planning

Account Planning Opportunity Planning Weekly planning / prioritization Call planning

Insist on documentation, reporting, and forecasting Facilitate within the organization. Eliminate distractions. Step in to fill the gaps - Help with middle or close, not open!

Page 35: Sales Operations for Early Stage Companies

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Motivating Sales People Cash / Commission Plan – “Feed your eagles.” Accurate & timely commissions – minimize “noise”. Commission Plan Upside – Encourage momentum,

discourage sandbagging. Recognition – Feed their ego. Contests – Great for motivating for short-term, closing a gap,

inspiring healthy competition. Infrastructure & Support – minimize distractions, maximize

selling time. High standards.

“We're adding a little something to this month's sales contest. As you all know, first prize is a Cadillac El Dorado . . . Second prize is a set of steak knives.

Third prize is you're fired.” – Glengarry Glen Ross

Page 36: Sales Operations for Early Stage Companies

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Thanks! Stephen C. Sweeney

Entrepreneur & Venture Capital ClubThe Darden School of Business [email protected] 832-647-3453