OK – here’s a simple question. Do you have a sales problem? Not enough new customers buying your products? Are salespeople consistently missing their targets? If you’re leading a company with the potential to grow, this is incredibly frustrating. I get it. It needs fixing. And fast.
It’s easy to blame the Sales function. Let’s face it; it’s rare to find good salespeople. The Harvard Business Review found that only 15% of sales reps regularly hit their annual targets. That’s not many. It’s a profession that gets a bad rap for a reason. There’s little consideration given to personal development or professional qualifications. Many salespeople bumble along in mediocre companies, going through the motions. They take orders from existing customers, and you pay them a commission. Occasionally, through luck, word of mouth or geography, a new customer opportunity appears, and the salesperson closes it. The company grows at 5-10% year on year.
But how much of this is your salespeople’s fault and how much the ambition of your company? If you really want to grow, you need to be prepared to take a long, hard look at your business. And recognise that to get the best results from your sales team, you need to change the way your company operates.
Step Back for a Moment
When they first come to us, most of our clients don’t know why their customers buy from them. They’re not terribly clear on who their core customer is. If the Executive team doesn’t know this, how on earth can they expect their sales teams to succeed?
They’re all in a B2B space and talk as if customers purchase on a rational basis. They have a list of product features as long as your arm and compare these to their competition. Unless the customer knows exactly what they want to buy, they’re not actively consuming their product. When we ask them who they sell to, they say, ‘Anybody’. What segment of the market are they going after? ‘Anyone with a pulse and a wallet’. That’s just not good enough. Yes, the business may bumble along, but if any kind of economic shift or competitor pressure hits? BANG. Their business will be gone.
You have to get clear on some fundamentals. I return to Jim Collins’ ‘Hedgehog Concept’ once again. Successful companies know what they can be best in the world at. At least, the best in the world they define – best in Yorkshire, for example, if the location is a factor. They’re passionate about their purpose. And they’ve worked out what drives their economic engine. The overlapping of these elements will turbo-charge your growth like nothing else. And they will provide your sales team with a clear product and company positioning.
Get Clear on Core Customer
Put in place a model that says, very clearly, this is how you’re going to approach your market. Too often, companies cast the net too widely. Work out what your expectations are in terms of growth. And how many net new core or ideal customers you need to achieve this. In most markets, this won’t be thousands of leads.
Instead, you need to segment. Work out your core customer – the one that buys from you at the highest profit. Give them a name and job title, e.g. ‘Trevor’ from Human Resources. People buy stuff, not companies. Work out how you can add value to Trevor’s life. How can you be an expert in the problem Trevor has? Then makes sure your sales and marketing teams understand this implicitly.
The value proposition needs to be written in a way that interests Trevor. Most of the time, it isn’t. We see so many that talk about widgets. ‘Our product is better because of x, y or z’. But purchase decisions are made emotionally. Do people really buy a car because it has Michelin tyres rather than Goodyear? No! They’re drawn to a brand because they have an emotional connection.
Once you’ve identified 350 new Trevors, you need to build that emotional connection. And this takes time and repetition. Don’t move on to the next 350. Run Marketing campaigns, over and over, on this segment. Until these target customers start to buy from you.
Your sales teams need to spend all day, every day selling. Be ruthless about this. Hopefully, you’ve employed people skilled in the art of conversation. Then make sure they’re spending 80% of their time talking to potential Trevors.
Don’t have them cleaning data or doing quotes. They shouldn’t need to set appointments or spend hours on their CRM. Definitely don’t give them responsibility for existing customers. They are NOT Account Managers. They’re salespeople. These people should have a talent for sales – if they genuinely love selling, they’ll bite your hand off to be released from all the admin. Get them to spend all their time selling net new revenue to net new customers. All the other stuff can be done by Marketing and Customer Services.
Set Clear Expectations
Look at activity levels in sales teams, over and over. And set realistic goals. People ask us, how should we manage our sales teams? Same as everyone else. Work out the leading and lagging indicators.
The lagging indicator is likely to be revenue or sales order intake. So far, so easy. But you need to identify a single number to track that will keep this lagging indicator on track. Maybe it’s customer demos? You might know that it takes 400 customer demos to hit your sales target – so this is the leading indicator that you need to track.
Make sure progress on this number is discussed during daily huddles and weekly check-ins. Set up scoreboards that show individual and team progress so people can compare themselves with others and feel a collective sense of achievement when the team succeeds.
Make Sure You’ve Invested Enough
In a recent article, Sammy Abdullah from Blossom Street Ventures talks about the typical funding of SaaS companies. On average, they’re spending 39% of their expenses on sales and marketing. That’s a sizeable amount. But if you’re not a fast-growth SaaS business, what should your expenditure be? When I was MD of Peer 1, we were at a £100 million turnover globally, growing 20% year on year. Our Finance team benchmarking suggested we should be spending 15% of gross revenues on sales and marketing.
Often, we find our clients aren’t spending enough. Businesses spend 10% and are disappointed with their growth. They’re not spending their money in the right places. There are too many customer service or account management people who aren’t adding value. And they’re not spending enough on Marketing. An additional spend of just 5% could make all the difference. If you’ve done the necessary work on core customer and product positioning, the extra cash will give Marketing some money for focused activity and campaigns.
Don’t Pay Commission
Controversial, I know. But if the rest of your employees aren’t paid commission, don’t pay your salespeople in this way. I have a big aversion to commission. My feeling is that companies do this because they haven’t done the necessary work themselves to figure out their sales strategy. The line of thinking goes, ‘If I give them this massive sales commission opportunity, they’ll work extremely hard, day and night.’ But you can’t use money to drive the right behaviour. It just doesn’t work.
Assuming that good salespeople are coin-operated is a mistake. Most people don’t do piece work. You don’t pay software developers per line of code. If you did that, they might write shorter lines or rubbish code. Similarly, if you paid support desks per ticket closed, they would likely steam through them without paying any attention to customer satisfaction. If you pay salespeople to close business, is it any surprise that some of the deals aren’t right for the customer or the company? And once they hit their target, they stop. Where’s the incentive to do 2x?
If you’re genuinely trying to build a ‘great company’ (in the Jim Collins sense of the word), this is the wrong approach. You’re passionate about what you do. You want to be the best in the world at it. And you want one of the top 15% of salespeople that feels the same way. You shouldn’t need to pay sales commission – they’re intrinsically motivated to solve Trevor’s problem. There’s no evidence that remuneration changes behaviour. Hire people with the right traits from the start and allow them to flourish.
Another reason to ditch commission? It’s corrosive to your culture. In tech firms, the salesperson rarely wins the deal on their own. Everyone else involved is on a salary. Why should Sales get more of the money when they don’t seem to do as much work? Get rid of this toxic mix!
Ultimately, realise this. There are only two things you need to grow your business. The desire to change and the willingness to put in the effort. Have a model, follow it, put the effort in, hire the right people, use agile and iterate. Test and then iterate again. And again. Over and over. If you’re not prepared to put in the hard work, then you need to accept mediocrity. But if you are, the sky’s the limit.
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