CRM Archives - Thinks, Inc.

Smart Sales Operations – Pipeline vs. Estimated Revenue

When I began speaking about Sales Operations, I mentioned there is some bleed between selling and sales ops. One of the critical pieces which companies focus on is pipeline. Where sales and Sales Operations depart, is how pipeline is used to estimate revenue and revenue is used to determine pipeline.

What do I mean? With a few employers, when I entered in an opportunity and my estimation of percent completion, the company then provided a calculated revenue equivalent for the opportunity.

For instance, if I identified a $100,000 opportunity, and was in the initial stages, having maybe had an introductory meeting, I would set the probability at 10%. My employer shows revenue of $10,000. As I progressed through the sales stages, the probability would increase, and so would the estimated revenue, for instance at 40% equaled $40,000.

There is a problem here though, because this IS NOT revenue. It is pipeline. By forecasting revenue dollars inevitably the company would begin looking at this number as real dollars–essentially “counting chickens before they’re hatched”. This, in turn, would lead to greater pressure on the rep to close the deal. And if the deal fell through, which does happen to deals, the company would go into a tizzy. No wonder reps sandbag their deals…

When I’ve asked different companies why they do it this way, they explain it is for budgeting purposes, resource planning, etc. Okay, I can understand the need for planning for resources and budgeting, but it shouldn’t be done off of imaginary numbers. If anything, it should be planned using pipeline probability. A $100,000 opportunity with a 10% chance of closing doesn’t represent $10,000, it represents ZERO dollars and a chance at $100,000 dollars! If the deal proceeds down the pike and gets to 70%, 80%, even 90%, it still represents ZERO DOLLARS.

As a tangent, this mentality is seen in the statistical situations. If you ask anyone what the likely outcome would be if they flipped a coin 10 times, they would say five heads and five tails. But if they are flipping the coin themselves and run into a streak, say, heads four times in a row, then instead of using statistics to predict the next toss, they use their human math and predict what the next toss will be. The problem is, statistically, each toss is 50/50. It doesn’t matter if there has been a streak of heads or tails, as each toss isn’t dependent upon the previous toss or the coming toss, only the current toss. Prediction doesn’t cut it.

Why am I so emphatic about this? Because if pipeline is set up this way, it creates a situation for management to scrutinize deals farther along the pipeline as needed revenue, without considering–among so many other things which can sink a deal–competition or buyer indecision. If you’ve sold before, then I bet you’ve had a customer sit on a deal decision for many months longer than expected or you’ve lost in the eleventh hour to your competition. These things happen to even the best sales people. But to be on the hook to management for a deal which doesn’t close because management is forecasting revenue, well, that’s just bad accounting. Not bad selling.

In Smart Sales Operations, Pipeline Percents represent confidence–how much confidence does the sales person have that a deal will close. Based upon that, estimates of potential revenue are either shown at 100% or nothing. If a company is trying to use some sort of percentage to allocate resources, then it should take the quote which is in consideration by the customer coupled with where it stands in the pipeline, and forecast resource availability. This is a topic within itself, but suffice it to say, resource availability is significantly different from estimated revenue–and I can’t bill my resources against estimated revenue. Only real revenue.

And if it hasn’t been sold, then potential revenue equals nothing. Once it’s been sold, it becomes real revenue.

Last, remember once you have real revenue, then the deal is truly done when the business gets paid real dollars–and the rep gets paid commission.

Thinks, Inc. is a consulting firm which specializes in Smart Sales Operations. If you’d like for us to come and assess your chaos, drop us a line at contact@thinks-inc.com

PS The Infrastructure Guy and Smart Sales Operations are Trademarks of Thinks, Inc.

Productivity

I am going to preface the following by telling you I am a big believer in Lean. Most people think of Lean Methodology as something only for manufacturing, but more and more people are coming to see organizations can implement Lean practices to improve operations and internal harmony. Dan Markovitz is an avid proponent of this philosophy and he is one of my influences when I’m consulting for companies, or thinking how companies could be better.

Recently, I was listening to a book-on-CD (yes, I still do that) by Womack & Jones called Lean Thinking. The title caught my eye because I thought it would be in line with my thinking. Alas, the book, written originally in 1997, is focused on manufacturing and the gains to be had by using lean practices. But something the narrator said caught my attention and it is completely applicable to sales and sales operations.

Briefly, the discussion was around “muda” or “waste” (the big three are muda, mura & muri or waste, overburden & unevenness). In Lean Manufacturing, waste is money down the drain, either by time or production. But where it is easier (but maybe not just easy) to track down waste in a manufacturing line, the 3M’s , but mostly muda, can be seen constantly in business on the sales and marketing side.

And this is the crux of smart sales operations–we look at sales processes as additive. What do I mean? I mean instead of looking at how a sales rep gets their work done and how do we extract information from that work stream, we layer a process on that sales rep to report on that work stream.

Let me give you an example to illustrate. A new sales rep is given a book of accounts in a given territory. Then, the sales rep is given a tool like a CRM, to prospect into these accounts, build a pipeline and funnel and start to close deals. Most of you are probably nodding your head in agreement, “Yes, that’s how it’s done.” Next, management wants to track the progress of the rep, so they ask the rep to produce a report. “No big deal,” you say, as all the rep has to do is create a report in the CRM and run it and give it to management. Then, management wants to know where deals stand, so they ask the rep to produce a report. Again, you may say, “No big deal,” and the rep produces another report. Soon, management wants to meet to go over the reports, which by now has grown to multiple reports and multiple meetings. The sales representative who was hired to sell has now become a reporting fool, spending significant time on administrative tasks, and trying to figure out how to balance their time with the other priorities of the job–like achieving quota.

As a personal example, my most recent experience was a manager who asked us to create a report used only by himself so he could present the team numbers to his management, showcasing the manager in the best light possible. The report was tedious, arduous and an exercise in frustration as it required two or more hours to produce each time (it was a Word doc, and none of the information gathering could be automated). This, coupled with the one hour accompanying meeting to go over the report and then the additional one hour meeting with the team to go over the collective reports was almost criminal in how much time it sucked. When confronted about this (as every rep had) the manager would say with his default response, “It only takes five minutes.”

Tying this back to Lean, what was wrong here? Waste. Waste of time, of processes and specifically of consideration. (While you might feel consideration can’t be wasted, how many times have you thrown your hands up in the air when your patience has reached its maximum? If someone who has been trying your patience continues to come back to you with the same issue again and again, you would more than likely snap, tell them about your frustration and tell them to get their problem fixed before they came back to you again.)

The problem for all this is a foundational issue: If the data has been captured in the beginning, then there should be no reason it couldn’t be pulled in an automated report. Computers are great at manipulating data, it is what they are built to do. So why was (I’m sorry, is–he’s still doing it) my manager wasting his team’s time to pull data he could have pulled? Because he didn’t value his team’s time. Why, as in the first example, is management layering on a report when the data for the report is readily available if it is being captured in the first place?

Smart Sales Operations deals with these issues in a foundational manner. We need to first look at what’s being sold, what is important information for the sales rep to keep track of and what is important information which sales management needs for visibility, and we build our tools around the information needed.

Recently I was having a discussion with a former manager of mine who has gone on to sales performance consulting. Our disciplines overlap a little, but his perspective on sales comes from a different angle than mine–he is looking to use tools to get more out of the reps, and I am looking at what is in place which can removed/tweaked/re-worked to produce better results. In the end, we both are working with companies to get more sales, for as I have said before, if the rep is making money, then the company is making money. Anyway, back to the conversation, he is a huge proponent of Salesforce. He believes it is infinitely tweakable enough to put processes in place to get the desired behaviors from the reps. My take on Salesforce is that it has morphed from a tool for the rep to manage customer interactions cradle to grave, becoming a reporting tool for management. While my former manager and I both see each other’s perspective, what I think is at the overlap of this Venn diagram is data. What is captured, what is needed, what is reported.

I’ve spoken about clean data before, and I am a huge proponent of data hygiene. But also in consideration is what data needs to be collected and how does this affect how the collector goes about their job. Because if your sales rep is spending more time creating reports, collecting data and meeting with their managers, then they aren’t out in front of customers doing what they were hired to do. They may be internally productive, but overall, they are not PRODUCTIVE.

Help your reps be productive. No muda.

Thinks, Inc. is a consulting firm which specializes in Smart Sales Operations. If you’d like for us to come and assess your chaos, drop us a line at contact@thinks-inc.com

PS The Infrastructure Guy and Smart Sales Operations are Trademarks of Thinks, Inc.

Clean Data

How many times have you received a piece of mail at your work or residence, and the address is correct but the recipient isn’t? The addressee ranges from someone who’s name is close to yours with the typos creating new and interesting aliases to people who sometime in the past lived or worked at the address. The most entertaining these are riffs on the names of people who may have lived or worked at that address combined with some sort of database which creates new people that never existed possibly living/working there. Then there is the case of my mom is receiving retirement home solicitations at my home address (in another city) although she’s never received a piece of mail there.

For a while I sold database and database tools and one of the most fascinating was one which cleaned up address lists. While this may seem a mundane exercise in data de-duplication, it is important and very common for contact lists, and this particular tool had broader application. For example, one company which was considering buying it was a natural gas provider. Of the hundreds of thousands addresses, they had a percentage of their customers who would move, not pay their bill and reappear at another address and sign up for service and use a variant of their name–different enough not to be flagged, but correct enough to allow them to sign up for service. They would have an address which might be a multi-family unit and have several people sign up for service at that address, and if they were all “P Smith” but actually different people, they had a billing problem.

Also, when the gas company would go to mail bills, if they had correct customer name information but incorrect address information, then the bill wouldn’t get to the address and the customer would be correct in not paying as they had never received notice. And last, incorrect recipients and addresses created waste (i.e., lost dollars and trash entering the waste stream) in the thousands of unneeded or possibly duplicate mailings.

So why does this matter for Sales Operations? Even though this was many years ago when snail mail was the predominate form of billing, correct information was at the crux of getting paid. Clean data is the foundation of smooth sales operations. And where clean data starts is the first time a prospect, company or customer is created in your CRM.

There are a few schools of thought in how to build prospects into a database–whether someone should be able to create an individual or be required to create a company in the CRM, but it is my opinion that the first thing is to create the company, and all data flows from there.

Believe it or not, this very activity is fraught with challenge. When the rep goes to create a company, have they done their due diligence? Is this prospect a subsidiary or the corporate HQ? and does the CRM have a process for creating parent/child businesses? Does the business have to have an address? And does this address have to be a corporate address or can it be local? Is the address a billing address or physical address or both? It goes on and on.

And while a lot can go awry in the entry of a new company, there is a step which should never be skipped and which should have penalties associated with it for skipping or for willful avoidance. And that is CHECKING FOR DUPLICATES. Why yell this at you with all caps? Because if a rep enters a company in a second (or third, or fourth…) time, it can throw off billing, accounting, quoting–a whole host of downstream issues which many times cannot be corrected later, corrected easily or corrected at all. And you may ask, why a penalty? Because many times I have seen where a rep has created a new account because the prospect they are working with is listed in another rep’s name. So instead of going to their sales manager about switching the account into their name, or possibly split/give up some money to the current account owner, they simply create a new account in the CRM. But in creating a new account, they create also create confusion and a new burden for smooth operations.

The burden lies with the information owner. If it is the sales rep’s responsibility to prospect and enter new companies into the database, then they need to follow specific guidelines to ensure the foundational elements are put in place the right way. Also, I have heard many reps say they don’t have time to enter all the information right then, which is fine, but they have to enter the minimum CORRECTLY. Here is my list of basic, correct info which should be entered:

Company name, spelled correctly, with proper capitalization and punctuation
- “Vern’s Pig Farm” vs. “verns pig frm”
HQ Address
Location Address of the customer the rep is dealing with.
Contact (customer or prospect) name, spelled correctly with proper capitalization and punctuation and a correct e-mail address.
Billing info (I’ll cover all required for this in another post)
Delivery address (see the above comments about “correctly”).
Correct phone numbers (again, I will cover this in another post).

Last, the one thing which can be the biggest impedance to getting correct data entered can be how the company has structured what data is required to create an entry. What do I mean? At some companies, when a prospect is created, the creator is required to enter specific information to create the record. For instance, if I am entering “Vern’s Pig Farm” I might be required to enter an e-mail address as well as a phone number. If that information isn’t handy, then many people will enter filler information, like “212-555-1212” (don’t get me started about formatting…) or an email which is “xyz@vernspigfarm.com”. Can you see the problem? Right away, I’ve entered bad info which quickly propagates into a cascade of bad actions. E-mail marketing campaigns, telephone prospecting and follow up, etc. It is my opinion the minimum information needed to create a company should be a business name and a business phone number. And before that rep (or whomever) can create that company, there is a mandatory duplicate check.

This topic, essentially Data Hygiene, can go on ad nauseam, but always keep this one fact about data in mind: it is easier to start with the correct information than to go back and fix it.

Measure twice, cut once.

What are you doing to keep your data clean?

Thinks, Inc. is a consulting firm which specializes in Smart Sales Operations. If you’d like for us to come and assess your chaos, drop us a line at contact@thinks-inc.com

PS The Infrastructure Guy and Smart Sales Operations are Trademarks of Thinks, Inc.