The New Year is here which means a flurry of activity as companies finalize their GTM plans for the year, set sales quotas, marketing budgets and put together lavish parties… uh, I mean sales kickoffs. But more often than not this year’s strategy is a close version of last years which may not have ended up where you wanted. So, how do you ensure you don’t spend all year to end up in the same place?
I have put together some challenging questions, which hopefully provide either deeper validation of your existing plan or possibly expose some opportunities to further refine or optimize your model.
More Reps ≠ More Revenue
Undoubtedly growing companies are in the market now seeking to add new headcount in sales to accelerate growth and increase revenue. There is, of course, no problem with adding more headcount if you need it but too often this is a rhetorical question and not a real one. The reason to add more sales staff is simple – it should be because you have exceeded the maximum capacity of your existing team.
How do you know if you have exceeded capacity?
- 70% or more of your reps hit quota last year
- Reps have more leads/opportunities/deals than that can effectively manage and it is causing lost revenue based on their inability to manage open engagements.
- Reps are spending 100% of their time working active and qualified opportunities
- You have a running queue and backlog of inbound leads and opportunities
Note: more often than not the limiting factor in your revenue growth is not sales capacity and more often marketing and lead gen performance and sales execution. Also, in today’s market rarely does adding sales headcount alone have a substantial impact on revenue growth.
Inequality > Equality when it comes to sales territories
Every sales team is comprised of higher and lower performers, more or less experienced reps but in most cases, they have identical territories. Most companies take their SAM (Sales Addressable Market) and divide it by the number of reps. This does not make any sense when you apply the logic to almost any other industry. When is the last time you saw a team pull their star quarterback to play the back-up because he needs to get his fair share of playing time? It sounds silly to even say, but then why do we do it?
The purpose of the company is to drive growth. The purpose of sales leadership is to lead the team to the highest production of sales possible. Shouldn’t we then allocate our resources to give is the highest output?
Here is an example of why you should think this way according to conversion math.
With just adding more opportunity and capacity to the top performing reps you have a potential 16% increase in performance. This is just a basic example not taking into account that top reps often have higher ACV’s as well which is an added impact.
Note: the application of this should be carefully considered to ensure the best results and to work through the change management for the team as it will often be met with some strong emotions. Also, it is important to mention this does not mean that commission rates or structures should be imbalanced. If a rep has a great territory or bigger upside then quota should be adjusted accordingly so that the financial structure is fair.
You must have the right tools
When you are scaling out your salesforce it is essential you have the tools, process, resources, and structure built out in advance so they are available when then need them. Walk through your onboarding, prospecting, qualification and sales cycle to ensure you have the necessary documentation, supporting resources and tools to make a rep successful. In today’s market, the cost of reps and sales leadership is so high it is foolish for you to burn $500/hour as top resources spend time creating documents and doing things manually when they should spend every waking moment focused on driving new revenue.
Build your team in funnel order
This means you should scale the marketing team first to nail the awareness stage and create some interest and engagement. Then build out the MDR/BDR organization to start building qualified leads and pipeline before you start adding inside or outside sales reps. Experienced sales reps are expensive and generally poor prospectors as they are focused on closing deals and cannot/should not be spending substantial parts of each day prospecting if they are juggling an active pipeline.
To do this properly, define the signal metric which signifies a requirement for the next hire. This should take into account hiring time, onboarding time to ensure the timing is in sync with the need.
Triangles > Diamonds
Structuring for the inbound age is a critical adjustment that many companies need to make. Too often teams are built on old-school ratios that no longer apply. The right ration depends on your business and product but should be defined by those terms and not some industry metric. I ran a 1:1 ratio for a time because the circumstances dictated it and would even have done 2:1 if it was required. There should not be any stigma to the ratio as this decision should come down very simply to pipeline, conversion metrics and capacity. The right structure should be based on your business needs not on your target audience and current business state.
Beyond just the basic of the ratio, the entire org structure should be re-examined to ensure it aligns with the way buyers engaged now. In the inbound age, marketing has the largest influence on purchasing from a duration and volume of engagement standpoint so they should be the largest group, followed by MDR/BDR’s who are working to expand and qualify that pipeline. I am not against having a sales rep prospect but it usually is not a financially viable option and would far prefer my very experienced sales reps to be 100% focused on working and closing deals.
In summary, I hope you use the start of 2018 to reflect on “WHY” your model is the way it is and “HOW” you know it is structured the right way instead of just rolling the model forward.
If you are struggling with some of these concepts, would like a second opinion on your model or looking to supercharge your sales performance in 2018, our team would love to make this your best year ever! #SaaS #sales #acceleration #gtm #strategy #ExecutiveAnswers