How to scale your sales from $1 Million to $10 Million
Freshsales CRM hosted Jacco Vanderkooij (Founder – Winning by Design) for a webinar on “How to scale your sales from $1M to $10M” on June 26, 2018.
In this webinar, Jacco covered how to approach Sales as a Science by training on just a few key skills that need to be applied during a few key Moments That Matter in the customer relationship.
- The fundamentals of communication and customer interaction
- Understanding customer impact
- Coordinating activity between specialized silos
How to Scale Sales from $1 Million to $10 Million
Correlation to Causation
The Sales canvas is driven by the process of Correlation today. When a salesperson encounters a problem or a scenario that he/she has come across before, they recognize it and, owing to the expertise that they have gained over the years, the problem at hand is handled in a familiar manner.
The aim of this webinar will be to move this thought process from Correlation to Causation with the help of science. Causation is the capacity of one variable to influence another and gives a clearer picture of the Sales process.
To get there, it is important to understand why things in Sales function the way they function today and what can be actively done to scale.
According to Jacco, the Sales model that is going to take you from $1 Million to $10 Million dollars in sales is often referred to as the Superstar Sales model. This basically translates to the fact that you are dependent on the least possible amount of people in the process of generating sales for your business.
An example of this is the case of Business Founders who sell their idea to investors and raise money for their businesses.
But one of the major problems with the Superstar Sales model is that it is dependent on a principle known as the Pareto Principle. The Pareto Principle states that 20% of your customers generate 80% of the business. Although it is a well-known Sales concept that has been used since long, the Pareto Principle is not applicable in a SaaS business. This is because the prices are really low and hence, a huge number of deals have to be closed by the salespeople to reach the targets.
The 80/20 rule is not applicable in a SaaS sales.
Hence, we see a shift to an 80/80 Rule which means that 80% of the salespeople (beta sales performers) generate 80% of the business.
Realigning Customer Success
Jacco gives us an overview that when we draw a Revenue Chart based on Land and Expand, we can understand what changes are needed. In the Land section, we have three phases – Awareness, Education, and Selection. In the Expand section, we have Onboarding, Customer-end Uses, and Upsell/Cross-Sell/Renewal.
In a traditional sales model, Revenue used to be a part of Onboarding. But in the SaaS model, Revenue has shifted towards Customer-end uses, Upselling, Cross-selling, and Renewal.
The problem arises when all of your Marketing and Sales efforts are focused on generating Awareness and driving Selection when all the big bucks lie at the other end of the spectrum.
Hence, this mismatch needs to be closed and processes need to be aligned together by training salesperson about overhauled cycles and new concepts.
Compressed Sales Cycles
Traditionally, it was seen that the maximum of Enterprise-level deals used to take about 9-18 months to close. But today, most of the sales can be closed in the time frame of just 30-90 days! This goes up to a maximum of 6 months for the bigger and more expensive services. Hence, the Sales Cycles have significantly become faster and there is an urgent need to live up to these expectations.
This indicates that a lot of the existing processes need to change!
This is where the splitting of the workforce according to their corresponding roles and responsibilities take place. This is done in conformance with the Go-to-Market Staffing Plan.
So if we refer to the Revenue Chart again, we see that there are various roles defined today for the workforce based on the segments of the market that the company is catering to. The most important element that helps a customer link the pre-deal and onboarding phases is a Sales Engineer (or Solutions Engineer/Architect). This is especially needed if your product is too technical.
Hence, with more technical products, faster sales cycles and increased reliance on beta salespeople, the sales force needs to be segregated into specialized (niche) roles in order to be successful.
Prospecting and Selling
A Sales Cycle is often the result of alternating Prospecting and Selling cycles. While the process works, it makes the Sales cycle longer. A quick analysis reveals that this is a result of inefficient time utilization since both processes are not being executed in tandem.
A better workflow is to divide the Sales cycle among two salespeople, where one person focuses on Prospecting and the other focuses only on Selling. This will add tremendous efficiency to both the processes and lead to increased Sales and Revenue. This is a practical example of the power of Specialization in play.
For example, let’s take the case of a company that has a 3 month Sales cycle. If we represent this graphically with the depiction of Prospection and Selling curves, we find that in the first quarter, only 1 month is spent in selling. And in the second month, only 1 month is spent in prospecting (only 2 months in selling). This gives rise to a highly inefficient workflow and uneven monthly performances.
To put this in perspective, an average Sales Development Representative (SDR) used to close 20-22 Sales Qualified Leads (SQLs) per month. But today, this has gone down to 10-12 SQLs per month. One of the major reasons for this change is attributed to the noise in the digital space today with every company trying to actively push their products.
This is one of the main challenges that need to be tackled if you want to scale.
You might know this that every functional process has an input and an output.
The Conversion Rate is defined as the zone between the input and the output, as depicted in the diagram. For instance, let’s say that the input is 10 and the output is 3, then the Conversion Rate will be 30%.
This conversion takes some time to execute.
Venturing Beyond $10 Million
As you move from a sales figure of $1 Million to $10 Million, you can no longer work on a Correlation-based model. As mentioned earlier, this process involves Causation. And while you do that, you have some room for experimentation and A/B testing to get things right. But the main challenge lies beyond the $10 Million figure. This is where it gets interesting and there is no room left for testing.
Let’s take a look at the ideal sales process through a diagram.
This gives the flow of a customer’s lifecycle right from being a Prospect to an LTV (Lifetime Value). As you can see, we have a total of seven Conversion Rates along the way (C1 to C7)
All these conversions take some amount of time to execute (t1 to t7).
Explanation of some terminologies used in the diagram:
- Prospects: Leads that may convert in the near future as you may end up being your customers.
- MQLs: Marketing Qualified Leads that are interacting with the business and begin with their Sales Journey.
- SQLs: Sales qualified leads that are more likely to convert since they show interest in our business through a phone call or a meeting.
- SALs: Sales Accepted Leads are when the salespersons have included the SQLs in their schedule and have had the first contact.
- Win: Defined as the moment when the customer finally converts and comes onboard.
- Live: The number of customers who are currently onboard and buying from the company.
- ARR: Annual Recurring Revenue from the customer
- LTV: Lifetime Value that the customer provides to the organization
If you are able to breakdown your Sales Process (or Cycle) into such a science-based model, you would exactly where every customer or deal stands at any given time. But what more value can this provide you with?
Jacco explains this with a mind-blogging example.
Let’s say that your marketing team generates 1000 leads per month. There are 4 conversion rates involved in the sales cycle before a sale is made (refer to the diagram above) whose values stand as follows:
C1 = 0.3
C2 = 0.2
C3 = 0.8
C4 = 0.2
The average price of a sale (S) after a 20% discount = $20,000
Can you calculate the total revenue for the month? It can be done as follows:
Total Revenue = Leads * C1 * C2 * C3 * C4 * S
= 1000 * 0.3 * 0.2 * 0.8 * 0.2 * 20000
Now consider a second scenario in which there is a slight improvement in each conversion rate and they now stand as:
C1 = 0.32
C2 = 0.22
C3 = 0.85
C4 = 0.25
Additionally, the discount has been reduced to 10% and the average price of a sale now is $22,500
The total revenue, in this case, will be:
Total Revenue = Leads * C1 * C2 * C3 * C4 * S
= 1000 * 0.32 * 0.22 * 0.85 * 0.25 * 22500
This is a remarkable increase of more than 75%!
So what is the takeaway here?
By optimizing every step of the sales process and clocking slight improvements in every activity, you can even double your revenue with the same amount of generated leads.
Improving Conversion Rates
So what can you actually do to improve your conversion rates to make them slightly better and faster?
On being asked about how to improve the Win Rate, Jacco explains that only relevant diagnostic methods can set you off on the right path. It is important to not depend on discounting to improve the Win Rate.
In fact, the concept of discounting is non-existent in a SaaS model. That is why you have tier pricing in the first place!
Still, small amounts of discounts (2-5%) can be offered if the customer is ready to trade it off for a favor like a referral or a social media shout-out.
Increasing the Win Rate
Jacco explains that the Win Rate can be increased if you correctly understand the science behind it. The process to bring a customer on board can be divided into 6 steps as depicted below:
- Open: Open the conversation with a 2-minute chit-chat about the customer and the business. This comes in handy especially in conference calls where you need to associate the right voice with the right POC.
- ACE: Appreciate, Check-in and set the End-goal.
- Agenda: Explain the agenda of the call and the process that will be followed or the support that will be extended
- CALL: The most important part of the conversation in which you should aim to solve 3 problems of the customer or give 3 demonstrations about the capabilities of your product.
- Wagon: Acts as a confirmation check against spillovers. Were you able to successfully put the message across? Did the customer understand all the details?
- Action: The final action that closes the deal and brings the customer on board.
This webinar was brought to you by Freshsales CRM. Freshsales is a sales CRM built to help you stop juggling multiple tools. It’s ideal for small businesses and refreshing for enterprises.
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