ENTERPRISE SALES PROCESS & FORECASTING DONE RIGHT — Part 1
Brett Queener at Bonfire Ventures
While it is a market behemoth today, Salesforce.com in 2003 found itself in a very different place. We had a product considered a toy by enterprises, an enemy by IT, and more expensive by CIOs and industry pundits than on-premise. We had less than 15 account executives with 90% of them focused on the inbound SMB free trial mode that we had pioneered and has just hired our first field sales “experiments”.
As the first head of field operations and strategy, it was my job to partner with amazing people like David Rudnitsky, Brian Millham, Kendall Collins, and Mike Rosenbaum and the broader sales and finance leadership to help define and execute the very first SAAS playbook — ie how do we take roughly the same product to market in every segment of the market effectively (which in the on-premise world had never been done before), albeit with different pricing, packaging, and sales and marketing motions and resources.
To do so we were essentially answering the same question constantly — in what segment/location do we add the next five salespeople to generate the most success. Furthermore, which segments did it make sense to pause on and if so, what was the underlying issue for us to solve? As you flash the movie forward, it turns out in retrospect we were pretty good at doing just that. To do so, we had to become masters in not just defining and understanding our sales process and sales pipeline but also forecasting future performance.
Now 15 years later, as a Venture Partner at Bonfire Ventures and a board member at numerous software companies, I work with amazing teams like Bill Binch and Chas Scarantino at Pendo and Gregg Johnson & Ben Sullivan at Invoca to implement the very same concepts. My end goal is always the same: for them to develop mastery and be able to not only effectively predict their future sales achievement but also diagnose past performance to help guide their team to identify the key areas to focus on for improvement.
For the myriad of software companies out there, this need is especially critical before you are in mega product fit/growth stage (even more so for the tech product founder) where you are still not comfortable yet in just regularly adding account execs for fear that you may have an underperforming group of people down the road who aren’t hitting their number and resort to saying not so lovely things about you on Glassdoor :)
While there are of course thousands of books you can read, and thousands of podcasts you can listen to, and thousands you can spend on industry/saas gurus, I will attempt to demystify all this as concisely and simply as possible. The good news is that it’s not that complicated and if your organization follows the steps/approaches I will describe, I am confident you will be more successful and more calm in discussing sales with your team and your investors.
Sales Process: It’s about them, not you. For your stages, use your customer’s buying stages rather than your team’s selling stages.
I can’t tell you the number of organizations that I have worked with who come to me frustrated that their sales forecasting is all over the place. Worse, when I dig in, we find out that there is a completely inconsistent application of whatever sales stages they use by their sales teams.
9 out of 10 times the problem is that the organization has defined their pipeline stages by actions their team has done — ala “gave demo”, “sent proposal”, “provided reference check” and so on. The problem with this approach is I truly don’t care what you have done as an organization to properly codify a deal — I care where the buyer is within their evaluation mindset of your product.
To that end, look to redefine the name of your sales stages as buying stages — ie, understanding offerings, building business cases, running an evaluation process, comparing shortlisted vendors, negotiating a price with the selected vendor, confirming deployment specifics, redlining documents, etc — ie steps your buyer is taking. You should use the appropriate terminology for your buyer and their process. When you start to codify your pipeline this way, you can consistently:
- Understand where all of your deals sit from the buyer’s perspective.
- Frame the questions for your reps on deals around what will it take to move the buyer further along their consideration/evaluation/ selection process.
- Define the specific actions your team must take in a given stage to move that buyer along and specifically what the buyer must confirm/agree to in order to do so.
- Understand the sales content your teams need to be successful — ie if we are struggling to advance on the early buyer stages (Consideration), then we know we need more ROI/ business value content whereas if we struggle mid-funnel (Selection) then we know we need more differentiation and validation content.
Pipeline: Are you truly qualified? If you do not have a clear definition of a qualified pipeline, your metrics won’t tell you much.
Time and time again, a company’s ability to answer the basic sales performance question (do you not have enough pipeline or do you need to be better at closing it) is a well-educated guess at best because they have yet to define what it is a qualified opportunity and what is not.
It’s understandable — fifteen years ago, we could insist on approaches like BANT ( Buyer, Authority, Need, Timing) or MEDDIC (Metrics, Economic Buyer, Decision Criteria, Decision Process, Identify Pain, Champ) as a justification for whether or not a deal was qualified. But with the rise of the Internet and all the research many people who are way down the totem ladder of responsibility will do, you rarely will find the Glengarry lead — ie someone early in your discussion who has all the money, all the power, and all the pain and resources available to make a decision and move forward quickly.
As such, how do we start to think about what should be a qualified opportunity — ie what I call a SAL — or sales accepted lead. This SAL is the holy grail of qualified pipeline and is the end of the hot lead journey as follows:
- A Lead is just a contact who may or may not have reached out to us
- A Marketing Qualified Lead (MQL) is one marketing thinks we should call back based on their title and/or their company and/or their level of interest (what action they took)
- A Sales Qualified Lead (SQL) is an MQL that an SDR contacted and qualified and believes an AE should meet with and accept or reject.
- A Sales Accepted Lead (SAL) is an SQL that an AE meets with and confirms it is a deal to pursue.
From my perspective, if you believe there is a path to an appropriately funded project within the next 12 months for which you are a good fit and the organization does have a compelling event / real pain you address, it’s a qualified opportunity. If you are not talking to someone with purchasing or decision-making power that is fine as long as the person you are talking to has committed to connect you with power during the process.
Your entire organization should understand well what qualified pipeline is and is not and you should be measuring your demand generation engines on this and not leads, especially your marketing organization. There are not many more important metrics to track in your business regularly than the net qualified pipeline you have created within a quarter.
Stay tuned for Part 2 where I will go into detail about how to both categorize and understand your sales pipeline as well as properly diagnose performance/underperformance and be able to answer the age-old question every board member asks you — do you have a pipeline problem or a sales performance problem or simply (this is goodness) not enough sales capacity?