The Five Magic Buying Indicators Needed to Make a Sale
Ever wonder why that promising lead never materialized into a client? So often, what seems like a sure thing in sales dissolves into nothingness and you are left trying to figure out what went wrong. When deals go south I often hear sales reps say things like, “They weren’t ready yet.”, “We just couldn’t get them over the line.”, or “They didn’t know what they wanted.”. These responses are obviously frustrating for a sales manager or CEO trying to understand what the real friction points are and how to overcome them. So, what is a reliable formula for understanding and tracking lead maturity through the sales cycle?
The answer is simple. Lead maturity centers around what I call the ‘five magic buying indicators’. They are magic because while each is independently important, all five are needed to close a sale. In fact, I garantee that every deal you ever failed to close was missing one or more of the following indicators.
1.) Need and Solution Fit
First and foremost, a prospective client must have an identified need for your product or service. This is naturally one of the first indicators that surfaces at the beginning of the sales cycle, though it can often evolve through the process. Need takes many forms; a prospective client may need a new internal productivity tool, want to launch a new business line, or optimize an existing offering. Whether the need is to fix a pain point or capitalize on an opportunity, a significant portion of the sales cycle is dedicated to identifying, understanding, and demonstrating your solution can adequately address their need.
2.) Executive Owner
As with most initiatives in business, somebody has to be driving the bus. If you can’t identify a primary point of contact as the executive owner, then it’s not a very strong prospect, or the project is not being taken very seriously. Either scenario bodes poorly for the other indicators. This makes sense because the project owner is likely the one who understands and feels the need the greatest, and as such, will work with urgency to lobby for internal resources and priority to move efforts forward toward securing a solution. Without an executive owner, the deal will likely wither away and become lost among the prospect’s competing initiatives.
3.) Budget
Nothing happens without a budget for the project. A prospect’s willingness to allocate a budget is highly correlated to the severity of the need. A savvy sales person should be able to extract an estimated budget for the project on a discovery call. Lack of budget will either decrease the scope of the partnership, and thus size of the deal, and/or increase the time frame to close. Without a dedicated budget, all the enthusiastic, positive conversations in the world won’t close the deal.
4.) Purchasing Committee
A purchasing committee is the composite of all the departmental stakeholders whose jobs your solution will touch in some way. The ‘committee’ is not self-aware but rather nomenclature the sales person uses to identify people she has to influence and win over. If you have identified your executive champion, they will shepard you through all the barriers that the committee may put up, advocate on your behalf, and share insider information to help close the deal.
In my last business, we would have to sell through the CEO + IT + Operations + Marketing and accommodate all of their respective concerns at different points in the sales cycle. You may not even be aware of all the committee members until late in the sales cycle. Any one of them could raise an objection and become your Achilles heel. For instance, I once thought I would close a prospect within a week’s time, but after meeting with their IT department we were handed a 1,000 question security assessment, effectively extending the time to close by a month.
5.) Time Frame
There are different shades to defining time frame. Some prospects say yesterday, next month, next quarter, etc. However, I don’t fully check the box on this indicator until there is a set date to close to which the prospect has agreed. Time frames are especially notorious for being passed, extended, and adjusted during a sales cycle, so I am especially wary of them; it is easy for a deal to fall into oblivion even if everything else looks great. In fact, I once had all four other indicators at 100% with an enthusiastic prospect, yet they kept slipping past and resetting the time frame; it eventually closed a year and a half later.
Measuring Deal Maturity
Now that we know our success factors for closing a sale, let’s look at how we can use them along with other milestones to inform pipeline forecasting and lead maturity.
Key Points
*Deals don’t go over 50% until a proposal is sent and in receipt of the prospect.
**Deals don’t go over 70% unless they are targeted to close with 30 days or at month’s end.
***A sale is not 100% until the contract is signed, even if you have all five indicators.
****Indicators don’t come in a particular order of time; there is flexibility to apply your gut feel to the probability to close.
Closing Thoughts and Challenge
The chart above is merely a guideline based on my experience. Every deal is unique in how it evolves, but the five magic indicators apply no matter what you are selling. If you are responsible for a sales pipeline, I challenge you to re-examine your prospects using the magic indicators and forecasting guideline above to see how different your opportunities look, if at all. Then let me know how accurate the model was once you work through your pipeline.
The chart above is merely a guideline based on my experience. Every deal is unique in how it evolves, but the five magic indicators apply no matter what you are selling. If you are responsible for a sales pipeline, I challenge you to re-examine your prospects using the magic indicators and forecasting guideline above to see how different your opportunities look, if at all. Then let me know how accurate the model was once you work through your pipeline.
