The best kept secret in sales management — the burndown chart
In my last post, I wrote about how effective adopting a “developer mindset” could be when running a sales team. In particular, I singled out the use of burndown charts, which is what I’d like to explore in a bit more depth in this post. Before we look into a few different use cases and how to make the most of the burndown in each one, let’s start with the basics.
What is a burndown chart?
The burndown chart is one of the simplest and at the same time most powerful project management tools.
It’s comprised of only two lines, which makes it super easy to read and understand. The first line shows you how a project should unfold over a given period of time if the workload is divided equally throughout the duration of the project (i.e. ideal world scenario). The second line shows you how the project is actually unfolding (i.e. real world scenario). Both lines track the amount of work that’s left to do vs. the number of days left to get there. The idea is that with each remaining day you should be left with less work to do. In other words, you are burning down towards your goal, hence the name of the chart.
What does this mean in the context of sales?
Burndown charts are very popular amongst agile software development teams, but in my opinion, totally underutilised in Sales. To get a better sense of how to use burndowns in Sales, let’s consider the following example.
Imagine we have a small sales team comprised of 3 sales people. The team needs to close $116,000 in a month that has 20 working days (for example February 2017). This means that in order for them to finish the month on target, ideally they should be closing $5,800 each day. They start the month with $116,000 and by the end of day 1 they are left left with $110,200 worth of business to close and 19 days to get there. By the end of day 2, they should be left with $104,400 and 18 days to get the job done. End of day 3 — $98,600 and 17 days, etc., until by the end of day 20 they have no more work left to do — i.e. they’ve hit their monthly target of $116,000. This scenario is depicted by the purple line below.
Anyone who’s worked in Sales knows that the above scenario is somewhat unlikely. There will be days where the team sells $5,800, but you’d also have days where they sell more, or they sell less, or indeed they don’t close a single deal. This “real life scenario” is represented by the green line.
How to read a sales burndown chart
The power of the burndown lies in it’s simplicity. One single glance and you know where you stand.
If the green line is above the purple one — you’re falling behind. If the green line is below the purple one — you’re pacing ahead of your target.
While this is incredibly simple, it is something which the traditional way of visually representing sales data totally misses.
Compare this:
With this:
The same data is represented on both graphs, but the emphasis is on two very different things. The first one captures the amount of revenue closed by the team (absolute results) — i.e. what happened, while in the the second one the emphasis is on team’s relative results or in other words, their performance. The burndown conveys not only what happened, but more importantly how it happened. The simple introduction of a performance benchmark (the purple line), enables us to do some pretty cool things, which can have a significant impact both on individual and team/company sales performance. Let’s look at a few of them.
Burndowns and the “illusion of invulnerability”
I started using burndown charts to monitor my own sales performance some 7–8 years ago and have not looked back. The biggest benefit I found as a salesperson is that using a burndown helped me spot problems earlier or to be precise — it helped me recognise and accept that I had a problem sooner than I normally would have. This may be hard to appreciate at first, so allow me to elaborate a bit.
When we (human beings) make judgments, we assume that we are highly rational and logical, and often feel that we are 100% in control of our thinking. However the reality is that, our brains have built-in biases that may subtly (or not so subtly) influence both our perceptions and decision-making. For example if you were asked to estimate how likely you are to experience illness, job loss, or an accident, you are guaranteed to underestimate the probability that such events will ever impact your life. This is because your brain has a built-in optimism bias — often referred to as “the illusion of invulnerability”.
Salespeople are no different and they too suffer from the “illusion of invulnerability”. When a salesperson starts slipping behind target it is very easy to underestimate how far behind they are and what it would take to get back on track. For example, if we imagine that the sales team from the previous example begins to fall behind target, under normal circumstances the gravity of the situation will most likely only begin to sync in around day 15 — when the gap between their ideal performance and actual performance is so big that the optimism bias can no longer blind them (see graph below). The problem is that by then the team is left with only 5 days to close almost $71,000 (vs. $29,000 had they been tracking in line with the model), which is not only incredibly hard to do, but also super stressful.
The use of burndown charts to track sales performance can help salespeople and sales teams alike to mitigate the risk of being blinded by the “illusion of invulnerability” and spot potential problems early enough to be able to effectively address them (i.e. around day 5–7 in graph above).
In other words, tracking your performance with a burndown can be a more accurate reflection of how you’re doing vs. how you think you’re doing.
Burndowns as a diagnostic tool
At Stack Overflow, we also used burndown charts to diagnose performance on a larger scale and identify what was causing certain issues. By the time I left Stack, the EMEA Sales team was comprised of 5 different sales teams, each with 5–8 salespeople on it. Each salesperson had their own burndown and in turn, each sales team their own burndown and all the burndowns were combined to create an office-wide EMEA Sales burndown (you get the picture). If the shape of the EMEA burndown started to resemble the shape of the burndown in the image above, the first thing I’d do is look at the 5 team burndowns to see what is causing the gap in our performance. From there of course we had the ability to drill down to individual level and identify problematic individual performances. This enabled us to spot issues within seconds and is something we applied on a company wide level to track performance (120+ sales people across 3 sales offices).
Forecasting and motivation
From a sales management standpoint, I find burndown charts to be highly effective to both motivate your team and forecast more accurately. That too is something I leveraged heavily at Stack Overflow and is now an important part of Heresy.
The image above is a screenshot from a Heresy burndown, tracking a fictional team aiming to hit $210,000 this month (November, 2016). The team is 3 days into the month and beginning to to fall behind. The extension of the line tracking their ideal performance (in red) is a visual representation of where the team will finish the month, if they were to carry on working at the same pace — i.e. the team will finish almost $26,000 short of their goal. In my experience, being able to visualise where you’d finish the month in advance could work as a great “wake up call” in situations like the above, where you’re are projected to finish behind goal. It could also work as a great motivational tool in instances where your current velocity is higher than the ideal monthly velocity, and you’re projected to finish ahead of goal.
Spotting Talent
During my time at Stack Overflow, I discovered that there was a very strong correlation between the shape of a new starter’s burndowns during months 1–3 and how likely they were to excel at their job. In fact, all three top sales performers in the EMEA office had almost identical burndowns in months 2 and/or 3.
The shape was very much like the one depicted above, characterised by the following:
- Velocity (the speed at which a salesperson is burning to goal) is almost consistent with their ideal monthly velocity — i.e. the slopes of the parts of the actual performance line highlighted in red are parallel to the model
- A few larger deals, taking the rep below the model performance
There are also a few patterns, that I’ve come to appreciate signalled potential trouble ahead. I’ll cover this topic in more depth in a future post.
Final thoughts
Burndown charts are a graphical representation of work left to do versus time — something, that in my experience is often overlooked in Sales. Despite originating from software development, I’ve found the burndown chart to be by far one of the most useful and versatile sales performance management tools. Whether you’re a looking for a better way to track your own sales performance, forecast more accurately or scale and manage a sales team, burndown charts could be incredibly helpful.
I must however stress on the fact that the burndown is simply a tool and just having one, won’t necessarily solve all your problems, and make you a better salesperson/manager. It is what you do with it, that makes a big difference!
