The founders of Yahoo! are purported to have said, “You Always Have Other Options”. It might be one of those apocryphal stories – but it’s a good one. And there’s a great and salutary lesson here for sellers.  When you’re on the receiving end of procurement pressures, negotiation nightmares, or buyer bad behavior, it’s good to know that you always have other options.  Or do you?  Well that depends on what your pipeline looks like, how you’re doing so far in the quarter, and what value your product really brings to the customer.

Later in this post I’m going to address the pipeline issue, or rather the “how do I know if I’ve enough in my pipeline?” question. But first I’d like to consider why it’s always good to have other options.

When I wrote the Select Selling Sales Fieldbook back in 2004, I used an acronym called BATNA.  BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, Getting to Yes: Negotiating Without Giving In. It is the acronym for Best Alternative To a Negotiated Agreement. It is your other option. Having a BATNA lets you know when to walk away from a negotiation without a deal. If the negotiation has arrived at that point where the deal on the table is less attractive than your alternative (your BATNA), you know that it is time to walk away. Your BATNA tells you when you should make that choice – it’s the yardstick against which you should measure any negotiated agreement.

Your BATNA is really the fulcrum on which the power of negotiation balances. If you are the preferred supplier to a customer, they have chosen you because you meet their needs better than any other vendor. If you walk away, they will lose something. Your BATNA is strong. Your negotiating position is strong. When the buyer has multiple vendors, who can offer similar products that don’t seem terribly differentiated, then the buyer’s BATNA is strong.

Sales executives sometimes feel that they don’t have a strong BATNA. They think their walk-away position is weak and that the buyer holds all of the cards. As quarter-end approaches, the buyer knows that you’re keen to get the deal done. But it probably doesn’t make a difference to him whether the purchase order is signed at the end of December, or in the middle of January. For you, the sales professional, the easiest way to have a strong BATNA is to not need the deal. A full pipeline helps you get to that position. A strong BATNA turns your need into a want. Yes, you would like to close the deal in the current quarter but, if the buyer knows that you don’t need it, your confident attitude will compel him to negotiate more reasonably to meet your interests.

What your sales pipeline should look like

So, let’s talk about your pipeline. You know that maintaining a strong sales pipeline, with enough qualified opportunities at each phase in the pipeline, is the only way to avoid the quarter-end crunch.  But how do you know when you’ve enough deals, at the right value, at the right stages in the funnel? Remember, your pipeline is a better predictor of the medium and long-term health of your business than your sales forecast – and they are two very different indicators.

Traditional approaches to setting the desired pipeline value usually went something like this. “We need 5x in the pipe.”  If that sounds too familiar to you, and that’s how you’re calculating your target pipeline value – then stop now.  It’s completely meaningless, and a complete waste of time.  It doesn’t account for your sales cycle. It pays no heed to your closure rates.  You need an algorithmic measure for each stage of the pipeline to determine whether you have enough opportunities at each stage. Consider the time to close, the probability of closure, and the target revenue to calculate the value you need.

Consider this graphic.

First things first.  The earliest you can close any opportunity that is in your pipeline is today, right?  And the further back up you go in the funnel, then the close date will typically be further out into the future.  In fact, if you take the fat part of the bell curve – for all your sales opportunities – you should have some predictability about how long it takes a deal to progress through each stage of the funnel.  Then, if you’ve a clear history of progression percentages from stage to stage, you can infer both a ‘time-to-close’ and a realistic ‘closure probability’ for each pipeline stage.  Now, if you know your average deal size (you do, don’t you), and you know your revenue target, you can figure out what the revenue target should be for a period equal to your average sales cycle, and hey presto! you can calculate what should be in each pipeline stage for you to hit your numbers.

(If this is a little hard to follow you can take a look at the video on the DealmakerMagic channel on YouTube, or call someone at The TAS Group.)

Make sure you always have other options

Negotiation is hard.  It’s good to want a deal to close in this quarter, but it not good to need it too.  The only way to avoid this is to have enough deals on the go, enough opportunities in your pipeline, and enough deals closed to place yourself in a position of strength.  I know this is much easier to say than do, but at least if you understand what you should have in pipeline, you will have an opportunity to understand early if you’re setting yourself up for a hard time.

And just two final points about pipeline management:

1. Pipeline stages have no inherent value in terms of deal progression.  It’s only the customer related actions tied to each stage that gives meaning to the progression of deals through the pipeline. Clear deliverables (based on evidence of customer actions) must be linked to each stage.
2. Deals that are inactive (have not been worked on for more than 60 days) should be cleared out of the sales funnel and sent back to marketing.  Otherwise you’re given a false sense of the value of your sales pipeline.

Just when you thought it was getting easy …

Front-line sales management can be one of the toughest jobs.  In many ways, you’ve a lot of responsibility – but you’re dependent on your team to deliver.  At times you need to be a blend of manager, business analyst, coach, therapist, counsellor, and the list goes on.  Whatever the mix is, there are always highs and lows, times when you are excited and grateful for things that go well, and then there is the rest of the time – well when you can be infuriated, dispirited, discouraged, dissatisfied, enraged, discontent, vexed … ok you get the message. But what bothers you the most? And, most importantly, what can you do about it?

A recent survey on LinkedIn tries to answer the first question – and the results are in.  Reps not following the sales process is the biggest frustration among the respondents to the survey. I’m not surprised with that answer. But looking at the other ‘frustrations’ listed (Sales forecast accuracy, Deadwood in the pipeline, Stop/start activity, and Deals getting stuck), I can’t help but wonder if they too might be resolved if the sales process issue was fixed.

Now, there are only two reasons for non-compliance with any directive.  The first is lack of knowledge or ability, and the second in lack of desire. In others words, either they can’t do the task, or they don’t want to do the task.  The first – once uncovered – can be fixed with training.  The second – unwillingness, or lack of desire – is harder to address.

Here’s the thing.  Most sales professionals understand that following a well designed sales process, that is easy to use, fits their business, and solves for the effort/reward equation, is a no-brainer.  Use the process and you sell more – period.

If you’re the sales manager, and you’re directing your team to use a sales process, the 10 questions you need to ask yourself  are:

1. Does it match how our typical customers want to buy?
2. Does it fit our industry, product or service?
3. Do all the supporting departments in the company understand the sales process, so that they can have a productive conversation with the sales person?
4. Is it easy to use and integrated with your CRM?
5. Does compliance with the sales process make sales forecasts more accurate – or does the sales person need to waste time on that as well?
6. Does the sales process have built-in steps to remove deadwood from the pipeline?
7. Does it guide the sales person to win the deal, and not just force him (her) through internally focused steps?
8. Do you manage deals, using the sales process as your compass?
9. Have you integrated the necessary marketing support / tools / collateral all through the sales process, mapped to the buying process?
10. Have you integrated skill/methodology/best practice learning at each step – that can be called on as needed?

If you can answer yes to more that 7 of these questions – then you’re probably not that frustrated, and your sales team is probably performing pretty well. If you can’t, then don’t blame the team for not following the process. Fix the deficiencies first.

“Are you sure this is a smart thing to do for your business?” was the question I was asked last week by a well regarded sales effectiveness industry observer. (I will call him Joe – not his real name.)  I had just told him that we were launching the DealmakerMagic Youtube Channel where anyone could go to look at online movie demos of our Dealmaker Sales Performance Automation platform.  Joe continued, “Surely you’re giving your competitors access to lots of information here.  Isn’t Dealmaker your main point of differentiation?”  Hmm, interesting perspective.

I know that Joe’s comments were well intentioned.  He’s been a supporter of what we’ve been doing ever since we acquired OnTarget (the sales methodology division of Oracle) back in 2006 and introduced sales performance automation to the mainstream sales training or sales effectiveness world.  He believes in the value of technology when intelligently applied to sales process.  Also, he’s a huge Dealmaker fan (bless his heart!).  But, this time, I think he’s missing the point on a number of fronts.

Difference versus Differentiation: In the first instance, I think there is waaaay too much emphasis placed on differentiation, and not enough placed on real difference. In my opinion an inordinate amount of misplaced and misguided resources is allocated towards marketing differentiation rather than product / service / solution value difference.  Too frequently the emphasis seems to be on finding how to position for a prospect, rather than how to produce for a customer.  Efforts should be prioritized towards how to provide real value to the customer from your product / service / solution.  Only then should positioning be considered. That’s not to diminish the importance of positioning; unless you can describe your value, you’ll never be able to afford to continue to add value.  But, in the long run, marketing messages can not supplant innovation.  And that brings me to my next point.

Sustain Advantage Through Customer Focused Innovation: Ok, so, according to Joe, our competitors can just go to our DealmakerMagic channel on Youtube and get a good understanding of Dealmaker. This is undoubtedly true – but I’m not sure that we should care.

• Firstly, it’s easy to see what Dealmaker does, but not that simple to understand what we do in the background to make it work. And, what we do is hard.  Delivering enterprise-class on-demand software that encapsulates complex sales methodology and delivers intelligent guidance to a sales person, in the context of where they are in the sales cycle – is not trivial; particularly when you consider that ever customer’s sales process is different.
• Secondly, our job is to continue to increase the value we deliver, and through a combination of vision and market research, we’ve roadmap and development initiatives that map the future for the next two years.   With all bias stated, we believe we can deliver much greater value to our customers today than any alternative – but that’s not enough.  Unless we maintain a laser-like focus on increasing the value we deliver to our customers, we will be caught up by our competitors, and in that case we don’t deserve to survive.  I don’t believe that will happen, and I certainly don’t think that making it easy for anyone to see our products will induce our demise.
• Finally, there’s no guarantee that our next innovation is going to look anything like the last one. A constantly changing landscape mandates fresh perspectives and evolving skills and the collective responses of customers to something like the DealmakerMagic channel can only help to inform that evolution.

Making It Easier For Customers to Find You:  If there’s one early business lesson to be learned from social media is that now is the time to make it easier for customers to find you, and focus less on pushing messages at prospects.  I don’t expect for a minute that viewing our online demos equates to an in-depth discussion with a customer about the business issues they are trying to solve, but it informs the conversation.  The old adage of ‘knowledge is power’ is less of a truism than before. Application of knowledge, and finding the right knowledge at the right time is more important, and we’re trying to make it easier for our customers to do that, and if they think it’s right for their business, they will ask us to help.

Learning from the Crowd:  Putting our product information on Youtube is also an experiment in crowd-sourcing.  We’re keen to see which of the demos will receive the most views, opinions or comments.  I don’t believe there’s anything about the content itself that will make it go viral, and our target market is quite specific, so I don’t expect huge volume.  But if we get a few hundred or thousand views, and subset of those people add comments – then we can only learn.

Today the DealmakerMagic channel is just a set of nine online movies, but we will be adding more over time.

Two of my favorites are:

Sales Process (shows how you can use Dealmaker to embody your own sales process), and

Dealmaker Virtual Learning System (shows how you can make your sales effectiveness, or other, content available on demand)

You can access the complete set of demo movies here.

Let me know what you think. Is this a good idea? Is Joe right? I’d love to hear your thoughts.

As we’ve deployed the Dealmaker Sales Performance Automation software platform for our customers we noticed a few common challenges around the area of Pipeline Management.  In the first instance, customers are often puzzled as to how to create the structure of the pipeline. Then they worry about how to keep the funnel full and whether to focus on pipeline volume or pipeline velocity. Finally we’ve been asked frequently to explain the ‘secret sauce’ that Dealmaker uses to identify pipeline risks or potential breakdown.

Here are four of the best practices lessons that our customers have learned by using Dealmaker.

1. Map the Pipeline Structure to a Sales Process

It is often difficult to decide how many stages you should have in your sales pipeline. We have seen different companies with their pipelines segmented into anything between three and 12 stages (we recommend no more than five or six) in the pipeline. Every week, or month, sales managers then ‘manage’ the sales force by working through each individual’s sales pipeline to determine how many opportunities are at each stage, and what probability to apply to each opportunity. More often than not, this is a fruitless exercise for two main reasons.

First, subjectivity plays a large part. In most cases, the interpretation of how to categorize the opportunity is left to the salesperson’s discretion. The buying cycle is often ignored, and there is usually little linkage between the key qualification questions used, and the stage of the process. One of the benefits of a standardized sales process is that everyone in the company involved in the sale adopts a common language. Clear deliverables are linked to each stage of the sale, and overall productivity increases.

Second, it is futile to determine the value of a pipeline by multiplying the value of each opportunity by the probability of it closing. There is no prize for second or third place in selling. You either win the deal or you lose. Having 10 opportunities at 10% probability mathematically may be the equivalent of one full opportunity – but it is not the same as having a signed contract. We are constantly amazed at how seasoned sales managers continue to value their pipelines in this manner. These percentage figures assume a ‘steady state’ economy, no variance in the competitive landscape, and a constant product scenario. Then the numbers often feed directly into company forecasts. Back to the fairy tale! Having a standardized sales process, and a fully-documented and formally-defined pipeline, with well-understood rules, results in everyone having the same, realistic view of the forecast.

You should design your sales process to incorporate stages in the pipeline that reflect the customer’s buying cycle. It seems more logical to us to link the selling cycle to the customer’s buying cycle, than to use other measures that sometimes seem arbitrary. If you take this approach, the selling actions that you have to plan become self-apparent. You understand the concerns of the buyer at each stage of the buying cycle, and, in effect, your pipeline management becomes a summary sales action plan. In addition, you can now link and layer the qualification process to the overall sales process, to help determine which qualification questions need to be answered, at each stage in the process.

2. Keep the Funnel Full

You mightn’t want to do it, but sometimes you’re going to have to generate your own leads. Getting appropriately-targeted customers into the top of your sales funnel is the source of your raw material. Without that raw material, you can’t build a pipeline. When there are gaps in your pipeline, pressure builds on the few opportunities you have. You’re tempted to try to progress a specific deal too aggressively. Your state of anxiety over this quarter’s revenue is heightened by the fact that you are looking into a void for next quarter. It may be the stated role of the marketing department to deliver qualified leads to the sales team, and you might be one of the fortunate few who is adequately served in this manner, but if you don’t recognize the need to look constantly for new opportunities yourself, you lose control over your destiny.

The likelihood of finding a good opportunity is dependent on the type of activity you undertake. If you’ve got your act together, you have a broad network of contacts who are potential customers. They respect you and the value you can bring to their business. Your existing customers can provide you with further business within their company, and referrals to their counterparts in similar companies. Strong relationships with industry consultants and analysts are a good source of recommendations for new business opportunities.

Your own market assessment and development activities will always provide the best quality of sales leads, but be sure that the folks in marketing aren’t working in a vacuum. Make sure they are in lock-step with your needs. Help them understand what’s exciting the customers. Together, you can craft effective seminar programs, social media campaigns, emarketing, or other campaigns for your territory. Marketing often bemoans the fact that they generate leads and the sales team ignores them. Get them on your side by telling them what you need, and then by showing them how you are responding to the good work that they do.

3. Rocks and Stones and Pebbles

If you want to fill a barrel with rocks and maximize the capacity of the barrel, you have to fill the gaps between the rocks with stones or pebbles. Have you ever been in the situation where you’re dependent on that one big deal? Our customers say that having Dealmaker highlight risks in the funnel mix – by identifying when there is an imbalance in deal sizes is one of the features that delivers most value to them.

Experienced sales professionals understand that relying on a small number of big deals is risky, and they will balance their opportunity portfolio with smaller deals in order to keep the numbers moving, in case the big rock falls off the cliff. It is one of the truisms of selling: big deals inevitably take longer to close than originally envisioned. Three months becomes six months – or a year. You need to be working on a mix of large deals and smaller opportunities. While waiting for the big deal, no one is making any money and desperation levels increase if there isn’t a backup plan. Your negotiation position weakens, and that major opportunity turns into a minor profit deal. Rocks and stones and pebbles make for a full barrel.

4. Know How Much you Need in the Funnel

There are four factors that Dealmaker uses to determine the health of a sales pipeline:

• Integrity of data
• Deal value
• Number of deals
• Balance across pipeline stages.

The information in the pipeline system must be pristine, continually updated to reflect progress, wins and losses. Everyone must understand the language being used and the salesperson (in particular) must constrain his normal unbridled optimism and not allow himself to overstate the potential value, or proximity to closure, of a deal. Every person entering, or interpreting, data must have a common understanding of the rules being applied to determine where an opportunity sits. Dealmaker automatically places the opportunities at the appropriate stage of the pipeline.

How long is your typical sales cycle? How much time passes during each phase of the buying cycle? As some customers are working through the Requirements phase of their cycle, you need to have others that you are guiding through the Evidence stage, and more with whom you are finalizing the issues that come up during Acquisition. To keep the pipeline balanced, and maintain a steady deal flow, you need to have an adequate number and value of opportunities at each stage in the pipeline. We use the Pipeline Value Factor, or PVF, to help gauge the value.

To achieve 100% of, say, a quarterly target, consistently over consecutive quarters, PVF is the measure of what multiple of that target number you would need to have in each stage of the pipeline, at any point in time. While PVF doesn’t take into consideration the mix of large and small deals, and it is a blunt tool, it is a useful early warning system. If you don’t have enough value in your pipeline, then whether it is made up of large or small deals isn’t the big problem. The problem is that you don’t have enough in your pipeline.

As you may know, The TAS Group, and others,  launched the Dealmaker Partner Network on Sept 29, 2009. Since then I’ve received many inquiries from individuals and companies who’ve expressed both intrigue and interest in what we’re doing. I hadn’t really thought that the DPN would create such interest, and as often happens when ideas evolve, I never called out the core thinking that combined to bring this idea to life.  Here it is in brief:

My perspective is informed by a number of macro trends that, in my opinion, are today combining to shape the future of the economy in general and specifically the sales effectiveness market in which we operate;

• Trend #1. The market is fundamentally changed – and it’s not going back
  The practices that have characterized (and, in truth damaged) our industry – no technology, poor adoption, little sustained delivery of value, ‘best practice-du-jour’, on the fly reinvention of (both sales and marketing) methodology, training event driven learning – are now, and will remain defunct. I’ve written about this a little in a previous post – The ‘New Normal’ in Sales Effectiveness

• Trend #2. We need to re-conceive value creation. 
  We need to prepare for the ‘new normal’ and commit to delivering sustained customer value, redress the value imbalance (you give me $100 and I will give you $13 value in sales training), and in effect re-conceive value creation.  If your customers’ adoption rates of the sales effectiveness solution you provide remains at the industry average (13%), you should give them their money back.

• Truth #3. Our customers need to be Agile – and it’s our job to enable that. 
  Market cycles are becoming increasingly compressed. Volatility is here to stay. Organizations or departments must be able to ‘turn on a dime’.  Velocity, productivity, effectiveness and information flow in the sales and marketing organizations are the enablers of growth that we must facilitate. That’s only achievable through short-cycle closed loop ‘now information’, that can only be facilitated with integrated technology.  Without ‘now information’ I can’t measure, or correct my course.

• Truth #4. This restructuring of the economy creates tremendous opportunity.
  I view the current/recent market challenges more as a restructuring of the economic order rather than a recession. It’s a fine example of capitalism at work, but re-imposes the need for a foundation of trust, ethics and good business practices.  On such foundations are good partnerships and other successful business ecosystems (such as the DPN) built.  We’ve witnessed many exemplars of this trend; e.g. Linux, Cisco, Dell, etc. Uncommon opportunity calls for uncommon partnerships to best support and facilitate the rate of change, innovation and self-disruption necessary in our business models – not just to grow, but to avoid extinction or lingering death.

When some one expresses interest in joining the DPN, my first question is:  “What value do you think the Dealmaker platform, and the DPN in general can bring to your customer?”  My contention is that if the answer to that question isn’t clear, then perhaps now isn’t the right time for the company to join the DPN.  I look for alignment with the core principles outlined above, because if we don’t share a vision, we’re unlikely to succeed.