The end of Q1 and beginning of Q2 is a great time to really evaluate your sales pipeline: what is working and what is not?
Step 1: The first thing you should do is to take a quick look at the wins and losses so far this year.
Step 2: Next, create a matrix of what products you have sold to your accounts and how long, on average, it took to close these deals.
Step 3: From there, look at how many of your suspect leads turned into deals and how long, on average, it took to close them. If your company already has the data on the average amount of time similar deals took to move through the sales pipeline, you’re extremely lucky. Whether it’s you compiling the data, or your team, you’ll have a leading indicator that a deal is stuck, not a priority, or that you lost to a competitor – or worse yet – to no decision. Use this information to gain real insight into your pipeline.
In the car sales industry, dealers have a report called DOL, or “days on lot.” They know that cars that sit too long become a drain on their cash flow and inventory. In enterprise or product sales, the same is true – you need to work on the deals that move, and minimize or kill the deals that do not. The historical data you compiled will give you keen insight and enable you to evaluate your deals appropriately.
Now let’s take this concept further and see how it relates to your product/services. Let’s say a seat of your standard product takes 90-120 days to close, while data management sales often take 180-360 days. When you run your “DOL” report, you will see which deals are falling outside of your company’s normal sales cycle. That begs the question – why? Here are a few questions to consider:
- Did the executive sponsor or organization change?
- Did the budget get cut?
- Did you capture the Critical Business Issue (CBI) and get agreement from the client that they will have an ROI by employing your solution?
- Or, did the competition sneak in and close the deal?
The last question is one we never like to ask ourselves, right? But we must in order to really understand if we have a viable deal or not.
If the deal score from your High Value Trades negotiation table shows that you have a good deal and the investment by you and the customer is equal, it’s time to requalify the deal. If it is determined that the deal is lost, getting to the WHY is important for moving forward and is an opportunity to learn.
Here is an example of our client’s lost deal and how we got to the WHY:
In this particular situation, our client was sure they would win the business – the prospect had even told the sales rep it was 95% in their favor. The deal stalled and eventually the prospect told the sales rep they had decided to stay with the current provider.
When we asked the sales rep why he was so sure he would win the business, he said that his company’s solution would have saved the prospect 35% over the competition. So price appeared to be the motivator, and while it usually is a big factor, this sales rep learned that it’s not the end-all in every situation.
When we sat down and analyzed the loss, the prospect’s potential savings to be gained by employing our client’s offering was definitely there ($1.2M versus $780K), but what the sales rep failed to take into account was the soft costs associated with changing providers, and those soft costs were very significant:
The prospect had a total of 50 users who would require 10 days of training on the new tools, a total of 4,000 man-hours (50 users x 8 hours x 10 days). Assuming these people cost $100/hour, that’s $400,000 in training costs alone. While the prospect would still recognize a small savings, it was nowhere near what the sales rep had assumed it would be ($20k instead of $420k). To top it off, in order to protect themselves, the current provider/competitor had offered a $100k discount and asked its customer to sign for 2 years, a $1.1M deal guaranteed for 2 years, effectively closing the door on the competition, while gaining $2.2M in revenue.
Getting to the WHY
If you lose a deal, the first thing you should ask yourself is why it was lost. The best analysis starts with some real honesty. Remember people, time, and money drive the decisions of those who sign the checks. The lessons learned here are:
- Understand how long deals take to close and requalify when outside that window.
- Use your insight to ask the best questions to your customer, and remember that just because you may be saving them a lot of money, the soft cost of implementation can narrow the savings gap significantly.
To learn more about our High Value Trade table and how to use it to qualify and score your sales deals, take our online learning module SG5 Negotiating with High Value Trades, or contact us at 781-910-0077 to develop your own program.