The Advantage of Uncertainty
The words uncertainty and risk can sound daunting. But, there is a way to demystify this scary topic and help people understood that uncertainty can be understood and approached. Risk management can give organizations a critical advantage over companies that ignore it, and avoid getting blindsided by situations that could be have been anticipated, managed, or mitigated. There are dozens of emerging tools and techniques for sales organizations to better understand uncertainty and risk, and use these for revenue planning. Andy Rudin and John Golden discuss sales and revenue risk in this expert sales webinar.
The automatic reaction for many sales organizations is to sweep uncertainty under the rug. But, rather than trying to ignore it, put it to work! Effective risk management is about knowing the risks that you face, prioritizing them, and then having the will to address them. This process begins with 6 key steps to embracing uncertainty and putting it to work for your company.
Start with a deterministic statement. A template for a deterministic statement might look like: “Our [name of goal] for [period of time] is [quantity]. A more specific example would be: “Our revenue goal for the fiscal year of 2016 is $35 million dollars.” This is something that most people should be familiar with, as all companies set this as a goal for their organization and sales team.
The second step is to identify areas of concern. What jeopardizes the outcome? What issues or challenges could stop you or your team in being successful? When you go over the things you’re most concerned about, it’s important to bring in your entire team, and have a collaborative discussion. Some of the most common worries of sales employees include: we might not get enough leads, our product might not be available when a customer requires it, we might not be able to sell at our list price, the sales team might not be able to engage with prospects, our average proposal value might be too low, the exchange rate for our exports might not be favorable, too few opportunities might reach the proposal stage, or that the brand might take a hit if an employee does something stupid on social media.
Third, prioritize your areas of concern. Whatever it is, you can prioritize it by most serious, to least. For example, not getting enough leads might be your first, most concerning priority. The average proposal value might be an area of note, but if it doesn’t rank high enough on the priority list, it may not be the task to immediately focus on.
For each of these priorities, take a view on a related process. If your concern is that you won’t get enough leads, the related process might be getting qualified leads from the marketing department. If you’re worried about the sales team getting enough engagement with prospects, look at the number of face-to-face appointments they have with clients. Fears of too few opportunities reaching the proposal stage can be deeper explored by considering the number of proposals that were generated. There are usually multiple related processes for each concern, but these examples highlight how to look deeper at your expected problem areas.
Determine the “worst case,” “most likely,” and “best case” scenarios for the processes created in step 4. For example, if your revenue goal is $35 million, you might estimate that the worst case scenario is around $18 million, the most likely scenario is $32 million, and the best case is that your company will earn $40 million. You can also predict values for each individual processes. Going back to the example of the number of qualified leads received from marketing, the worst case scenario could be 3,600, the most likely outcome is 4,000, and the best case scenario is 6,000.
For every minimum value, explain why it’s not possible to achieve a result that is lower. For every maximum value, explain why it’s not possible to a achieve a result that’s higher. This is a very important step because it helps managers understand volatility. In general, variables with lower volatility are considered less risky, and vice versa for variables with higher volatility. It gives more information on the range of possible outcomes, which allows sales managers to make predictions on which concerns and processes to tighten up and focus on.
For more information on how understanding risk and using it to your advantage, watch the entire expert sales webinar.
About our Host:
John is the Amazon bestselling author of Winning the Battle for Sales: Lessons on Closing Every Deal from the World’s Greatest Military Victories and Social Upheaval: How to Win at Social Selling. A globally acknowledged Sales & Marketing thought leader, speaker, and strategist. He is CSMO at Pipeliner CRM. In his spare time, John is an avid Martial Artist.