0
Money Wheel Analysis
How to find repeatable sales transactions to scale
       revenues in tough economic times

         ...
Overview & Contents

The most successful sales forces leverage repeatable sales
transactions to scale revenue. The Money W...
I Wish I Knew . . .

• Where to find more predictability
  in our sales?

• Why do some sales reps always
  do better than...
Money Wheel




• The Money Wheel is an analytical tool to understand where repeatable,
  scalable sales transactions are ...
Money Wheel Example
Product ABC Spokes / Spoke-lets       # Deals        Deal Value   % Deals   % Value
1. Net New
       ...
Money Wheel Overview Spokes
    Money Wheel Spokes identify the categories of repeatable


    sales transactions that oc...
Spoke-lets



                                                                     Spoke-lets




• Spoke-lets are the typ...
Money Wheel Example
   Sales Rep/ Sales $           1. Net New     2. Add-On         3. Expansion    4. Migration   5. Fin...
How Can I Use a Money Wheel?


• Focus sales force on highest yielding
  sales transactions

• Identify patterns of succes...
Reverse Engineering the Sales Funnel
• The Money Wheel can help you determine
  what your lead generation requirements are...
Demand Generation Estimate Example
                                          FY09 Targets                  Sales Funnel St...
Money Wheel Evolution




                                Visionaries   Early Adopters   Early Majority   Late Majority   ...
How to Build a Money Wheel
1. Develop Sales Transaction Analysis
    1. Assemble historical sales transaction information
...
Closing Thoughts


• The Money Wheel is just a tool to
  help management understand where
  their best sales opportunities...
DevelopmentCorporate
                                 DevelopmentCorporate is a strategic corporate
                      ...
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Financial Literacy: Money Wheel Analysis

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Another installment of the DevelopmentCorporate financial literacy series. This presentation focuses on discovering repeatable and scalable patterns in your organization's sales force.

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Transcript of "Financial Literacy: Money Wheel Analysis"

  1. 1. Money Wheel Analysis How to find repeatable sales transactions to scale revenues in tough economic times April 2009 DevelopmentCorporate www.developmentcorporate.com DevelopmentCorporate
  2. 2. Overview & Contents The most successful sales forces leverage repeatable sales transactions to scale revenue. The Money Wheel is an analytical tool tech companies can use to discover the most effective repeatable sales transactions in their markets Contents Money Wheel Basics – Spokes & Spoke-lets  Money Wheel Examples  How Can I Use A Money Wheel?  Calculating Lead Generation Requirements for a Product / Service  Money Wheel & Technology Adoption Life Cycle  How to Build A Money Wheel  DevelopmentCorporate
  3. 3. I Wish I Knew . . . • Where to find more predictability in our sales? • Why do some sales reps always do better than others? • How to find better leads for my sales force? • How much I really need to spend on marketing demand generation to hit my number? DevelopmentCorporate
  4. 4. Money Wheel • The Money Wheel is an analytical tool to understand where repeatable, scalable sales transactions are occurring inside your markets • Two components: Spokes & Spoke-lets • Spokes – Major categories of software sales. Net new customers, expansion of existing customers, financially driven deals, etc. • Spoke-lets – Specific events that cause a customer to decide to purchase a solution. For example, when a company implements a new ERP system they often have to update or replace other systems that integrate with ERP DevelopmentCorporate
  5. 5. Money Wheel Example Product ABC Spokes / Spoke-lets # Deals Deal Value % Deals % Value 1. Net New • Sample Money Wheel for a typical ERP Change 6 $ 172,420 11.8% 13.5% Merger 2 $ 54,405 3.9% 4.3% late stage enterprise software SOX Compliance 4 $ 157,950 7.8% 12.3% solution Subtotal 12 $ 384,775 23.5% 30.1% 2. Add-On Balanced Scorecard Implementation 4 $ 59,670 7.8% 4.7% Business Objects Implementation 3 $ 43,875 5.9% 3.4% • Only 30% of sales dollars and 23% Oracle Financials Upgrade 4 $ 71,955 7.8% 5.6% of transactions come from net SAS Implementation 3 $ 26,325 5.9% 2.1% WebMethods Integration 3 $ 32,550 5.9% 2.5% net customers Subtotal 17 $ 234,375 33.3% 18.3% 3. Expansion 0.0% 0.0% New Division 2$ 50,895 3.9% 4.0% • Add-on sales and financially driven Post Pilot Rollout 2$ 40,365 3.9% 3.2% Subtotal 4$ 91,260 7.8% 7.1% transactions account for majority 4. Migration Red Hat Migration 3$ 78,975 5.9% 6.2% of sales zOS Migration 3$ 89,505 5.9% 7.0% Subtotal 6$ 168,480 11.8% 13.2% 5. Financial PCI Compliance Audit 3 $ 64,935 5.9% 5.1% Q2FY08 Promotion 6 $ 222,885 11.8% 17.4% Q3FY08 Promotion 3 $ 112,320 5.9% 8.8% Subtotal 12 $ 400,140 23.5% 31.3% Total 51 $ 1,279,030 100.0% 100.0% DevelopmentCorporate
  6. 6. Money Wheel Overview Spokes Money Wheel Spokes identify the categories of repeatable  sales transactions that occur within a product / service line Net New Customers – organizations that have never  purchased from your company before Expansion Sales – Existing customer that is buying more  seats / copies / users Add-On Sales – Existing customer that is buying an add-on  product/service to support use of an existing product/service Migration Sales – Existing customers that are paying to  migrate from one version of a product to another version of a product Financial Transactions – Sales transactions that are totally  financially driven. Examples include 3 year prepaid maintenance deals with significant discounts and an add-on product bundled in so that some license revenue can be recognized. Conversion from term to perpetual software licenses. Disaster Recovery licenses. Etc. DevelopmentCorporate
  7. 7. Spoke-lets Spoke-lets • Spoke-lets are the types of repeatable sales transactions within a specific Money Wheel spoke • A Spoke-let answers the question: “Why did someone wake up this morning and decide they needed to buy a new software solution?” • In this example, the most common net new sales transactions were associated with a company deciding they had to implement a new ERP. That decision then triggered the purchase of your company’s software solution DevelopmentCorporate
  8. 8. Money Wheel Example Sales Rep/ Sales $ 1. Net New 2. Add-On 3. Expansion 4. Migration 5. Financial Total Peters $ 42,120 $ 25,530 $ 24,570 $ 33,345 $ 124,605$ 250,170 Calvin $ 91,260 $ 64,935 $ 31,590$ 187,785 Smith $ 54,405 $ 26,325 $ 26,325 $ 63,180$ 170,235 Baker $ 45,630 $ 26,325 $ 42,120 $ 50,895$ 164,970 Jackson $ 24,570 $ 50,895 $ 29,835 $ 47,385$ 152,685 Edison $ 60,100 $ 36,855 $ 50,895$ 147,850 Hobbs $ 98,280 $ 28,080 $ 126,360 Jones $ 14,040 $ 19,305 $ 14,040 $ 31,590 $ 78,975 Total $ 384,775 $ 234,375 $ 91,260 $ 168,480 $ 400,140 $ 1,279,030 Region / Sales $ 1. Net New 2. Add-On 3. Expansion 4. Migration 5. Financial Total 1. Northeast $ 110,565 $ 19,305 $ 40,365 $ 26,325 $ 138,645 $ 335,205 2. Central $ 24,570 $ 76,425 $ 24,570 $ 63,180 $ 128,115 $ 316,860 3. SouthEast $ 98,280 $ 73,710 $ 26,325 $ 42,120 $ 50,895 $ 291,330 4. West $ 151,360 $ 64,935 $ 36,855 $ 82,485 $ 335,635 Total $ 384,775 $ 234,375 $ 91,260 $ 168,480 $ 400,140 $ 1,279,030 • Data can also be re-cut to show what reps/ regions are doing what types of deals. • In this example, Peters is the leading rep, primarily because he sells primarily to existing customers. Hobbs does the best in selling to net new customers • The SouthEast region has a hard time selling financially driven deals DevelopmentCorporate
  9. 9. How Can I Use a Money Wheel? • Focus sales force on highest yielding sales transactions • Identify patterns of successful sales transactions in one region / rep that can be replicated in other areas • Determine lead generation requirements that are needed to hit a specific Product / Service revenue target DevelopmentCorporate
  10. 10. Reverse Engineering the Sales Funnel • The Money Wheel can help you determine what your lead generation requirements are for a specific product / service • The Money Wheel identifies the targeted # of sales for each spoke / spoke-let • By applying historical conversion ratios you can estimate the # opportunities by sales stage needed to hit a revenue target • Note, each spoke in the Money Wheel will have different conversion factors • Typically have higher conversions for sales to existing customers • Let’s you sanity check reality – are there enough suspects in the market to meet your needs? DevelopmentCorporate
  11. 11. Demand Generation Estimate Example FY09 Targets Sales Funnel Stages / Conversion Factors Product ABC Spokes / Spoke-lets # Deals FY09 Target Suspects Prospects Qualified Selected Closed 1. Net New 2.5% 7.5% 15.0% 75.0% 100.0% ERP Change 96 $ 2,758,720 455,111 11,378 853 128 96 Merger 32 $ 870,480 151,704 3,793 284 43 32 SOX Compliance 64 $ 2,527,200 303,407 7,585 569 85 64 Subtotal 192 $ 6,156,400 910,222 22,756 1,707 256 192 2. Add-On 15.0% 25.0% 50.0% 75.0% 100.0% Balanced Scorecard Implementation 64 $ 954,720 4,551 683 171 85 64 Business Objects Implementation 48 $ 702,000 3,413 512 128 64 48 Oracle Financials Upgrade 64 $ 1,151,280 4,551 683 171 85 64 SAS Implementation 48 $ 421,200 3,413 512 128 64 48 WebMethods Integration 48 $ 520,800 3,413 512 128 64 48 Subtotal 272 $ 3,750,000 19,342 2,901 725 363 272 3. Expansion 10.0% 25.0% 50.0% 75.0% 100.0% New Division 32 $ 814,320 3,413 341 85 43 32 Post Pilot Rollout 32 $ 645,840 3,413 341 85 43 32 Subtotal 64 $ 1,460,160 6,827 683 171 85 64 4. Migration 20.0% 25.0% 50.0% 75.0% 100.0% Red Hat Migration 48 $ 1,263,600 2,560 512 128 64 48 zOS Migration 48 $ 1,432,080 2,560 512 128 64 48 Subtotal 96 $ 2,695,680 5,120 1,024 256 128 96 5. Financial 15.0% 25.0% 40.0% 50.0% 100.0% PCI Compliance Audit 48 $ 1,038,960 6,400 960 240 96 48 Q2FY08 Promotion 96 $ 3,566,160 12,800 1,920 480 192 96 Q3FY08 Promotion 48 $ 1,797,120 6,400 960 240 96 48 Subtotal 192 $ 6,402,240 25,600 3,840 960 384 192 Total 816 $ 20,464,480 967,111 31,204 3,819 1,216 816 DevelopmentCorporate
  12. 12. Money Wheel Evolution Visionaries Early Adopters Early Majority Late Majority Laggards % Revenues Net New Customers 97% 85% 60% 45% 15% % Revenues Existing Customers 3% 15% 40% 55% 85% Total 100% 100% 100% 100% 100% • The Money Wheel for a Product / Service is not static • It evolves as the Product / Service moves through the technology adoption life cycle • Understanding where your solution is in its evolution is critical to building a good Money Wheel DevelopmentCorporate
  13. 13. How to Build a Money Wheel 1. Develop Sales Transaction Analysis 1. Assemble historical sales transaction information 2. Identify spoke-lets 2. Build Historical Money Wheel 1. Analyze by spoke / spoke-let, region, rep, and vertical 2. Identify any fundamental shifts in mix over time 3. Assess Position in Technology Adoption Life Cycle 1. Honestly assess where product / service is in TALC 2. Develop consensus of most effective spoke-lets for market position 4. Develop New Money Wheel 1. Develop for next 12 months 2. Establish basic revenue target 3. Determine distribution of transactions / $$$ over spokes / spoke-lets 4. Calculate demand generation requirements 5. Sanity check to see if demand generation requirements are feasible 5. Roll out Money Wheel to Field 1. Train sales force on concepts and how to leverage spoke-lets DevelopmentCorporate
  14. 14. Closing Thoughts • The Money Wheel is just a tool to help management understand where their best sales opportunities lie. • It provides a way to identify where the best types of repeatable sales cycles exist for a Product / Service • It also provides a framework for assessing where to invest marketing lead generation dollars and resources DevelopmentCorporate
  15. 15. DevelopmentCorporate DevelopmentCorporate is a strategic corporate development advisory firm for enterprise and mid- market technology companies. We assist management teams, board of directors, and investors in updating their merger, acquisition, and divestiture strategies and then we provide tactical support for the implementation of those strategies. Our credentials include: •Served as trusted advisor for four public company boards of directors as well as three large private equity firms •Developed over 300 in-depth analyses of public and private technology company acquisition candidates •Led the approach, initial management meetings, and due diligence for over 40 acquisition projects •Led 4 major acquisitions that closed for over $200 million in consideration. •Played a supporting role in 4 other acquisitions that closed for over $300 million in consideration. •Led 8 major divestitures that generated over $30 million in consideration •Led numerous cross border projects, especially in Western Europe, Korea, and Japan •Led over 12 major strategic corporate restructuring projects DevelopmentCorporate Copyright 2009 Development Corporate www.developmentcorporate.com
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