Managing sales targets in uncertains times and its impact on your runway
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Learn killer techniques for managing sales in a crisis. - Rebuilding your 2020 budget - How your unit economics are more important than ever - Operational plan for rapid hypothesis creation and testing - Dynamic re-forecasting every week - Qualification, Qualification, Qualification
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Managing sales targets in uncertains times and its impact on your runway
- 1. & In This Together Series “Managing Your Reps Targets During Uncertain Times… And The Impact On Your Runway” Ben Wright - Founding Sales Coach at SIA Pete Crosby - NED at Kluster and Founder Member at LRC hello@salesimpactacademy.co.uk Sales & Marketing Leaders Webinar will be live at 4pm UK Time presents
- 2. Managing Targets to Support Uncertain Growth ● Important to start redefining your plan for rest of CY2020 ● Understand how you will survive if the market is choppy for next 9-12 months ● Do you need to consider extending runway from existing investors? ● Do you need to re-balance your budgets / leverage government support?
- 3. Agenda ● Re-defining your sales plan ● Creating pipeline ● Closing deals
- 4. Re-defining your sales plan ● Top-down plan ● Unit economics ● Bottom-up plan ● What to do when these plans don’t meet
- 5. Defining Your Top-Down Plan ● Determine minimum revenue for survival with exec team and board ● What does ‘good’ look like for future investors? ● Factor in potential for clients paying late and churning ● Compare this model with your bottom-up plan to sanity check
- 7. Why should I care about this while Rome is burning? ○ What will be your key drivers when you build the Bottom Up? ○ Which Outputs should you focus on? ○ The earlier you can make data driven decisions the closer you will be to the right answer Unit Economics
- 8. ● Example I ○ CAC ■ demand gen + sales costs (last rolling quarter) / new customers this quarter = cost of acquiring a new customer ■ This may well be depressed over the coming months, but what degree will you tolerate? Unit Economics
- 9. Tracking CAC by Source enables us to focus early on the fastest recovering channel Upward cost trend as sales volume drops Modelled impact of Covid-19 on CAC
- 10. ● Example II ○ ORM ■ New Opps / Rep / Month ■ Whether you deploy SDRs, survive on inbound, or operate 360°AEs how many Opps must be driven to fill the tank in a post-C19 world? Unit Economics
- 11. Impact of small drops in Velocity drivers
- 12. Building A Bottom-Up Model ● Need to identify the metrics which are the key indicators for how your sales pipeline may change ● Your lead gen function is likely to be the canary in your coal mine ● Understand what Leading, Current and Lagging indicators are useful - for example: Leading Email opens / CTR Email +ve response rate Qualification calls Current SQLs Discovery calls SAOs Lagging Paid pilots POC Deals closed
- 13. Building A Bottom-Up Model ● Iteratively compare leading indicators - for example: Leading Q1 Week 1 / Averages Email opens / CTR - 35% Email +ve response rate - 18% Qualification calls - 7 per week Leading Q2 - Week 1 Email opens / CTR - 14% (-60%) Email +ve response rate - 9% (-50%) Qualification calls - 3 per week (-57%) ● Don’t panic yet (particularly if you’re using averages) ● Continue to measures on week by week basis for each rep
- 14. Building A Bottom-Up Model ● As the quarter progresses start bringing later metrics: Leading Q1 Week 4 / Averages Email opens / CTR - 35% Email +ve response rate - 18% Qualification calls - 7 per week Discovery calls - 5 per week Leading Q2 - Week 4 Email opens / CTR - 29% (-18%) Email +ve response rate - 13% (-28%) Qualification calls - 5 per week (-28.5) Discovery calls - 3 per week (-40%) ● By Week 4 - 6 you should have enough data to make first assessment of where you quarter might end by averaging across reps ● Start feeding these numbers / ratios into your quota calculations
- 15. Building A Bottom-Up Model ● SDR / Leadgen ○ Previous target was 3 SAOs per week ○ New metrics suggest 33% reduction in Leading indicators (in this example by taking an average of quali and discovery call reductions) ○ Downgrade SAO target to 2 per week ● AE / BDMs ○ Previous target was £120k per quarter ○ Use SAO target conversion rates (as above 33% reduction) ○ £120k becomes £80k quarterly target
- 16. Matching Top-Down and Bottom-Up Models ● It won’t match, don’t force it too ○ But neither can it be an excuse to disregard the top down build ● No hope or hype ○ Sales leaders can be prone to optimism. Resist this urge ○ Founders like punchy, but can you deliver it ● Sense check every conversion ratio & every assumption ○ Is there a precedent for these numbers ● And if it still doesn’t match the Top Down demand ○ ...it’s time to reduce the Top Down Model
- 17. Agenda ● Re-defining your sales plan ● Creating pipeline ● Closing deals
- 18. Opp Gen in a cold climate What’s your plan? Daily Measurement Weekly Standups Rapid hypothesis EWS
- 19. Tweaking the Flywheel 66% 25% 50% 4% Calls, Emails, Social Touches Meaningful Conversations Discoveries Deep Dives Opportunity
- 20. Agenda ● Re-defining your sales plan ● Creating pipeline ● Closing deals
- 21. Value Proposition ICP Buyer Personas Re-evaluating GTM on the fly
- 22. Summary ● Re-defining your sales plan ● Creating pipeline ● Closing deals
- 23. Q & A
Editor's Notes
- Thanks Paul, that’s great, really pleased to have everyone on the call today. As Paul mentioned we’re going to talk about how to manage and if necessary re-frame your sales targets for 2020 based on the somewhat uncertain times we find ourselves, assuming that is you’re not benefiting from some Zoom-effect which is actually accelerating your sales. Certainly from our view, while it’s possible that Q2/Q3/Q4 may see some improvements in markets, it does seems likely at the moment anyway that some, if not many, of the current restrictions that are in place will remain through this period and so it’s really important that you start get a sense of what your sales plan for the rest of 2020 is going to look like in terms of what you can actually deliver and how this will impact - and be impacted by - your sales targets. You’ll hear more about fund raising in the session tomorrow with the folks from Emerge, Episode1 and Notion, but it’s worth mentioning now that it’d be a good idea to talk to your board to try to get some feeling for what ‘good’ will look like to future investors over the coming months. As always, it’s worth bearing in mind that your board & investors will appreciate any bad news that you might have early, so make sure you keep those communication lines open. If you haven’t already, it’s also worth thinking about whether you can extend your runway by raising a small round from your existing investors - I’ve two current clients that are doing this, one specifically raising a smaller internal round essentially to postpone a much larger series A, and another doing a series A+, both with the goal of extending runway so they can continue to build their business through and beyond this crisis and get back on a proper commercial footing before doing larger raises. So to today’s topic - how you can start reframing your sales targets based on the changes that you’re seeing today and over the coming weeks and months in the markets in which you operate. NEXT SLIDE PLEASE
- We’re going to focus on these three main areas. We’ll spend much of the session talking about how you can re-define your sales plan, looking at how you can bring together the revenue you need for your business to survive - and perhaps even thrive - with what is achievable, and also how you actually work out what is achievable in the current market. In this we’ll also take a look at what happens when these plans don’t match - when the revenue you’re planning for isn’t matched by what you’re seeing happen on the ground. And we’ll look at how these changed plans will then affect your sales targets and quotas for your sales team - and Pete will take you through some thoughts on Unit Economics as you develop these plans. Once we’ve covered your overall sales plan, Pete will also take you through some thoughts to bear in mind as you’re creating pipeline and closing deals. NEXT SLIDE PLEASE
- So let’s start with redefining your sales plan. It’s quite likely that you’ll already been re-working your top-down plan based on what you’re seeing in your markets, updating your operating model to work out the minimal revenue and operating cash you need as a business - so we’ll take a quick look at that, then Pete as I said will take you through understanding your unit economics. The last two pieces of this are then building a bottom up plan to work out what is actually achievable in the real world as you go through the next quarter and beyond, and then what to do if your top-down plan is not compatible with your bottom-up plan. I.e. if the revenue you need or want to generate isn’t deliverable given what’s happening on the ground in your prospect markets. I think the first thing to say is that if this ISN’T a process you’ve been through then this is a real call to action for you. It’s not just something that happens in times of crisis, I’ve worked with many teams who have developed top down plans from a revenue number they believe they need to hit, but then that turns out to be completely un-achievable when you dig into what is actually happening on the ground. This is something we should really try and avoid at the best of times, but in the current situation, it’s absolutely critical that you don’t make this mistake, because your margin for error will likely be significantly less. And while we go through this process we also need bear in mind this will be an iterative process - we’ll talk you through the bottom up plan in more detail, but the model we’ll be following is one of constantly setting metrics, analysing results and iterating your operating plan based on the results you see happening in the real world. NEXT SLIDE PLEASE
- So, I’m not going to spend too much time on the top down plan as it’s likely to be relatively straightforward - the baseline for this will be how much revenue you need to survive until your next funding round. You’ll need to work with your management team and your board to understand the bare minimum you need to maintain your workforce and the efficient functioning of your business. You’ll also need to factor in some model for what ‘good’ will look like in this environment to your next investors, and make sure you give yourself enough runway to try and get to this point before raising again. Another reason why considering a smaller internal round may make sense for you right now. It’s possible you may need to defer hires, or pull back spend in certain areas to get to a ‘minimum viable revenue’ figure. It’s possible, perhaps even likely, that you’ll need to iterate on this once you’ve built your bottom up plan and realise they don’t match, but we’ll get to that later. Whether you’re relatively early stage company and don’t have a particularly seasoned management team or if you’re later stage company and either have more experienced managers or board members who help operationally, you will have a number - a revenue target - which was defined for growth. You may have already redefined this for a more modest growth trajectory or perhaps even just pure survival. If you haven’t, then this is something you do need to look at with some urgency, involving your management team and your board. It’s also important to bear in mind that your customers may well be going through this exact same exercise, so if you haven’t seen this already it’s possible - perhaps even likely - that you may see a reduction in cash-flow with customers paying late and potentially a reduction in revenue as your customers look to reduce their costs and either ask for a reduction in your cost or perhaps even churn because they decide to stop using your platform or service altogether to save money. You’ll need to start factoring this in based on what you see over the next few weeks as I’ve certainly seen this start to happen with some of the clients I work with. Before we look at the bottom up model, it’s important to look a what you want the outcome of this to be, so I’ll hand over to Pete to talk a little about Unit Economics.
- Extends runway, informs hiring, iterates before the competition. Of course we could affect this chart further by acting quickly to cut channels in march/ april which demonstrate ineffectiveness early
- 60% drop in this example
- That’s great Pete, thanks. So let’s take a look now at how to build your bottom up model. The key to this model is to first identify the metrics that are really going to determine future growth - and as Pete has shown, it’s your lead gen function that is likely to be the best predictor of this. When we look at these sort of metrics I like to think of predictive data using a model of Leading, Current and Lagging indicators. The Leading indicators are those ones that give you the first insight into what may happen in the future - there will be obviously be some variability in the consistency of exactly how accurately your Leading indicators are able to predict future outcomes, but they are the first indicators of what may happen. Your Current indicators come next, these will be further along your sales pipeline, but will start to have more accuracy, and then of course your Lagging indicators are most likely the actual outcomes you want to deliver, which will obviously have much greater accuracy. The challenge we have is that - unless you have a very short sales cycle - your Lagging indicators and perhaps even your Current indicators will likely take too long to filter through to allow you to do any sort of proactive planning. Another challenge I’ve seen, for example, is that I have several clients where the right hand side of their pipeline (from negotiation to close) is still showing relatively strong movement, because the prospects who have already been considering their solution and understand how it works can see how it could actually provide a huge benefit in the current situation. But even for these companies for new prospects, people who they haven’t properly engaged with yet, they simply don’t have the headspace to deal with anything new, so even for companies with strong Lagging indicators, their Leading indicators are weaker, and it’s these Leading indicators that are going to determine medium term growth once those existing opportunities have been closed. Essentially what I’m saying here is that even if you have relatively strong demand in the later stages of your funnel, it’s the earlier stages that are both going to be predictors of future growth, and are going to be the earliest indicators of what that growth will look like. What you’re seeing here is by no means a comprehensive list, but these are some of the indicators that may fit into these three categories. For Leading indicators, you may want to look at the very early metrics like email opens, CTRates, and positive email response, though for my money, it’ll be getting Qualification calls book that is probably the more reliable Leading indicator. I guess it’s possible some of you may not be doing Qualification calls, and if you’re not, now really is the time to start building this into your sales process - and we’ll take a quick look at that later. For Current indicators, you could look at things like SQLs, Discovery calls or SAOs - what you decide to use here will likely be dependent on the length of your sales cycles. SAOs are likely to be a more accurate Current indicator - assuming you have a rigorous process for defining these - if not, then perhaps Discovery calls. For your Lagging indicators, most likely Deals Closed is the outcome you’re aiming for, though again, depending on your model, it could be a Paid Pilot or POC What’s really important is that whatever indicators you choose, you should be measuring and monitoring on a week by week basis moving forward to determine exactly what’s going on in your markets, and for each of your individual reps too.
- Let’s take a look then at what your first week of Q2 could look like. You can see in this example I’ve chosen to monitor three leading indicators, the rates of email opens, positive response rates and qualification calls and compare them against data from the previous quarter. The first two will give you good insight into what’s happening in your target markets, though as I said, it’s probably the bottom one, Qualification Calls, that will be the most important leading indicator. As you can see in this example, Leading Indicators of Week 1 of Q2 has seen some significant drop off against Week 1 of the previous quarter. If you don’t have week-by-week comparable data from last quarter, you could use quarterly averages, though bear in mind there may be some week by week variance in how these perform over the quarter. If you haven’t been tracking these sorts of metrics, well, now is the perfect time to start getting your data house in order, but it also means you’ll have to make some assumptions, or better yet go through your diaries or CRM to try and put some data together. If this is what your data looks like at the end of Week 1, then there’s no need to panic, it’s still early days as your prospects come to term with the new normal - it seems that the tech sector went remote much earlier than a number of other sectors, so while your business may have got used to running remote, it’s possible, perhaps even likely, that your prospects are still coming to terms with this. Hopefully this will settle down over the coming weeks, though if you’re selling into retail, travel or hospitality, you are probably already thinking about alternative markets.
- So let’s fast forward to Week 4 of Q2. You should have been monitoring these Indicators every single week and perhaps you’ve already started to see some trends emerge. You can see in this example that things have started to settle down a little, response rates have recovered somewhat, but they’re still down. I’ve also brought in a more current indicator of Discovery Calls, you could also bring in SAOs (Sales Accepted Opportunities) at this point too to take a look at how they’re performing. There’s nothing to say that these indicators won’t recover over the following weeks, but at this point, you’ll really need to start re-framing your revenue plan if you haven’t done so already, as what the data is clearly showing you is that your Q2 revenue is already compromised. Both Pete and I have talked about working with reality rather than hope and here is where the rubber meets the road. If you’re seeing these sorts of drops in your Leading and Current indicators, you have to factor these into your revenue plan and targets, and make sure you’re communicating this effectively to your team and your board - personally, I’d have agreed with your board at the outset what indicators you’ll be tracking and would be sending them this data on a week by week basis. If we go to the next slide please, we can see what we’d do with our targets in this example.
- On the previous slide we saw that qualification calls were down by 28.5% and that Discovery calls were down by 40%. We could take an average from these to give us a combined Leading indicator which would show that we’re overall down by about a third. So for example, if your lead gen function is targeted on 3 SAOs per week, it’s clear that’s not realistic in the current market, so that should probably be modelled at a target of 2 per week. Equally, if our sales targets for AEs or BDMs is £120k, then the data is showing us is that the right target for this quarter at least is £80k. You can then use these new sales targets to roll up into your overall revenue target, which will give you an early indication of what revenue you can expect to hit at the end of the quarter. Again, you should keep monitoring this week by week and reviewing what the data is showing you, as well as keeping all of your stakeholders informed. You may not like these number, your board and management team may not like these numbers, but they’re based on the reality of the new situation. There are I’m sure, may new innovative ways of engaging with your prospects that you could and should be trying out at this point, and hopefully these will start giving you more traction as you move into the quarter, but it’s absolutely critical that you are building a plan around what is achievable rather than what is desirable. Your or your board giving your sales team a number which is completely unachievable based on what you’re seeing on the ground will not only simply fail, but it will also prevent you from making the right business decisions early enough for them to be effective, and it will be a massive de-motivator for the sales team and perhaps the rest of the company too. I’m going to hand over to Pete again, who’s going to talk you through some practical steps to take if and when your top-down number doesn’t match this bottom up plan as well as some thoughts
- Tweaking the flywheel Upsell, expansion, new bus? Execute Deal propensity Deal inspection & accurate opp stages
- Today, then, we’re going to focus on these three main areas. We’ll spend much of the session talking about how you can re-define your sales plan, looking at how you can bring together the revenue you need for your business to survive - and perhaps even thrive - with what is achievable, and how you actually work out what is achievable in the current market, and in turn then translate these into revenue targets for the business and sales targets and quota for your sales team. We’ll also take a look at XXXX
- Is your value prop still right I.e. Did your PMF just shift? Has your ICP moved I.e. Are you just gonna sell to everyone, if your ICP is tight, is it still the right one? Are your personas the same Who cares about what right now? Is your GTM still the same For example should we move to a POC model
- Thanks Pete, some really interesting ideas there. What we’ve seen today then is how you can redefine your sales plan by using both a top-down and bottom-up model to understand how what you need to deliver as a business is matched by what’s actually happening on the ground by using Leading and Current indicators in your sales funnel and monitoring those closely as you move into the next quarter. We’ve talked about how important it is to use real-world data to frame your revenue and quota plans and how to iterate your way to a more accurate model of what’s achievable. And we also took at look at how you can refine these plans if and when your top-down and bottom-up models don’t match. Pete also took us through an examination of Unit Economic and shared some great insights into how you can optimise your opportunity creation and deal closing processes. We hope you’ve taken away some real actionable insights and given you some tangible actions that you can start putting in place immediately.