Lessons From A 73mm ARR Company, 1 of 2

Probably an eight minute read

 

In October, I got a call from a company’s COO out of New York. We’d talked before, and I’d done some training for his company, so he was familiar with me.

He said, “Adam, we need to talk. Sales missed their goal last quarter, and this one isn’t looking good, either. We’ll miss our number, even though sales says they’re doing everything they can. Can we look at how we might get this thing growing again?”

 

I agreed to meet with him and explore how I might be able to help.

They have the behemoths in their industry chasing their innovation, positioning and more.

Their sales leaders are all tenured in their industry and have great reputations.

Their sales team has knocked down the biggest accounts in the space, and made plenty of money along the way.

In short, everything looked great. From the outside.

But it wasn’t working like it needed to.

What we found was that common practice isn’t always the best way to grow.

And appearances can be deceiving.

 

The company in question is in financial services.

And their product is top flight, in a hot sector.

They sell into one of the most recession-proof and cash-rich industries in America.

The product is enterprise level, selling to CFOs and VPs of finance in large organizations.

But sales had been dragging all year.

Talking with the COO, I discovered these surface issues:

• They’d missed the most recent quarter, and it wasn’t the first time.
• The quarter before they’d skated by by pulling through a lot of deals, and offering generous discounts.
• The current quarter wasn’t looking good.
• Heads of sales reportedly said, “We need to get aggressive on this one” to close business.
• Sales leadership was “optimistic” but the C suite didn’t believe their forecasting.
• There was little faith that this sales leadership team could pull off a comeback given the recent track record.
• The board was getting antsy about performance.

 

When I hear this, it’s often an indicator that some of the following are present:

• Leadership isn’t managing, but playing Superman, closing all the deals. This creates a problem of learned helplessness, but also a bottleneck in how much can be won by the TEAM.
• The sales process is focused on events – like demos – rather than finding core information that justifies advancing a deal.
• There’s not a focus on building the case for a product or service, but pitching and praying. (I can say that – I’m a person of faith.)
• A lot of people in sales roles shouldn’t be there, at least at this level. They have “experience” but it’s not necessarily constantly compounding.
• The sales team isn’t able to effectively and consistently sell to the C level.

 

That’s where I start. I had some idea that a lot of this was happening. It often is. But there was more.

After connecting with the head of sales, it took some patience and convincing, but he finally agreed to let me into their world.

(Sometimes the biggest challenge with functional leaders is getting their buy-in: they believe they have to be the expert on everything related to their field, and they are distrustful of anyone they haven’t worked with before.)

The leaders of the sales org explained poor performance a few ways, all of which sounded like excuses:

• This is how this market buys. They tick up every year in December.
• It’s on the sales managers because of how they manage deals in the mid-cycle (without recognizing that the sales managers rolled up to him).
• It’s our investors’ fault for pushing a certain methodology on us: they don’t get our market.
• We haven’t innovated in a while (product’s fault).
• We’re waiting on product marketing’s new positioning (someone else’s fault).
• It’s a tough economic cycle for this market (economy’s fault).
• The market is more competitive (competition’s fault).

This was a massive red flag. And the core problem.

 

If a leader is making excuses, it means he or she doesn’t know. But has the hubris to believe that an answer isn’t needed, or the insecurity to ask for help.

Both run a company into serious trouble.

Now, you may be reading this thinking, “We got the leadership piece – give us some strategery stuff.”

I will. But first, consider this: auditors know that if they find a mistake in the first 5 minutes of examining something, there are guaranteed to be more.

Excuses like this indicate the leader is the wrong person. And it’s working downstream.

Not just in execution, but likely into culture and morale.

You think top performers want to stay in that environment?

But let’s roll into some strategery.

Let’s be honest, this leader couldn’t get it done. He wasn’t going to stop making excuses.

But there was more we found (and all of it is very common):

• The CRM was a mess. It was clear people were burning through opportunities quickly, but calling on them again in the same calendar year.
• The CRM – despite having thousands of data points about customers and prospects over the prior decade – wasn’t reliable as a source of data. There was too much noise because of how poorly it had been managed. Sales leaders must insist on clean data.
• The pipeline was a mess. Different teams staged things differently, and when talking with reps, it became clear that deals weren’t as advanced as leaders were projecting.
• The pipeline couldn’t predict what would actually close because the sales process was set up based on events (“We had a meeting,”) and gut feel, not actual data.
• Accountability was missing, and you could see it when reps didn’t update the CRM – they had their own private sheets and didn’t feel like inputting information in Salesforce.
• This lack of accountability led to a lack of prospecting activity. That lack of prospecting led to a lack of pipeline coverage, meaning the amount needed to “guarantee” they’d hit their target. For example, if the target is 1mm, then most organizations will say you need at minimum, 3mm in the pipeline to hit that 1mm. This assumes a steady 33% closing rate.
• Deals were aging over 500 days in the pipeline. More than twice. There more cobwebs in the pipe than in my attic.
• They based pipeline on total amount of all the deals in the pipe, not on number of deals and average deal size. So any one large deal would make it look like there was a large pipeline…when it was simply overloaded by one deal.
• Sales wasn’t getting to the right people. They were trying to sell up rather than start at the top and work their way down. Ever try getting to the C-level through mid-level management? Lot harder than the other way around.
• Despite being in a bad way, there was no sense of urgency, no, “We’re getting on planes to meet with all these customers to ensure we get things done.” If that’s not coming from the sales leader, are the reps going to do it?
• Sales leadership kept the C-level execs from their own company at bay on deals. When going after 7 figure accounts, you want to leverage your own CFO, CEO, and head of product.
• A sales rep had written the sales process. And it had never been revised or reviewed. Everyone acted as if the timeline laid out by this rep in her process couldn’t be questioned: it was tantamount to Moses coming down the mountain with tablets. It was a 9 month sales process.

• There was no attempt to expedite legal proceedings in their sales process. Instead, it was, “Well, we tried and it didn’t work.”
• Despite selling high 6 figure and mid 7 figure deals, there was no emphasis on how to sell strategically. There were no customized, tailored hypotheses in going after major customers. (Want to know about this? Check out my buddy, Chris Schaum.)
• The comp plan incentivized chasing easy deals, with no consequences for burning through top flight opportunities. When a very small group of people have large, prime territories…and they can make a lot off a few deals… and there’s no accountability on what they’re doing elsewhere… you lose money. You just don’t see it. Unless you track “Closed Lost.”
• Execs were leading by winning deals for everyone, leading to learned helplessness. The sales leaders were literally closing, not coaching, on all the deals near the finish line.
• All training for reps was on their pitch. No emphasis on how to deal with execs, how to handle pushback, how to build a case, how to get multiple players on board. If the market had become more competitive, as the head of sales insisted, these reps certainly were struggling to adjust.

 

The current situation was that the pipeline needed home run after home run to hit their target. In early Q4, I told the COO, “This won’t happen. Statistics aren’t on your side.”

EVERYTHING had to fall right. Not the sort of bet you want to make going into the holidays.

Even if they did nail that quarter – by some miracle – the following quarter was also light – they’d burn through everything to hit the current number.

In two weeks, I’ll go over what we shared with them.

There are a few lessons we can extract from this, though.

• Just because a company is big or has had success – that doesn’t mean they have all the answers.
• A sales problem is usually a sales leadership problem. It’s either character or competence.
• The right character can usually develop the right competencies.
• The usual suspects show up in most B2B selling problems: hiring the wrong people, not managing data well, running poor processes, not training and developing people appropriately.
• Those usual suspects + poor leadership set off a chain of events that compound. The work needed to turn this around and get it healthy should take at least 12 months.
• A lot of answers are simple ones (as you’ll see in 2 weeks).
• A lot of solutions start with holding people accountable.
• A lot of problems don’t require an outside consultant: they require curiosity and a willingness to look at how the engine is running. A 1 hour review into data by a senior exec would have surfaced several of these issues.
• Knowing where to look for core issues is a learned skill, but can be taught to smart, hungry, humble leaders.
• An acceptance of “this is how we’ve done this” is the reason a lot of problems never get addressed: no one has the temerity to question them.

 

If you’re reading this and sales aren’t where you want them to be, my question is, where do you need to inspect?

• Your data?
• Your people?
• Your process?
• Your systems?
• How does your customer buy?

 

Just start looking. You’ll soon find symptoms of issues, and more than likely, be able to start addressing them yourself.

Especially those around accountability. It just takes guts.

In 2 weeks, I’ll share my recommendations for this company, and how you might be able to apply those to your own.

 

 

adam@thenorthwoodgrp.com