Thursday, October 27, 2016

Lesson #248: Sales Not Closing? Know When to Panic!

Posted By: George Deeb - 10/27/2016


& Comment

Most B2B businesses are sales driven organizations, often with a team of expensive sales people in the market trying to hunt down and close new clients.  This is typically a really stressful process for early-stage startups, as they typically are incurring the costs of the sales team, well ahead of the sales actually closing and running through the income statement.  The key is learning what the normal sales cycle should be for your specific business, and when the sales slowness is due to the normal cycle versus a weak salesperson or conversion process.  It is critical to learn when you have a real problem on your hands, and when you don’t, so you do not unnecessarily panic when sales are slow to materialize.

Key Drivers of Sales Conversion Timing

When closing sales, these are typically the key drivers around timing of the sale: (1) the quality of the salesperson and their ability to ask for the sale (or on the flipside, bullshit management into thinking that leads are real when they are not); (2) your nurturing process to move clients from upper funnel to lower funnel leads; (3) constraints of your clients, like available budgets or multiple decision makers; and (4) the average ticket of the product you are selling, where bigger ticket products take materially longer to close than smaller ticket products.  When you are worried about sales not closing, you need to dissect your business into each of these core components, to get to the real reason sales are not closing.

The Wide Range of Enterprise Selling

On one end of the spectrum, you can have very low cost software-as-a-service products that are priced at a low fee per user with a pay-as-you-go model, without a material long term financial commitment.  Those are pretty easy and fast to close, assuming your product solves a pain point for that customer.  At the far other end of the spectrum, you can have multi-million dollar installed software solutions.  These can be torturous to sell.

The big ticket sales often hit multiple departments, meaning multiple decision makers.  The business people need to see a business need for your product.  The technology department needs to approve it for compatability with its other systems and policies.  The procurement department needs to make sure they are paying the lowest price possible.  And, the finance department needs to make sure a budget actually exists to afford your solution—where it is much harder to sell if no current budget exists versus replacing another vendor with an existing budget.  Furthermore, the more consultative the product is to sell, the longer it takes to educate the business people that they have a real need for the product.  And, the more seasonal your clients planning process, the easier it is to miss the prime selling months, and lose an entire additional year in the process.

So, what does this all mean?  It means that some enterprise sales can be closed in a matter of days, or they can be closed over years of selling time.  Yes, years!!  So, you need to make sure you are clear on where your business falls within that spectrum, so you are not placing unnecessary pressure on your sales team to close faster, when in fact, it may not be their fault sales are not closing faster.

Learning When It is the Salesperson’s Fault

When you have a long sales cycle product, that means you are carrying a lot of salesperson costs over time, before the sale actually closes.  And, the worst thing you can do is carry a weak salesperson along for an extended period of time.  When you have long sales cycles, you need to be putting measurement around the four key sales drivers above, especially around the movement of clients through the sales funnel.  Set clear “proof points” along the sales cycle, and measure accordingly.  That could be number of initial calls made, number of initial meetings, number of proposals sent, number of contracts sent, number of contracts closed, etc.  If you are seeing good progress in these metrics, you most likely have a good salesperson.  If not, cut your losses as fast as possible, as you can’t afford any mistakes here.  This post will help you learn how to best screen your sales candidates for success.

Don’t Panic Too Early

I had a client that was making the pivot from selling lower ticket products into agencies to higher ticket products into enterprise-scale companies.  They made a huge investment in sales and marketing budgets to help propel their growth.  But, when they did not see the sales closing as fast as they used to close, they assumed they had a problem on their hands, and unwound their entire initiative half way into the normal process.  What a mistake that was!!  They just didn’t understand the new flows of enterprise selling, and basically, flushed a material startup cost down the toilet, and making any reasonable chance of materially accelerating their sales that much harder and longer-term in nature.  What a mess!!

In Conclusion

So, the keypoints here: (i) know where you are on the sales cycle curve, and set reasonable expectations for management and the sales team; (ii) measure everything, so you can get clear visibility into progress being made, even when sales are not closing; and (iii) for bigger ticket items, patience is a virtue (young Jedi), so make sure you have enough capital to afford the long sales cycle without panicking.

For future posts, please follow me on Twitter at: @georgedeeb.

Red Rocket is a featured contributor on entrepreneurship for many trusted business sites:

Copyright 2011- Red Rocket Partners, LLC