Most CEO’s have good visibility into the top deals in your sales pipeline and are reviewing with their CRO and CFO at least weekly. And often, CEO’s will review top deals with their Chairman or a board member in a weekly touch base, a monthly review, and most likely a quarterly board meeting. For a CEO, the big deal can make or break the quarter. And most likely, it is not just you, the CEO, thinking about the top two or three deals in the pipeline. If you are following the best practices as we outline in our blog, Can a Big Deal Save Your Quarter or using our Big Deal Strategy Tool, the rest of the management team is involved. More notably, the customer success and operations teams who have to execute on the deal to make the customer successful. In my experience, the big deal is critical and helps, but is it what you should really be focused on?
As you scale your business, you will often start to focus on up-market, larger opportunities. This is a natural evolution of many product offerings and especially enterprise software and SaaS businesses. And as the CEO, the math is easy, and you know bigger deals make it that much easier for growth. The conversation goes like this: “If we close this one $8M deal, we will over-achieve our quarter.” Or, “if we can just prove we can deliver on this one, we can crush it on the next ones and really start to scale the business.”
These are all valid points, but if you want to grow your business and grow the deal size, you must look at more than just the big deals. Here are three specific concerns to be thinking about as it relates to the big deals and what it does to your business.
- High Customer Concentration: Our biggest customer is 50% of our revenue! At one of my previous companies, our largest customer was 50% of our revenue at one point. Everything we did revolved around the status of the account. On the one hand, it was great to have a forward-thinking customer that believed in us and more importantly, helped us innovate our business. But as a public company, it was quite challenging. In every Board meeting or Investor call, the conversation would turn to a Customer Concentration question. You have to footnote everything about their every move, and their success seems to control your success.
- Product R&D Efforts Are Consumed: Most often, a significant size deal brings a substantial level of special requirements. They want you to build something you don’t have, or they need integration into their proprietary platform or some new 3rd party app. Or they want features that enable certain AI and reporting capabilities. With this focused one customer effort comes a lack of focus on product innovation for your core customer base. Is it really worth it to shift resources for one customer in place of making good product advancements for all of them?
- The Implementation Team Is Wondering What to Do Next: A large deal means a massive implementation. You typically find the best people in the organization, pull them off what they are currently doing, and immediately start hiring more to fill in gaps. And clearly, you want to staff it appropriately to create a great onboarding experience. But what happens when the big deal gets implemented, the project is a success, and the implementation team is not needed? Most likely, your utilization rates are upside down for months or at least until your next big deal comes in.
The reality is a big deal happens, and the company most likely rallies behind it. As the CEO, you reward the team and hand out prizes and maybe even bonuses. And before you know it, everyone in the company is changing their behavior to win the big deal.
I have spent my time on that elephant deal, but recommend you shift your time allocation to an emerging best practice. As you think about your go-to-market strategy and how you want to grow your business, in addition to the big deals, ask how many Ideal Customer Profiles (“ICP or ICP’s) you have in the pipeline. Are you and your team spending time and effort to win the customer that is the best fit for your operational capabilities in your addressable market? You can use the SBI ICP Tool to validate you have a clear definition of your ICP.
An excellent purchase segmentation process will map to the best ICP for your business to be successful long-term. The best ICP will enable you to have a clear view of the implementation needs and R&D investment areas. More importantly, you will see where you are getting the best return on marketing and sales dollars. A good ICP will have a higher propensity to buy than other accounts. A good ICP strategy will include account spend potential with each account you are targeting. A great ICP score methodology mapped to your go-to-market strategy will ensure your sales team is spending their time on the customers and prospects that will drive the best return for your company.
So, on your next weekly staff meeting, ask the team how many ICP’s are in the pipeline. Is your team rallying around these opportunities to make sure they are processing through the funnel using your ICP sales process? Ask your head of marketing how many ICP’s they will have in the pipeline this quarter and next. How are you investing in nurturing your ICP buying personas? I can assure you, focusing your pipeline efforts on your defined ICP and away from the big deal, will help you make your number.
To learn more about Purchase Segmentation and Ideal Customer Profiles, use the SBI Tools here: