article | April 3, 2013
How To Explain Sales Performance to the CEO
If you hit the number, he makes light conversation and congratulates you. If you missed, he asks, “Why?”
This is a big question. The CEO wants to see if you can accurately assess the problem within your department. However, many Sales VPs fall back on one of the standard excuses:
After one of these responses, they may provide an anecdotal story or several examples. This is the wrong approach. CEOs don’t like vague generalizations. They are data and numbers driven. So what tools do you have at your disposal to help make your case?
One of the most overlooked tools within the Sale Organization is the CRM system. Built correctly, a CRM system provides clarity and visibility within the entire department. Built incorrectly, you have an expensive spreadsheet or rolodex. Download our 4 Crucial Components of CRM Checklist and find out where your system can boost visibility.
Here are the four crucial components:
Let’s break down the first one:
Pipeline Accuracy and Forecasting: For many organizations the biggest reason for purchasing a CRM system is forecasting. In fact, some use CRM solely as pipeline tool to provide revenue visibility to management. However, many firms still struggle with accurately predicting revenue despite this feature. Some even return to spreadsheets in frustration.
If you’re struggling with predicting pipeline, ask yourself these 4 questions:
Are my Sales Stages based on the Reps’ Gut Feel, or Customer Driven Exit Criteria?
If your Sales Stages are solely based on rep intuition, this is your first problem. Sales stages must be built on customer driven exit criteria. What does this mean? Sales Rep activity and “feeling” do not determine stage. Only buyer behavior does. Find clear indications that a buyer is willing to progress in the Sales Process. This is usually an action or clear agreement. Only then can they move to the next stage in the Sales Process.
Are My Percentages Based on Historical Close Rates, or Are they Out of the Box?
Many Sales Leaders fail to adjust the percentages within the CRM once they purchase. They accept the provided Sales Stage percentages as fact. Don’t. Different industries have different advance rates. If you’re not updating stage advance rates based on historical opportunities, you’re just guessing.
No Additional Information Is Incorporated Into The Close Rate:
The best CRM Forecasts don’t rely on Stage alone. They also incorporate answers on a forecasting form. Let’s say a prospect is at the “Evaluation” stage. This is where a traditional demo occurs. Is this client a referral or somebody who submitted an RFP? Is there a compelling reason WHY they are looking for a new solution? Are you the sole vendor in the opportunity? All of the answers would have a dramatic impact on your chances of closing.
Now see how the Optimized CRM System could impact your conversation with the CEO:
We lost the big opportunity we thought we’d win: On the surface the opportunity looked promising. It fit our Ideal Customer Profile. However, we quickly realized there was an incumbent competitor. This lowered our forecast by 19%. It helped us recognize we needed to differentiate ourselves to increase our chances.
Some of our deals pushed into the next quarter: While the customer seemed excited, we realized there was no compelling event driving them to purchase. Also, our highest contact within the account needed approval on budget. Based on historical rates, this changed our forecasts. We moved the opportunity out 2 months and reduced the closing percentage by 17%. We focused on more urgent opportunities.
Our Sales People don’t have talent/training to sell the product: We noticed several reps had a lower advance rate (41% vs a 64% group avg) in the Uncover Needs stage. We provided additional training based on the data. They significantly improved in stage performance.
Our product/price wasn’t competitive: This competitor was involved in 21% of our opportunities last quarter. We lost to them in 80% of those deals. We created competitive messaging to help increase our chances in high value deals. We also decreased the likelihood of closure based on this vendors engagement.
We didn’t Get Enough Leads: When we failed to get enough leads the quarter before, we warned it would have an impact on our pipeline. It decreased it by 21% and resulted in decreased revenue. The leads marketing provided were also more likely to stagnate in stage 1 than our historical trends. We are seeing a lead quality problem.
It’s never easy to have this conversation with CEO. But the only thing worse is an insufficient explanation. Download our 4 Crucial Components of CRM Checklist. Next time the CEO asks, you’ll be able to answer “Why”.
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