OK, admit it. As CEO of a growth stage technology company, when it comes to your sales team, they all have “happy ears.” Joyce Durst, former CEO of Infraworks, an enterprise security software company in Austin, TX, used the phrase in describing the eternal sales optimism she and her VP Sales have to counterbalance every week during their Monday morning sales pipeline meetings with their sales team. You know, this is the optimism that insists that the prospect call that just took place the week before is not only a “sure thing,” but is also a particularly big sized deal, and will surely close before the end of the quarter, with room to spare. Unfortunately, “happy ears” are the occupational hazard of a good sales person. These are the ones that as often as not has to take a partially completed beta product, dress it up, sell it into a market where no other solution like it has ever existed, persuade someone that the solution is a “must have,” and then also persuade the other buying influencers within the customer that doing business with an underfunded start-up with perhaps less than 12 months of cash in the bank is a capital idea.
Working with growth-stage CEOs as executive recruiters, we’re often helping to hire sales VPs that will be able to build and manage a company’s sales pipeline. Certainly hiring the right VP Sales is an important first step in sales pipeline management. However, once you’ve gotten the right person in the seat, we asked a dozen or so early-stage technology CEOs what other tools, processes, and mistakes they’ve used or made that have led to their “best practices” for effective sales pipeline management.
TOOLS (technology)
Regardless of which tools were the favorites of each CEO, there was agreement that data hygiene was critical
Chuck Dornbush, CEO of Athenium Software, put it succinctly, saying, “Make sure the data is well organized, and frequently reviewed.” Another location-based services CEO added, “no matter what CRM tool you use, as CEO you need to make sure every sales person is using it, and using it the same way.” Vinit Nijhawan, former CEO of Taral Networks, emphasized that sales people hate to use a system at all; you’re lucky to get them to enter the data once, and you’ll never get them to double enter for forecasting purposes. So you need to use the same system for lead tracking and reporting/forecasting.”
PROCESS BEST PRACTICES
Meetings 1x-week—sales people defend their new pipeline additions
One of the above CEOs stated simply– “Know the basics, and do the basics.” In more detail, he and several others sketched the basics out. Have a weekly sales meeting. For sales people to have a prospect “make the pipeline report,” they need to defend their putting the prospect into the pipeline, akin to a team interrogation.
7 categories involved in qualifying additions to the pipeline
Many of the CEOs talked about the minimum information requirements for a prospect to be added to the pipeline report. Although some CEOs had four steps, and others had up to 40, the core must-haves most often included the following 7:
1. Budget—– Is there an earmarked budget set-aside for this category of expenditure?
2. Need –Is there a compelling need driving the prospect to make this purchase?
3. Time urgency—–Is there something that creates a sense of time-bound decisioning, or is this an important-but-non-urgent agenda item?
4. Internal champion—–Is there an individual inside the prospect who’s willing to go the extra mile and spend the political capital required to “fight the good fight” internally within their own organization?
5. Decision making power–—Who holds the real “power” to make the decision? Can a clear decision-making organization path be mapped?
6. Clear ROI—–How is the prospective customer going to measure “success” for this product or solution?
7. Trust– Both in the relationship between the individual sales person and the individual representing the prospective customer company, and the prospect’s relationship with you as a company with whom to do business… do they trust your products, your company, and your sales people?
Tim Butler, former CEO at SiteScape and now CEO of growing RFID company Tego, said that as a reminder for his sales force, they have adopted a pneumonic, BUTANE–—budget, urgency, timing, authority, need & event.
Stages of the sales pipeline
Joyce Durst has her sales team and VP Sales apply a ranking/scoring system for each sales prospect. If the customer is 50 points or less, they remain on the prospects list only, and don’t move onto pipeline report; if more than that, 50-70, they’re pipelined for NEXT quarter; if 70-90, they’re qualified as “committed;” If 90-100, the prospect is considered “ready to close.”
Athenium CEO Chuck Dornbush finds that it’s critical to “set entry/exit rules litmus tests for each stage.” One CEO established the rule that “you couldn’t allow a prospect into the pipeline until at least their forth stage–qualified, demonstrated, formal price quote, and funds allocated. “
Other critical ingredients
Categorize every lead as “hot, warm, cold”
In addition to assigning probabilities as a percentage, try using some sort of ranking system. Tim Butler uses another version– possible, likely, & probable
Add non-sales peers to pipeline meetings…
One of the CEOs stated that it was very valuable to bring non-sales functions into sales pipeline meetings. He added that personal accountability generated by sales people committing to forecasts in front of non-sales peers in a weekly/monthly meeting environment can do a lot to reduce the “fudge factor.”
Get the customer prospect to serve as proxy VP Sales for you…
Former Pantero CEO Pano Anthos who now is CEO of Hangout added a trick of the pipeline trade he’s found very useful– —“The customer needs to sign OFF on moving from one step to another. Have the CUSTOMER via email play a proxy VP Sales role for you.” Do this by having your sales person ask for a confirmation by email that the prospect has indeed passed from one stage of the sales pipeline to the next, whether confirming the ROI value proposition, or the budget allocation, or any of the other stages listed earlier.
If no date for next prospect action step, off it goes…
“Every prospect has to have an action item by date, or qualify it as ‘dead,’” another CEO offered up.
Kill the bad deals early…
Many CEOs listed this as critical to effective sales pipeline management. Slow prospects should be turned over to the inside sales team. Prospects that are particularly non-committal should get put in direct mail “tickler” mode. “Stop spending the time on them, trying to actively manage them to close,” Marc Tremblay states, and adds that, “if feasible, you want to focus your sales team more on hunting than farming if you can. You can get tied into prospects who may take two years to close… “ They may close, but “I always get my man” isn’t the most efficient proverb for sales.
Expect the unexpected…
When ending the quarter and/or the year there will be sales people who will say, “we’ll absolutely close these deals….” Even when all indications say they’re done, assume that some percentage will fall out, no matter HOW good they look. Jim Lawton, a veteran VP Marketing at a number of venture-backed growth-stage software companies who has seen a lot of sales pipeline management approaches states the reasons can include someone at the prospect company “getting sick, leaving the position, dog ate my homework… expect just about anything.”
“3x coverage” to mitigate the unexpected …
Continuing, Jim Lawton added, “If I’m trying to hit 3 million in quarterly sales, I want to have 9 million in the pipe. Living on luck is tough, and you might hit a quarter or two with a thin pipe where you muscle the prospects and get a blue bird or two, but you’ll never make this repeatable.”
Consider having TWO sales pipelines
No, this isn’t two separate sets of books, nor is this a tool meant to be used deceitfully. However, one of the CEOs offered up the fact that—–early on at least–there was a pipeline they kept internal, and one the executive team shared with investors that better illustrated the potential traction of their products. The internal pipeline was more conservative. As they grew the business, there was a natural convergence of the two into one. Controversial, yes. However, in order to manage burn-rates, and make sure you live to fight another day, it’s a survival tactic that no doubt many CEOs use, whether they admit to it or not.
Other Considerations
When to begin trying to do sales forecasting
Once you’re at what’s often referred to by venture capitalists as the “scaling stage,” most CEOs list their pipeline out and begin assigning probabilities. However, Vinit Nijhawan cautioned that, “You rarely ever hit the forecast you set up. After you get your 3 or 4 customers, you feel there is a market for your product, but actually what you’ve done is gotten the really early adopters. And CEOs then start to scale too early, hiring resources, and making decisions that are difficult to undo. Instead, you need to be in that strategic marketing role in sales longer than most start-ups might think. Don’t even OFFER sales pipeline reports. It’s not an issue with the start-up’s products, it’s the market. Quarter-over-quarter projections are almost impossible.” So where is the line, and where do you know that you have a product that the market is ready for? “THAT is the art in sales pipeline management,” says Anthos. “It’s definitely not a science.”
Strategic consideration in building the sales pipeline–—proper reference customer sequencing
Another wrinkle in building an early-stage sales pipeline CEOs mentioned was the proper ordering of reference customers. There is a step before managing the pipeline process or implementing some tool to help in pipeline forecasting. This is determining what is the optimal sequencing of customers you go to in order to create proof points and references to scale customer acquisition most efficiently and effectively. Do you sell big customers first, then the small customers, or smaller customers and build up to bigger ones? CEOs concurred, —“It depends on capital resources available.”
MISTAKES & LEARNINGS
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