Before the deal is won - how one sales team undermined profitability
Only the deal wasn't won. The prospect never signed the contract, and when they were presented with a bill for all the work that had been done they simply brushed it aside, surprised by the company's "unprofessional" approach. Hundreds of thousands of pounds were wasted, internal and external relationships were damaged and the company was on a knife edge as to whether it would survive.
Whilst it would be easy to blame an overeager salesman, like so many of the similar situations I've observed the problem was deeper and cultural. Claiming to be a "sales led" organisation, an attitude had developed where sales put pressure on other functions to "deliver" and any voices of caution were denounced as "not being a team player." This, management were convinced, would lead to an organisation hungry to win business.
My analysis of actual sales performance showed a very different picture. Conversion rates were around one client for every eight prospects, with an average of ten man days of delivery effort being put into every deal after the proposal was submitted. In other words, around seventy thousand pounds of additional and unnecessary cost was incurred for every client that was taken on. The loss of this one major prospect had simply lumped that cost into one highly visible pot.
Tackling this issue required the Commercial Director to take some hard decisions. Not wishing to lose the drive the sales team had he recognised the need to temper it and limit its impact on the wider business. By devising four simple interventions I was able to assist him in turning the situation round:
- Talk times, not dates. Sales often perceive a pressure to deliver by a specific date, when the client has yet to determine whether it is reasonable on their side. Discussing delivery timescales, with the associated assumptions and dependencies reduces pressure on both sides of the equation to be ready by an arbitrary date.
- Know the internal approval process. Understanding the client's approval process will help sales teams gauge how close their proposal is to the final decision and how well it is being received. No proposal should be submitted without understanding who will see it, who will influence the decision and how that decision will be made.
- View signals for what they are, not what you would like them to be. A contact in a prospect saying they liked the proposal is not the same as getting approval, yet often sales teams will view this as further evidence the deal has been won. If a proposal has moved to the next stage it is not a sign that the client likes it above all others, only that it has moved to the next stage.
- Limit pre-deal work. Before the prospect has signed on the dotted line any work that is undertaken is at the company's risk. Any work that is done should be seen in the context of the wider priorities of the business: working on new features that may make the product more attractive to a wider market could be a good investment, whilst creating "prospect specific" screens wouldn't be.
The objective of these interventions wasn't to improve sales performance, but to reduce the impact sales was having on the wider business. The effect was that after six months time spent on post-proposal activity had fallen dramatically and there was a greater sense of trust in the sales team. Improvements to the way new features were being harvested from proposals had also seen the start of a richer development path that should, in the longer term, provide a better product.
Sales teams can have a counterproductive impact on business that can only be changed by addressing their behaviour. In this example, four relatively simple interventions had a significant impact: reducing waste, improving profitability and rebuilding trust with the wider business.
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