A Mission-Critical Sales Metric

Seems simple, but here it is:

Connects to Close

Let me offer up some definitions of each box:

Connects: Cold contact from a list or similar resource

Suspects: Contacted and have general need or use for your product/service

Prospects: Qualified for need, budget & buying time

Quotes: Formal proposal to do business

Close: Completed order in response to quote

Again, this is a simple concept, but it is of great consequence when hiring salespeople.  We call it the Connects-to-Close ratio and it defines many of the parameters you need to use in your hiring efforts. 

There are many layers to the ratio that impact the sales skills, selling style and aptitudes to measure in any candidate.  Instead of getting lost in those weeds, let me boil it down to the essence of why you need to know this ratio:

You cannot ask a new salesperson to do something 10, 50, 100 times without first being able to explain it one time.

The On-Demand Economy

More and more workers are moving away from traditional jobs and towards the “gig” economy of on-demand roles that have a finite time frame.  Some of the startling trend from the Yahoo article (emphasis mine):

The report said the number of independent workers in America is expected to grow from 30.2 million to roughly 37.9 million in 2020, in part due to businesses seeking flexibility and also because young adults are more comfortable in the lifestyle.

Adding occasional independents, the projected number of US adults working independently will grow to an estimated 54 million or nearly 45 percent of the private, non-farm workforce, the group said.

I’m not sure what this effect will have on sales positions.  Perhaps the distributor/rep model that has been prevalent in certain sales for decades will become a common structure for companies.  I find it difficult to outsource a customer relationship especially if you are in a service sale.  Perhaps the development will be salespeople who have specific relationships with large companies and provide the channel to those decision makers?  Again, this is the distribution model that has been in manufacturing for decades and it would appear this model has the potential to expand in the very near future.

The Money Trap

-Discounting is a hot topic in sales especially in this prolonged, down economy.  However, discounting is never the best choice regardless of the situation.  Here is a good Eye on Sales article speaking to that point.

Here is a good suggestion:

The first question I ask anyone who thinks they need to lower their price to close a sale is if they know at least 3 needs the customer has and if they have been able to measure the real value of those needs with the customer.

Exactly.  The author is speaking to qualifying which is the core of all successful selling.  This is why it is of the utmost importance to see a sales candidate’s qualifying ability in your interview process.  Do not provide all of the information to the candidate – hold some back to see if they ask for it.  Do not make the initial interview too easy – provide a little resistance.  These types of techniques give you a glimpse into the candidate’s qualifying which you can’t get from a resume.  If they cannot qualify, they cannot handle money/pricing issues.

If the candidate or salesperson is adamant about discounting, they get caught in a trap:

It’s easy to cut your price. Anybody can do it. But what I guarantee when you cut your price for the first time, you’ll do it again and again. I’ve yet to meet a salesperson who has reduced their price only once.

Always qualify candidates for qualifying to avoid this trap.

Adjusting A Sales Process For This Recession

The thought of retiring is going to be a novel idea in the near future, at least according to a new abcnews.com poll.  In a recent survey of Americans (my bold):

Half the population in this new ABC News poll thinks both job security and retirement prospects in the years ahead will remain worse than their pre-recession levels. Four in 10 also see worsened prospects for the availability of jobs and advancement, and, consequently, their own spending power.

No surprise there.  The second aspect regarding worsened prospects for the availability of jobs is phrased in a negative manner.  However, it is only 40%.  This effect occurs in these difficult economic times – times will never be as good as they once were.

I have seen this effect in some candidates recently which is never a good approach to landing a new job.  As a recruiter, I am not looking for a naive optimist – the times are difficult and sales cycles are extended.  Yet there are still deals to be closed and almost every opportunity will be highly competitive.  This economy separates salespeople from pretenders in a fast mode.

My recent sourcing activities have involved finding sales candidates who acknowledge the economy while expanding on the modifications they have made to their sales process.  Increased prospecting, budgetary qualifying, time-frame discussions, etc. are all important adjustments that should be forthcoming from strong candidates in this economy.

Quoting Is Not Qualifying

I run into this topic often and it is one worth defining.  Many companies value quotes as strong sales activity.  Now don’t get me wrong, quotes are a step in the sales process and typically one that occurs before a close.  However, companies that have under-defined sales processes often choose to substitute quotes for qualifying.

Here is what I mean – just because a suspect asks for a quote does not mean that they are a prospect.  This applies to customers too.  First, let’s define suspects and prospects.

A suspect is a company that shows some interest in your product or service but you are not sure of the level of their interest.  They could be tirekickers, competitive shoppers or legitimate prospects entering the sales process.

A prospect is a company that has a need/pain, budget for a solution, time-frame to buy/implement and a defined decision process.  The prospect is actively seeking a solution and will reach a decision.

Here is the problem when companies substitute quotes for qualifying – they do not invest the time or effort to determine if the quote-requesting company is a suspect or prospect.  In other words, they skip the qualifying step in the sales process.

This approach is dangerous in that the company invests resources in producing quotes.  It has been my observation that these companies almost never know how much a quote costs to produce.  Big red flag – you must know how much time, effort and resources are involved in generating a single quote.  You may be shocked.

Second, the suspect company may simply be probing your company for competitive information.  Is there anything more valuable than receiving your competition’s standard quote?

A sure sign of this quote approach is a close percentage well below 80%.  Quotes are the last step before closing so your closing percentage should be quite high – certainly over 75%.  If it isn’t, you have a qualifying problem amongst your sales team.

The first step to fixing this problem is to develop a form for the key information needed before issuing a quote.  May I be so bold as to suggest need, budget, decision process and timing as a good first step to this process?  If you implement a pre-quote structure, you will see a marked decrease in your quotes and a dramatic increase in your close percentage.

Shortening The Sales Cycle

Salesopedia.com offers a good article this week on a timely topic – How to Shorten Your Sales Cycle.  The author cuts to the quick on an issue we encounter frequently:

To begin with, many sales people just don’t know how long their sales cycle is, we ask and we hear things like “depends” (sometime it fits), “it changes” (it always seems longer during Daylight Savings Time), and the all time favorite, “well you know it’s different in our business”. Well it’s not really.

Underlying this is the fact that many reps and organizations do not know what their sale looks like, they have not deconstructing their sale, identified the basic building blocks to identify and truly understand what it should look like and when efficiencies can be had. One facet of this process is covered in “Working Backwards From Your Goals”

True.  We see this often when we start with a new customer by profiling their sale.  It is amazing how few salespeople can define their sales cycle.  Clearly it varies to some degree, but I always tell them their guess is better than mine.  So how do you fix it?  Simple:

While there are a number of ways to affect the length of the sales cycle, by far the easiest to implement with the highest rate of return, no technology required, is to always secure a next step with your prospects.

This approach really is simple – it just takes a slight bit more effort to accomplish.  Many salespeople end a call or meeting with some form of “I’ll call you next week.”  That’s it.  No clear next step, no future commitment, no clarity.  The better approach is to ask this way, “I’ll call you next week.  One thing, what topics should I be prepared to discuss?”  That short question will do more to qualify an early-stage prospect than any other a salesperson could ask at that point.  Yet, most do not use it.

The author sums up this approach nicely:

In most instances, a next step does not always have to be quantum leaps, just remember that even a small movement forward gets you that much closer to close. But if you don’t secure a next step, have you advanced at all?