Tread Carefully, A Q4 Sales Crunch Can Create Repercussions (Sales & Marketing Management)
Tread Carefully, A Q4 Sales Crunch Can Create Repercussions
By Frank Visgatis, President & Chief Operating Officer, CustomerCentric Selling® – The Sales Training Company
As we stare down the end of 2014, does this story sound familiar?
Going into the fourth quarter, a division of a large company had the chance to meet annual sales of $300M for the first time. In December, the SVP of sales told everyone to do “whatever was necessary” to achieve that number. They succeeded. At the kickoff meeting the entire sales staff received plaques with $308,000,000 proudly displayed.
The next year the division’s revenue target increased to $360M. The problem: They effectively only had a 10-month year because the pipeline had been drained in December. First quarter revenues were predictably disappointing. In April, the CEO and VP of Marketing were fired. The division finished the year at about $300M. Ironically after taking the first two months of the year to rebuild the pipeline, they tracked at $30M/month.
This story had a partially positive result in that they exceeded the initial stretch goal but paid the consequences the next year. Many organizations and sellers push hard in Q4 and ultimately come up short. But there are a couple ways to minimize fire drills at year-end.
Do the Math (But in Smaller Increments)
My first suggestion is that sellers divide their annual quotas by 12 to track progress a month at a time. Train wrecks happen over time, so whenever a seller is less than year-to-date (YTD), adjustments in activity should be made to make up shortfalls that exist.
Sellers and managers tend to look in the rearview mirror of what has been closed YTD. The more important view is through the windshield. It’s a matter of knowing a seller’s current position, but more importantly understanding where they’re headed. Assuming CRM software can capture historical close rates at each pipeline by rep, a projection can be made a sales cycle in the future. If this data isn’t available, close rates can be estimated and plugged into some simple math.
Let’s say in January a seller is assigned a $2.4M quota, has a 25% win rate and average sales cycles of three months. That means the seller needs to close $600K in the first quarter to be YTD. With a 25% win rate, there should be $2.4M ($600K/.25) in their pipeline. As the year unfolds if the seller is less than YTD, the shortfall should be multiplied by four and added to the $600K target.
Doing these calculations every month will provide a clearer picture of what has to be done to optimize the chances of achieving quota. If a seller is higher than YTD, the target for pipeline remains $600K.
Avoid “Happy Ears”
What can you do when you have a significant shortfall in the fourth quarter? Avoid developing “happy ears.” A seller that is 37% of quota going into Q4 can usually manufacture a way to make the performance club. Often this requires unreasonably optimistic conclusions about opportunities that aren’t actually qualified. Instead, take a realistic view. For those real opportunities that can potentially close by year-end, consider doing the following:
Ask the highest level you’ve called on if the transaction can close by year-end.If so, map out with the buyer the necessary steps and estimated time they can be completed. Warning: If it is a new account, be aware that delays with contracts and procurement can cause order dates to slip. Also understand that buyers closing sooner than they had planned are likely to expect something in return. Discounting may be necessary and would reduce the revenue toward achieving your quota.
For each opportunity that must close, try to establish — with the buyer’s help — the potential benefit or savings that your offering can allow them to realize.Sellers are always in a rush to get orders. Have you considered the cost of delaying buying decisions? Putting it in context of monthly savings can increase a buyer’s sense of urgency.
Try to assess what impact moving decisions up may have.I would be more comfortable trying to have customers, rather than prospects, accelerate buying decisions. If you run the risk of alienating buyers or ultimately scaring them off, you may want to consider letting those sales cycles play out in a more normal fashion.
The fourth quarter can be rough, but there may be other times throughout the year when vendors or sellers need transactions in short timeframes. Hopefully, tracking on a monthly basis and projecting a sales cycle ahead of those situations will be the exception rather than the rule. Significantly emptying pipelines in a short timeframe will usually create future repercussions, so tread carefully.
As President & Chief Operating Officer of CustomerCentric Systems®, LLC and co-author of the CustomerCentric Selling® sales methodology, Frank Visgatis leverages 20 years of leadership experience. His ability to identify trends and changes in the sales ecosystem has helped improve the dynamic of interaction between sellers and buyers through the development of CustomerCentric Selling® and Sales Ready Messaging®.