Salesconx Weblog

New article by Karl Goldfield

When Jimi Hendrix ripped down his guitar and sent a flurry of tones into the air, few people thought about the theory that made it so enjoyable. Even Jimi himself did this on instinct, not on review and analysis. He was an innovator and paved the way for new exploration into music.

Fifty years later, the music that achieves recognition and is enjoyed by the masses is structured and built on that same theory. The difference is that it is now dissected and delivered by people who have studied. This is the world we live in, and much like in music, in sales we have to accept that the days of lighting the world on fire with radical new ideas is more or less gone.

Does this mean there is no more room for creativity? Absolutely not! It means that to have the freedom to use this creativity we must first build a strong platform on which to perform. This is the topic of the 12th episode of Sales Evangelist TV (http://tv.salesevangelist.com) that aired last week, and I will share one of the secrets in this article.

What we will touch upon is the way to analyze a quota and break it down into the right mix of sales, opportunities, and leads. This exercise will empower us to spend the right amount of time working towards overachievement.

For the sake of this example we are going to begin with some assumptions. The first is that we are responsible for sourcing and cultivating our own leads. Some of this process can be circumvented if a marketing team delivers leads. The second assumption we are making is for the ease of the math. We are going to work from a $1m annual quota. If this quota is low or high, just adjust it as needed. The third assumption is that there are 2080 hours in a work year. This is the math used by recruitment agencies and it makes it easier if we are all thinking the same way. It equates to 52, 40 hour weeks. Yes we are ignoring vacation and PTO for the sake of this exercise. Yes we are ignoring the 60 hour work weeks we put in at the end of each quarter to make the number.

We are going to break down our quota in two ways. The first is to determine how much revenue we must generate for each month, week, day, and hour we spend working. This is as follows:

$1m/12 months = $83,333

$1m/52 weeks = $19,230

$1m/260 days = $3846

$1m/2080 hours = $481

When we break down our quota in this manner, what becomes apparent is the value of our time. A wasted hour means a loss in almost $500in revenue generation, a lost day is $1000s. This realization can be frightening and should really solidify why being at our most effective is absolute for sales success.

The next breakdown is an analysis of the ratio of big to medium to small sales we make annually and how this fits into our goals. If last year we closed 2 $100k deals, 10 $50k deals, and 30 $10k deals, then we know that we need 5 times as many medium and 15 times as many small deals as we do large deals. What this breakdown really does is help us uncover where to spend our time sourcing and cultivating leads.

If you look at this mix, we have to spend half of our time on the midsized deals. With ten deals in this mix, we can see that we can spend up to 104 hours on every $50k deal:

1040 hours (half of 2080)/10 = 104 hours per midsized deal

We will spend 20% of our time on the two big deals:

416 hours/2 = 208 hours per large deal

And the remaining 30% on smaller deals

624 hours/30 = 21 hours per small deal

This way of looking at things should bring some perspective to how to spend our time. With less than 3 days of effort allowed to close smaller deals, we have to become wary of chasing opportunities that do not carry a worthy price tag. 21 hours is not a lot of time, and unless we make it up somewhere else, meaning get a medium or large deal through the sales process faster, we have to stay aware of how much time is spent on these small deals. How often does a $50k+ deal just fly through the pipeline and onto the commission sheet?

The last piece of the puzzle and one that people tend to forget when doing this type of analysis is how to build the right lead mix to get the right mix of opportunities in the pipeline. We are going to make another assumption, but when we employ this exercise it is important that we do some research and plug in our own numbers.

The assumption we will make is that for every ten leads, no matter deal size, we get a sale. This would mean that we need to source:

20 large opportunity leads to make 2 sales

100 medium opportunity leads to make 10 sales and

300 small opportunity leads to make 30 sales

420 leads to make a $1m quota. This is the secret. This is what makes for true effectiveness. This is what empowers great reps to overachieve. It is proper lead sourcing and defining who we want to reach out to via research and strategy. If we can put together the right concept of who we want to contact, then it is necessary to contact far fewer potential clients. This is also when personal introductions to prequalified leads help greatly.

Try putting the efforts into the early stages of the sales cycle through analysis and research. This, along with finding creative new ways to source pre qualified leads, will save precious time later in the process.