Compensation Plans Will Make or Destroy Your Sales Strategy
Compensation Plans Will Make or Destroy Your Sales Strategy Home Projects Sales Finds a Way Sales Finds a Way The Challenge A compensation plan will make or break your growth strategy. A budding sales manager was tasked with building a two year sales initiative including new compensation plans that would change the sales team behavior from the inside out. This is the story about the lessons learned along the way that played a vital role in succeeding where 80% of other businesses failed. Lesson 1 – Leaving Dangerous Holes in Your Compensation Plan One year at SaaStr a Founder/CEO of a company with a $2 Billion dollar valuation was on stage for a fireside chat. This Founder told a very important story about his experience with sales reps, compensation plans, and the human behavior that follows. Note, this story has been paraphrased to distill the lessons. The Founder said one day during the business quarter, the company CFO bursted into his office and exclaimed, “We have to stop selling immediately!” Obviously the Founder said, “well we aren’t going to stop selling, tell me what the problem is.” The CFO calmed down and explained to the Founder that the sales team had found a way to exploit the sales compensation plan in their favor, which would cost the company more money than management had anticipated. The CFO was right to bring this discovery to the attention of the Founder but the Founder had a different perspective. The Founder’s perspective was, “well, that’s what we hire salespeople to do. The best salespeople are like water. We hire salespeople to find the cracks in a business. That’s how the best salespeople build value and position a business case to their prospective customers and the results are massive revenue growth. It’s on us in management to build a compensation plan that drives the behavior we want to see in sales.” What Happened Next? Psst. A New Compensation Plan Saved the Day. The Company did not stop selling The company did not stop selling. They alerted the sales team the compensation plan would be changing next quarter, and sat down to create a new competitive plan that would drive the sales behavior needed for the company while still being lucrative for all involved. Lesson 2 – How Do You Account For Future Sales Behavior In Your Compensation Plan? Accounting for future sales behavior can seem like an unwieldy task. You’re not a mystique that can see the future but you can make friends with sales following the easiest path possible in the reward system. Your sales people will be better at finding cracks than any other department. Human behavior is lazy, though not in a bad way, that’s part of our nature. If you don’t anticipate and plan for this behavior then you’ve already made the job as a people leader that much harder. This is where effective, well researched compensation planning and system planning come into play that align with the business level goals to compensate (drive) the desired sales behavior from discovery call, to close, to sales hand-off, to renewal. Without taking this careful planning approach, many businesses put in system and compensation practices that actually behave as impedances to business growth. The actual process described above looks like the following: Is there a product-line the business is trying to phase out? Difficulty: Easy. Drastically reduce commission on the specific product. Is there a new product-line the business is trying to upsell? Difficulty: Medium. New sales behaviors are required. Bring in Sales enablement. Heavily incentivize compensation on new product-line for a period of time to reinforce sales driving customer adoption and new sales behaviors. Is there a product-line that represents the core business revenue, that is required to keep the lights on, but ultimately the company needs to sunset said product-line and spin up revenue for a replacement? Difficulty: Extreme. In this scenario, new sales behaviors are required, new compensation on replacement product-line is necessary, while ensuring the core business revenue is not ignored. This is done by careful, tactical goal-setting based on deep data analysis, and compensation planning. Yes. Bullet three is achievable. Lesson 3 – Successfully Implementing A New Compensation Plan Get comfortable with repeating yourself. Socialization is a key part of change management that is often overlooked. Why? Change management is hard enough on all parties involved. The teams bringing in new changes are temporarily taxed by doing two jobs, their current role to keep the business running, and the second role which is doing their part to help ensure the new changes bring minimal disruption to the day to day business functions. However, socialization with your key influencers is a vital step that when done correctly, can open up areas management overlooked during the planning process. If you genuinely ask your teams for input on future plans, they will raise problems that can be accounted for now and minimize the risks when new plans roll out. Socialization also lowers fears when done correctly. People fear the unknown, and would prefer to participate in change rather than be handed a new set of marching orders with compliance expectations. This is how companies can avoid unnecessarily power struggles that kill productivity. The Outcome 100% sales team retention of existing staff. Quota attainment for the sales team floated between 103% – 108% during the change management period. Acquisition met all targets. The key was the achievable yet generous comp plan, and early socialization of the upcoming change management that had to occur as the next evolution in the company history. Sales management invested time to go through and identify gaps in the commission plan and carefully plug the gaps with positive behavior drivers (financial incentives), in addition to creating negative consequences for toxic behavior. Sales management introduced clear, transparent guidelines and, most importantly, remained consistent. Thanks for reading this story, this one was fun to put on the scoreboard. Share : Want More? If you haven’t fully defined your project,
How To Master Change Management: A Sales Manager’s Story
How To Master Change Management: A Sales Manager’s Story Home Projects Planning for Sales Behavior Planning for Sales Behavior The Challenge How does a business get sales people to do system work they don’t care about? Fun topic, right? Wrong. Now that we have established the baseline challenge, let’s add more complexity to this topic: How does a business get salespeople from older generations to adopt new technology workflows that are foreign to them? The fear of failure drives the resistance seen in human behavior for adopting new technologies. There’s a 10-80-10 early adopter rule at play here, but that’s a story for another time. A software sales company was using… 11 different software programs A software company was using 11 different software programs to accomplish day-to-day operations. This company had integrated each program to the max and overstressed the integrations on a regular basis, resulting in frequent work stoppages and lost revenue. Leadership eventually realized data silos, redundant work, lack of real-time insights, and frequent work stoppages were restricting the managers abilities to hit the next growth targets and decided the time had come to move to an all-in-one ERP. Lesson 1 The people in charge should not be the final designers of the day-to-day workflows for the employees. Why? The people in charge don’t know the day-to-day steps. The people in charge know the outcomes necessary to operate the business but more frequently than not, do not have intimate insights into the daily challenges faced by the people who do the work. A new CRM is an opportunity to reimagine how current sales CRM steps can be consolidated, automated, and done in a manner that is easy and natural for a non-technical sales person to follow. All involved benefit greatly from leveraging a SME who clearly understands the goals of leadership and the current needs of sales to get revenue across the finish line and handed off to delivery. This SME is someone that understands how to systematically join the desired outcomes from leadership and incorporate the steps required to drive these outcomes into the new CRM for the sales team. This person understands the pressures of being in sales, the drag of the data entry requirements, and the business value behind the needs for reporting accuracy. This was not the original approach taken by the CFO at this business who also led sales. This CFO tried to reimagine the entire sales process by himself. Because of this the CFO missed multiple implementation deadlines and was ultimately yelled at by the CEO (co-owner) when the new system was not live after 8 months of effort. Once the CFO set their ego aside, they tapped a 24 year old program manager on the sales team to do the work. The workflow was documented within 5 hrs, and ready to hand off to implementation for system configuration. Lesson 2 After the CRM build out was completed, the training period leading up to go-live began. The entire sales team was granted access to the sandbox of the new ERP to familiarize themselves with the CRM. Everyone was granted access. The CFO would frequently tell the sales team during team meetings to login, get familiar with the new system, and ask two designated people on the team for help. Shockingly, the sales team did not take these practices seriously but still claimed they would invest the time to learn the new system before go-live. This never happened. The SME’s on the team asked to host live training sessions where each individual on the sales team would go through the CRM steps in front of a group as a behavioral training exercise. The CFO opted to not do these steps, thinking go-live would be delayed and said if the team members do not use the new system, they do not work here anymore. Lesson 3 Keep the new system roll-out as simple as possible. Do not automate everything yet when rolling out new technology. Set the expectation go-live will contain the business process steps to operate, and automation will occur as everyone becomes more familiar. The teams need to understand what steps in the CRM are their responsibility and what can be automated away. This is a pattern to establish value and further adoption within your teams. When the initial go-live period occurred in this story, the outside implementation team had automated so much functionality, the internal teams did not trust the system mostly because they did not understand the steps under the hood. They actually became afraid to touch the CRM after a sales rep accidentally charged a client the entire balance for a new order, rather than the payment schedule the client had signed off on. Once this story got around, the team began demanding other departments’ own steps in the sales process, all because the reps didn’t trust the new system. This was a gap created by the lack of exposure to the new practices prior to go-live. The SME’s were not empowered to drive change management amongst the team, and had to course correct live, during selling hours, which put unnecessary stress on the sales reps, SME’s and CFO. There was yelling on the sales floor that could have easily been avoided. The Sales Outcome Unnecessary stress was put on the teams, SME’s and CFO that could have been easily avoided with intentional change management planning. Rather than prioritizing change management adoption before going live, the effort was delayed and implemented after the new CRM was live, leading to negative impacts on revenue and system confidence. One can argue that frontloading the change management effort would impact revenue as well, but ultimately is the lesser of two evils. New systems are disruptive but necessary for future company success. This change management was ultimately successful, massive amounts of time-saving automations were put in place. This led to automation handling most of the sales order processing that a team of 11 were doing manually. That same team was cut down
How to Convert On-Premise Perpetual License Customers to SaaS Revenue
How to Convert On-Premise Perpetual License Customers to SaaS Revenue Home Projects Legacy Customer Conversion Legacy Customer Conversion The Challenge – Grow SaaS Revenue How do you take a human mentality of, “if it’s not broken, don’t fix it”, and turn those thinkers into engaged buyers that grow saas revenue? This is a story about keeping a plane in flight to the planned destination while rebuilding the wings of the airplane. The plane is the company, the flight is the product market fit, the destination are the revenue targets, and the airplane wings are literally engineering swapping out the product being sold. How can business leadership accomplish this without… Seeing massive customer / revenue churn Burning out sales / team attrition Plummeting customer satisfaction scores Missing revenue & customer acquisition goals If you’re someone who likes to read the ending first, scroll down to “The Outcome” portion of this page. Obsessive understanding of the market, laser awareness around attaching solution benefits that clearly solve prospect pain points, rigorous sales enablement training, reinforcement, and coaching, combined with frequent metric review promoting course correction are the foundation to how these audacious goals are accomplished. Lesson 1 Get comfortable with the fact that failure is where most businesses land when attempting this companywide conversion. Understand that this is recreating the company from the inside out. While the business mission remains the same, 99% of the steps to achieve revenue conversion need to be rethought and centered around how a prospect will process and respond to the new sales motions. The sales motions, discovery, demo practices and compensation plans have to be reconstructed, mapped out and tested in the environment before releasing new plans that scale. Keep in mind, it is infinitely less effort to modify approaches and find new sales motions that are easy to follow before releasing anything to the sales team. Select three types of personalities from the sales organization and ask for input on your plan to grow SaaS revenue: These personality types are: An analytical supporter from the sales team. This is someone trusted to give constructive feedback. A middle of the road, average contributor. This is someone that is happy in their current role, hits quota frequently, and represents the career sales reps on your team. The common team detractor. Yep. As you read this, you know who they are on your team. This is someone that will always skew the playing field to their advantage, no matter what the outcome is for the company, and someone you can rely on for criticism. Why pick all three? Easy. Introducing change management early to these three personalities Will help management reinforce the positive, confirm or disprove any sales rep can follow the new processes, and arm the team with the first pass of criticisms to solve before rolling out new structure to the entire sales organization. There are many more benefits but these are the ones this story will focus on for now. For executive leadership, this change will require unrelenting stamina from the managers and executives tasked with this undertaking. Lesson 2 Secure support from the entire management team. This task is crucial. The executive tasked with leading this change needs unwavering support from their management colleagues. That is easy to say, but what does this really mean, and what does this look like in day-to-day practice? The General Profile: Attach the new sales initiative to the company metrics. Explain why this path is required to achieve the common goals placed on management by ownership or the board. List off the high-level structural changes occurring in sales. Don’t go into detail. Keep answers to questions short and concise. At the end, reinforce how these necessary changes will result in the executive team achieving goals and subsequent bonuses that are typically attached to company growth. Provide each management team member with a clear, simple, and concise connection to how they contribute, and what their role is in supporting success. Seek individuals out afterwards, and provide a private, safe space for them to give feedback outside of the wider group. Also request management forwards any questions or concerns they are unable to address to the program leader. This is what management alignment looks like when everyone is rowing together. Lesson 3 This section goes deep into sales ops, sales enablement and roll-out practices in order to effectively grow saas revenue. In order to accomplish this company shift from the inside out, two different quota buckets had to be created, incentivized, and built in such a way that a minimum threshold of achievement was required in the legacy revenue bucket before the high-paying, behavior-shifting new revenue bucket would pay high commissions. This drove the sales behavior to still sell and nurture the company revenue required to operate the business while building the future sales behavior needed to grow MRR on the SaaS platform. This compensation model was the strategy that allowed the company to rebuild the plane while in flight. Sales enablement came next to take the existing discovery playbook questions and reframe the sales return on investment discussion centered around the new product line. From there, the entire demo flow to build product value had to be restructured. After the teams were trained and provided documentation on these new approaches, they were told to practice and given a buddy system as support for the first product demonstrations. The SaaS Revenue Outcome This company saw success in the form of saas revenue conversion activities where 80% of similar businesses fail. New product line adoption rates came in at 2.3x compared to the previous revenue line being sunsetted. Mid year management raised quotas by 8% to account for other sales groups missing numbers, and all new quota targets were achieved. All saas revenue targets were exceeded in both quota buckets. SaaS revenue metrics were achieved, securing the targeted business valuation. This was accomplished through careful educational campaigns highlighting the pain points a business experiences with on-prem software
How To Achieve 50% YoY Top Line Revenue Growth
How To Achieve 50% YoY Top Line Revenue Growth Home Projects Early Stage Growth Early Stage Growth The Challenge Scale the business without funding in a highly competitive growth market. A sales leader was brought into an early stage start-up alongside colleagues that had never been in strategic management roles before. Every other individual on the management team had never scaled a business in their career. Lack of experience creates massive layers of complexity for tenured leaders even before revenue production is tackled for several reasons. The applicable reasons here are: Unrealistic expectations that shift on a moments notice (moving the goalposts) No impartial board of directors and advisors with experience Lack of accountability for operational delivery and contract revenue maximization (revenue churn) Expectations that every investment will WIN, and uncontrolled emotional responses when reality sets in “Lifestyle” business mindset from ownership while expecting hyper-growth results Lesson 1 The sales leader would frequently ask themselves, “Am I dealing with someone based in reality or am I dealing with the ego of the individual?” This is an important question. The answer will massively alter the approach to successfully navigating this emotionally charged environment. In this lesson, the sales leader understood and confirmed the goals, expectations and desires of ownership. After gaining this understanding, the next step was to go through all company data available to assess what type of growth velocity is required to come within striking distance to achieve or over achieve the goals provided by the company ownership. In order words, identify data points such as current sales trend success, close ratios, what % of deals get stuck in “no decision”, average opportunity value of deals won, deal source origination, under what conditions did these deals close (discounts granted), and more. All these steps are required to grow revenue in a sustainable manner that will not burn out sales. In this part of the lesson, the sales leader was forced to have many difficult conversations with ownership about the gaps between reality and desired goals. In addition, ownership had expectations the COVID success bubble of 2020 would keep pace, without altering company strategy. This created a strenuous relationship and the only saving grace was the data assessments conducted by the sales leader that were based in reality. Data does not lie. Once everyone made friends with the data, the management team was able to create trust and build together. Lesson 2 The next lesson in this growth story is the network created the growth opportunities. Without these important relationships, it is 10x more difficult to refine sales cycles that elevate business revenue when funding for demand generation is non-existent. These relationships were the first giant leap towards creating sustainable revenue practices to achieve growth. Partners at well established companies that actively sell into similar target markets are the fastest path to scale business revenue in this scenario, and guess what. Partners help people they like. The lesson here is to show up frequently and often, and get as close to these influential partners as possible. Find a way to help these partners win, and be that reliable source that answers the phone every time. Once trust is established, ask for referrals often and ensure referral leads are treated better than gold. Build a sales process and business reputation of professionalism that shows up no matter what. Guarantee sales response times to these partners bringing referral leads to the business, and double-down on providing strategic advice whether or not the lead signs with your company. Make sure to report successes and lessons learned to the rest of management and partners, above and beyond the expected KPIs. Bottom line, take care of your business network. Understand the value in your network, invest when asked, invest when you see a gap, and volunteer your time when you are able. Lesson 3 Follow the newly defined sales process, relentlessly. Don’t let ego get in the way, and be extremely careful of others saying, “they don’t need to follow the sales process” or “the product sells itself, we don’t need to do discovery”. This is the unchecked ego talking. First time business executives have a habit of falling into this ego trap, and have a habit of saying, “man I feel really good about this deal”. Remember, sales can’t forecast a “good feeling”, and certainly can’t guarantee revenue without the vital business case data learned during the sales process. Closing revenue feels good, but unless someone can close revenue day in and day out, year after year, they’re not sales. To all the CEO’s and Founders reading this, please don’t jinx sales by making these mistakes. The future company revenue will thank you, and if you’re lucky, sales leadership may stick around longer than the avg. 18-month tenure seen in the industry today. The Outcome Massive revenue growth, company reputation becomes well-known, and referral business grows. Recruiting new staff becomes easier because the company reputation and brand speak volumes. Businesses achieved positions on the Inc 5,000 list in the top 1,000 privately held companies across North America. Invitations by top eco-system partners into esteemed industry groups. Growth velocity exceeding 700% averaged across three years. Repeatable sales practices that win 25% – 33% of sales cycles…..and of course massive impact to top-line revenue. Share : Want More? If you haven’t fully defined your project, that’s ok! we can help your prioritize your sales projects for maximum revenue impact. Let’s Talk Monthly Newsletter