Stop reading if you don’t recognize any of the following sales challenges: a portion of your sales team doesn’t have the confidence to pitch large deals, they drop price at the first sign of resistance, or they are unsure of the value of the product compared to competition. These challenges occur regularly at software startups, especially among newer or less experienced sales reps, and they erode your ability to capture full value from the products your team worked so hard to bring to market. They may even be intensified at your startup if you are approaching quarter close or if your sales reps are laser focused on acquiring new logos at the expense of revenue or profitability.
The Problem: Same Sales Situation, Wildly Different Outcomes
I recently polled the sales force of a later stage software company out in the Bay Area to see whether and how much these challenges held back their growth. Each rep was put through a set of sales scenarios with hypothetical customers and had to answer what would be their starting price for the deal, their target price and at what point they would walk away from the deal. I found that reps targeted wildly different prices for the same hypothetical customers. In one scenario prices ranged from $7,000 to $13,000 in ACV, in another prices ranged from $10,000 to $17,000 in ACV (see the chart below). Most reps generally knew to aim for a higher deal size in the second scenario compared to the first, but again differed on how much more they should charge.
Interestingly, when I dug a level deeper I found that the best performing and most experienced sales reps (and managers) were the ones who targeted higher deal sizes. In other words, the best practices were second nature to the old pros, but never got transferred to newer or less experienced sales reps.
Imagine the financial impact if you could let the best, most experienced sales reps inspire the rest of the sales force. Doing so isn’t rocket science, you can take a page out of Flywheel’s playbook and tap into the power of transparency and (friendly) competition.
The Solution: Flywheel for Your Sales Team
For the uninitiated, Flywheel is the uber-popular indoor cycling phenomenon and SoulCycle spin off that’s sprouting rapidly across the country, hooking users on its expensive and intense classes. Flywheel differentiates itself from competitor SoulCycle by focusing on technology and performance transparency, for instance through their TorqBoard screens. The TorqBoard screens, which are visible for all to see, track exactly how each individual is performing and how they rank against their peers.
By making riders’ performance so transparent, Flywheel holds riders more accountable to their fitness goals and fosters a spirit of (friendly) competition. This makes it much harder to coast by with just an average workout and riders end up pushing themselves far harder than they otherwise would. You too can accomplish this performance improvement at your software company, fostering competition and building confidence across your sales force by giving transparency into what the best performers have been able to achieve.
Implementing Your Own TorqBoard
There are four fundamental steps to implementing this approach across your sales organization: segmentation, data crunching, tool building and iteration.
First, create segments of accounts that share similar characteristics. These segments should tie back to the factors that either already drive – or should drive – differences in spend and willingness to pay across your customer base. The most common segmentation criteria typically include the product line, buyer persona, company size (e.g. number of employees or annual revenue) or geography (aligning to your sales territories). It can be tempting to over-engineer the segments, but these should be kept to a manageable number with enough deal flow to draw meaningful conclusions about best practices.
Next, comes the data crunching. For each segment, analyze the distribution of ACV across recent deals to understand the best practices. A typical approach is to flag the ACV of the top 25th, 50th and 75th percentiles of deals within the same segment. Deals in the top 25th percentile are green lights – that’s what reps should be striving for and motivated to achieve. The next bucket of deals (25-50th percentile) are yellow lights – they’re perfectly fine, but not quite best practice. The third bucket of deals (50-75th percentile) are red lights – they can be done, but should be avoided if possible. Anything above that should be highly discouraged and only let through with management approval.
Third, build the transparency into systems, tools and sales enablement. This includes both the stoplights (green/yellow/red lights) so that sales reps know what ACV they should be aiming for in new deals and a ranking of reps’ performance so that there’s transparency and competition across the sales force. These should be incorporated into whatever systems, tools and documents are already in place so that they become embedded in the organization.
Finally, track the results and evolve based on what you’ve learned to continuously improve. Pending success, you can scale these ideas more broadly across a range of other business practices as well, such as sales compensation plans, pricing strategies and KPI dashboards.
If you plan to test some of these ideas, we’d love to hear from you and learn about your results!