Sales leaders are focused on closing sales and winning business. By their personalities, nature, and inclination, they want to compete and succeed. Sales leaders want to win. They are focused on assessing, prioritizing, and closing deals and then, letting their best sellers sell and replacing the sellers that can’t deliver. Sales and sales revenue are the objects of attention.
However, if it’s true, as Forrester Research has recently asserted, that C-level executives, board members, and investors increasingly expect predictable and profitable revenue growth; the game has changed. Recently, my colleague Joel Shapiro shared his thoughts on how AI can help sales leaders and why the C-suite demand AI solutions for them. While closing deals and managing talent remains critical, the sales management process will change. The deployment of new technology will come with the sales process transformation.
Here are a few examples.
Today, balancing territories is nearly always based on equalizing territory potential and seller work effort. However, not all client relationships (and thus not all selling effort) delivers the same profitability. Optimizing territories based on profitable revenue growth in place of sales growth means new territory balancing algorithms, reshaped territories, reset quotas, redefined links between quota achievement and incentive compensation, and restructured compensation plans. All require new and more sophisticated technology.
Fortunately, sales leaders have a wide range of options to consider. Possible sales goals can be selected from a menu of options. Following the guidance of C-level executives, sales leaders can choose to maximize sales and sales growth, customer lifetime value, profitable sales, or any combination.
In the past, territory balancing algorithms and optimizing profitability required integer programming capabilities that could not be delivered with existing computing capability in a reasonable time. The computational burden was too large. Now, increased computing speed, readily available cloud computing infrastructure and improved software make much more sophisticated territory balancing possible.
Sales opportunities are assessed differently now with a requirement for predictable revenue growth. The need for both predictable and profitable revenue can skew sales effort to smaller, more immediate sales. Larger opportunities with longer sales cycles could be viewed as less desirable. Consequently, the revenue mix needs reexamination. The mix of small, medium and large deals needs to be reconsidered in light of the sales effort required, the necessary pre-sales resources, and the gross margin of the ultimate transaction.
All deals are not equal even when all are assessed with a high probability of closing. However, with a naïve focus on profitable and predictable revenue growth, the resulting revenue structure can be shifted in a direction that could threaten financial health. The need to balance profitable and predictable revenue growth with the best customer mix makes opportunity assessment more important and more complex.
Sales leaders, by the nature of their role, have a built-in bias to manage and control the sales forecast provided to their senior leaders. In part, the forecast control results from the concern that adequate resource will not be available to deliver the agreed product or service, resulting in embarrassment in front of the customer.
The desire to manage the forecast also reflects the use of the forecast to motivate and push the sales organization to achieve ambitious goals. It’s powerful to communicate to the sales team the sales commitment to senior leaders. However, with a requirement for predictable revenue growth, accurate forecasting also becomes a requirement. It’s necessary to realize that ambitious sales goals and a revenue forecast are two completely different concepts. Both need to coexist and process transformation is necessary to achieve both. Accurate forecasting tools are necessary as well as effective goal setting.
The pressure for profitable and predictable revenue growth will only increase. Sales forecast that turn out to be substantially off the mark at the end of the quarter will no longer suffice. Likewise, the need for aggressive sales goals will persist. Understanding the difference and using the best technology available for each has now become an element of sales leadership success.