Oct 112010
 
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A CFO with whom I once worked shared with me the qualities he believed essential in a VP of Sales. As he worked up the list from bottom to top, I was certain that some variation of “consistently achieving revenue and gross margin quota” was going to occupy the #1 slot. But instead, he treated me to this nugget of wisdom that has stayed with me over the years:

The thing I care about most is predictability. Of course I want the VP of Sales to make his number. But actually, I really need him to make the number that he has been forecasting to the executive team, as close to the mark as possible, regardless of where that number is in relation to quota.  To put a finer point on it, if he over-performs against quota by 30%, but he told us that he was going to beat quota by 10%, I’m happy for the business that month, but that VP of Sales has lost a measure of credibility with me. And by the same token, even if he comes up short, I want him to tell me how much he’s going to miss the number ahead of time, and then deliver that result exactly. Because that shows me he’s in command of his business. And when he’s in command of his business, I can manage mine more accurately.

I was reminded of this conversation recently when the sales director for one of my clients happily announced the latest new customer win. I relayed my congratulations and then asked “how is the forecast that we discussed last week coming along?” I know, I know. Shame on me for not letting the sales director enjoy a few more moments in the winner’s circle. But this exchange, and that CFO’s words, point to an important truth about modern sales management:

It’s not enough to be a rainmaker. You also need to be a meteorologist.

It’s not enough to simply beat a sales goal. Management expects that. To be an “A player” in sales, you must be able to accurately predict AND deliver a specific sales outcome.

To the casual observer, this may seem like a ridiculously tall order to fill. But it should be noted that these kinds of sales acrobatics used to be easier to pull off than they are today. Sellers had more direct leverage in the sales process, buyers had less information, and there were fewer regulations on corporate accounting practices such as the Sarbanes-Oxley Act of 2002. These and other factors gave Sales VPs more hands-on control of the revenue factory.

Today, sellers have less leverage, buyers have more information, and compliance regimes have significantly reduced or eliminated sandbagging. But somehow the sales VP is still expected to accurately predict when it’s going to rain (hour-by-hour), how many inches will fall, and what the temperature, windspeed and direction, and barometric pressure will be. Oh and s/he needs to do this job while managing the people (sales reps, overlay resources, clients, channel partners, and executives) whose interactions will determine the final “weather report.” If you’re a Sales VP and this is your reality, here are a few ideas for how to pull this off….

1)      Look at your past ratios and trends. Get a report of your past sales results, by month, going back 1-2 years. Then on the same timeline plot all of the contributing factors inputs to those results you can think of. How many sales reps were on staff during each month? How many selling days were there during each month? If you can identify a metric that is more highly correlated than others to variations in sales, you can try forecasting the next few periods using that ratio. It’s a low-tech and brute force forecasting method, but it may nonetheless make your crystal ball a little less cloudy.

2)      Look at the sources of leads that convert into sales. Which lead sources have the highest conversion rates and deal values? Which ones have the most consistent conversion rates and deal values? You may need to optimize your lead generation portfolio for the same reason you may need to occasionally re-balance your investment portfolio – to get predictable returns.

3)     Find out what your champions eat for breakfast. This is really just another take on the lead sources recommendation. If you had a widget factory with 20 assembly lines, and 4 of them consistently shipped defect-free widgets, on time, and in the quantities specified on the work order, you would figure out what goodness is happening on those assembly lines and make sure the other 16 know it too.

4)      Look at marketing automation software and or services. Although much more of a “commitment to the process” than the first three suggestions, marketing automation can provide, along with many other benefits to your organization, more predictable revenue and profit over time.

Whatever you do, don’t try to pull this off alone or as a project managed solely within the sales organization. Making it rain is an art form, and it’s what you’re really good at. Meteorology is a science. So partner up with the scientists in marketing, operations, and finance people who “get” sales  the most (but could never do your job) and ask for their help.