Some says that Sales is more art than science, I don’t disagree, but I will argue that sales management is mostly science. In SaaS company revenue projection could be modeled with numbers that will be fine tuned over time. For software sold as a service on a monthly basis, sales goals could be highly predictable and well monitored. With a simple model On Demand software companies can clearly connect Marketing and Sales efforts with respect to lead generation, referrals, conversion, revenue and profit.
Using the Sales Funnel to forecast revenue
- Value of closed sale – closed lead (annually)
- # of leads enter the top of the funnel
- Close rate
- Revenue per sales rep
- You now have a model that can simulate alternative revenue projections based on different close rates, lead values, MSP(Management Service Provider) sizes, and the number of productive sales reps.
- You can make it more complicated by factoring the close rate for each sales rep and the retention rate.
Using the Sales Funnel to plan and monitor the Sales process.
How many leads do we need to generate $X revenue?
Are we on track?
- Revenue forecast
- Sales funnel
- The number of leads that we need to make the revenue target
- This model help to answer if the pipeline will deliver on the revue target
- It goes back to marketing (inbound and outbound) volume of activities for lead generations(webinars, conference sponsorship, SEM) as well as referrals rate
Next: Using the sales funnel to calculate sales quota, compensation and for forecasting profit
When you think about your Software as a Service company sales, and marketing strategy you’ll need to consider the product complexity, who is your target customer segment, and what other players will be involved in the sale process(not full 4Ps analysis here). In each of the cases below different levels of effort and cost to market and sale your product(s) is needed. Partner recruiting is selling, which means, leads generation, sales cycle, value proposition, and some form of an inside sales team. Working with the channels requires investments, competing on VAR attention is selling, and the competition is growing with every new SaaS solution developed. Growing SaaS companies like HubSpot, Marketo, ConstantContact and more as well as giants such as Oracle have been already investing in capturing these channels. The alternative of going directly to the customers is not financially viable in the case of a small start-up company selling to the small and medium business(SMB). The complexity of the product will determine how long is the sale cycle, the onboarding process, and the need for Management Service Provider(MSP) participation. Considering whether the product should become a platform requires considering the implications on your go to market strategy like setting and governing the quality of the add-ons(certification) and pricing.
Here are some combinations to look at.
|Vendor Type||Billable Customer||IT Reasonability||Likely Exit Strategy||Product Strategy||Sales & Marketing Strategy|
|Startup||SMB||SMB owner||Building a cash cow – why sell?||Simple, limited functionality, self served||Online, inbound marketing|
|Large Enterprises||Corporate IT Department||M&A (sell to one of the big players: SAP, Oracle, IBM, Microsoft)||Perfecting one use case, or developing strong protected IP – proprietary algorithm||Direct sales. POC/paid pilot, partnering with other solutions.
B2B marketing: thought leadership, trade show.
|Young growing company||SMB(<;2000 employees)||MSP/VAR||Going up the market, or M&A through Vertical integration||Building Platform as Service (PaaS), OEM(embed other products)
Requires customization and integration with add-on
|Partner recruitment. Referral program.
Working with partner on developing strong value proposition and go to market strategies.
Sponsored conferences, Webinars.
|MB||MSP/VAR||IPO, M&A||Become mission critical||Ad above and recruit strategic partners|
|Large Enterprise developing SaaS||SMB||MSP/VAR||N/A||Medium complexity. Open API, web services, enabling value added services||Partner programs. Account executive to harvest strategic partners|
|Large Enterprises||Corporate IT Department||N/A||Hybrid between on premise and hosted||Direct sales, rebranding|
I’m sure that there are other combinations of vendor and customer types, product, sales and marketing strategies. However, some combinations could lead to successful outcome while other be disastrous!
I’m now two and half years into the part-time MBA program with Boston University with a little less than one year to go. One thing that surprises me the most is the lack of Sales Management class in the core program. I was educated about managerial accounting, finance, operation management, organizational behavior, marketing, economics and corporate strategy, but not a word about sales. When I got to the time to select my electives I knew that something was missing, so I found only one class called Entrepreneurial Sales Strategy (that I later heard was offered only every other year) and signed up for it. Only one class in the whole program that talks about sales. When I checked with my friends who went to other universities for their MBAs I was even more surprised to hear that this is the common case. Sales is not part of the MBA program!
The irony is that Sales (as I was reminded by my Sales Management professor during our very first class) is the only activity that contribute to the positive side of the income statement.
I’ve learned a ton about running a business so far, but this class was the most transformative one in the MBA program for me. It does make sense to allocate this class later in the program after understanding key frameworks like DuPont analysis, Five Forces analysis, the time value of money, pricing, marketing positioning, among others, yet sales management can help to tie all these things together in a coherent manner with a very clear goal in mind.
Here are some of the key subjects from the Entrepreneurial Sales Strategy class:
- Business Models and Value Propositions
- Building a sales organization – hiring, compensation, organization, and management
- Direct, Indirect and Channel Sales Strategies
- Importance and development of strategic partners and alliances
- Understanding the Selling Process and Sales Cycles
- Implementing Pipeline Management Principles and Forecasting Techniques
- Repeatable Sales Models – what they are and why they are important
- Keys to successful selling including Solution (consultative) selling vs. product selling
- Sales Management, Positioning a sales force as a barrier to entry – differentiation and competitive advantage
- Major Account Selling, Team Selling, Global Sales Strategies
During the course we participated in two team sales activities:
- Sales Challenge – the objective of this activity was to engage in a complete sales process including building the value proposition and sales funnel, leads generation, leads qualification, cold calling, navigating the target organization, and closing. We had to convince a VP of Sales from a company with over 100MM annual revenue to participate in a panel with more VP of Sales from other industries at the university in one of the class evening.
- Sales Audit – each team was assigned a company(a real one), to execute a complete sales strategy and management auditing consulting project, and to come up with recommendations. We got the chance to meet with the CEO and VP of sales in the assigned company, to hear about the strategy and sales activities, and to gain access to real business data.
- The Sales Audit project was one of the highlight of my MBA program so far, I learned during this activity more than I could ever learn from case studies discussions in class. This company is a young SaaS company (Software as a Service), selling mainly through partners (MSP/VAR) and growing their booking more than 45% in 2012. We mapped their entire sales process, identified areas for improvements, and came up with two major recommendation plus other areas for further research. After delivering the presentation in class we also travel back to the company to report our findings.
The key outcomes from this projects were:
We made a difference – the company is actually revamping it sales process following some of the input from our recommendations.
We build great relationships with the CEO and VP of Sales
One of our team mate who graduated after this class was hired by this company
We earned a real consulting experience and learned how sales works in the real business world
We got an A
I know I did good choosing Boston University for my MBA program!!
In summary, the motivation for writing this post came as a result of a comment I heard during our second visit to the company that we audited, it came from both the CEO and the VP of Sales saying that this material was never taught in their MBA program(one of those was done at Stanford). I believe that Sales Strategy and Management are a core managerial skills, even if you end up working as a general manager, business or financial analyst, in operation, it is important to understand your value proposition to the organization and how your activities contribute to the sales activities. For the ones going for an MBA program with the aim working in Sales, Marketing, Strategy, or to start their own business, learning about sales is a must!!