Getting good results, especially when searching for a product-market fit, means spending hours talking to your potential customers. In order to understand how you’re doing on your way to closing deals, i.e. investing your time and focus wisely (e.g. on a good customer segment) and that your prospecting efforts are as effective as they can be, you need to evaluate them on a regular basis. Try to look at your numbers without rose-colored glasses, and, only then, evaluate your sales efforts. In this article, we’ll explain when and how you should evaluate the sales results, to identify barriers, areas of improvement, and ideal customers. So, if you’re in the process right now, of getting your product to your first customers, keep reading...
When is the right time to evaluate?
All the time. Along the way, you’ll most probably encounter blockers: objections and/or low engagement on the side of your potential clients. In both cases, you either picked the wrong value proposition, explained the right one insufficiently, or found yourself in a segment/industry that doesn’t feel the pain you’re trying to solve.
To be able to react to these situations; by, for example, reallocating your resources and improving strategy and activities, you need to constantly interpret and evaluate the sales results. Customers’ needs keep evolving with new technologies, so be flexible with changing the value proposition (you probably picked a wrong one anyway ;-)) as well as your pricing.
Take a closer look at sales blockers:
Repetitive objections should push you in adjusting the parameters of your offering. It’d be a big mistake to keep offering your product without changing the conditions, knowing they are the obvious blocker. Reaching out to everyone with the same, low value proposition or price list could end in wasting a nice list of leads.
Sooner than later, you’ll identify the right segment or industry for your product. But at the same time, some will seem to be a waste of time, even before you’ve finished your lead list. DON’T try to finish the list if it generates low interest or results. You’ll simply end up wasting your time hoping for a miracle that won’t come. Instead, focus on more interesting segments.
Before you start evaluating, have a proper setup...
Back to basics - we’re hoping that terms “sales deck” (call scripts, email templates,...) or “sales process” are not unknown to you. Should they be, dig into them first and then come back for the rest of this article. You need to have these set up so that you can work effectively and know where you stand with your customers. Otherwise, you won’t know whether the conversations you have with them are moving you forwards. It’s likely that the conversations are nice, but that doesn’t necessarily make them business opportunities.
The sales process divides your customer interaction into stages. In SALESDOCk we work with many, but we measure average conversion rates at 4 stages: “Lead”, “Sales Qualified Lead”, “Opportunity” and “Deal”.
Movement between the first two stages indicates when a (cold or warm) lead becomes a sales qualified lead (aka “SQL”), meaning a common ground with the prospect has been found. You can do this basic qualification over the phone and the usual discovery about your potential client is:
- what is the need
- whether your product truly fulfills the need
- when they want to have it solved/implemented.
Another stage in your sales process is “opportunity” that usually qualifies during a follow-up meeting, where, in a deep discovery conversation, you find out:
(Tip: This is where we work the BANT technique)
- whether they’re willing to pay the amount asked (Budget)
- who the users and buyers are and what their motivation is (Authority)
- what their use case is and why? Why haven't they solved it? What the underlying motivation is to have it solved right now/this year? (Need)
- whether they want to solve it now - is there an urgency, priority? (Time)
Five meetings iterations
Now let’s take a look at how to evaluate your sales results at each stage. In SALESDOCk, we usually evaluate at the end of a new project, in other words we mostly do a product-market search evaluation. But meanwhile, we also run this “5 meeting iterations” technique. Try as we do:
Meet 5 clients from the same industry or segment. After the meetings, if at least 3 of them have a meaningful ongoing conversation with you, or you scheduled follow-up meetings, opened an opportunity, worked on POC, etc., it's a signal you’re in the right market. If this is not happening at all, or it’s less than 3, start evaluating why. Was it the price? Or anything else? In some cases, just changing your approach (adjusting the pricing) can solve the hassle. If you don’t think this would be the reasonable thing to do, rather consider avoiding this segment all together.
Tip: Don’t get fooled by having many meetings in a particular segment. Always consider whether you’re able to turn them into opportunities. Some segments are easy to meet but won’t generate any business. One reason can be that you have a very pushy sales representative, and the other could be that the segment you chose actually has a big enough problem but your solution just isn’t the right fit for their use case.
How to interpret your sales results
SALESDOCk measures 3 average conversion rates:
- Cold Lead (in database) -> Sales Qualified Lead
- Sales Qualified Lead -> Opportunity
- Opportunity -> Deal
We’ll take a look at what they represent individually. Plus, we’ll explain what conversion rate you want, in order to know that you’re doing a good job.
1. Cold Lead -> Sales Qualified Lead (SQL)
SQL is the initial pain discovery. You found a reason to meet up. Even though we always strive for collecting BANT (a popular qualification method), we usually don’t fully manage to. The relationship hasn’t been established yet so prospects won’t be willing to share much, or they might not even have the information you need. Other criteria for SQL is that you need to be talking to a relevant person. It is not the receptionists, even though they know the company well, at the end of the day, they’re not the decision-makers. It’s not even the interns - they could have been in the company for only 2 months. You can meet the intern but always ask for a boss or supervisor.
What the conversion rate of your cold leads should be:
It depends! When your scope is unlimited because the industry is broad, 10-15% is OK. If your market is narrow (20 customers on the market - banks, insurance companies), conversion rate above 50% is OK.
2. Sales Qualified Lead -> Opportunity (OPP)
You can call a starting deal an “opportunity” once you have a full BANT and know the potential customer’s motivation. Knowing what motivates them helps you explain value for everyone involved on the other side. Ask why they want to solve their pain now, what happened, and find out whether the motivation is big enough. This tells you how much energy you should invest. If it’s not big enough, this potential customer is not an opportunity now. Try again later.
What the conversion rate should be:
Again, it depends. If you’re searching for a product-market fit, and you’re still learning, 30% is OK. If you already know what you’re doing, 50% should be your benchmark. Be mindful that if your conversions are below 20%, something is wrong.
Check out this example of low motivation:
Company ABC knows it could save 1000€ by implementing a new CRM. They want to do the implementation, but among other company needs, this is a negligible amount. The company has bigger priorities, like onboarding digitally, as there is a pandemic, which could save them 1 000 000€. They will keep using the old CRM knowing it’s a waste of money. If you talk to a company and discover that they want to talk about your solution in 6 months, and there is no further ongoing discussion, you’re still not in the stage of an opportunity. There’s low motivation on their side. Moving a similar discussion into opportunities is overly optimistic and it messes up your pipeline.
A common mistake in this phase:
An opportunity is something that you put into your sales forecast. Very often, salespeople do not disqualify on time. If you managed to discover the need, stakeholders, budget, and then the customer told you “hey, call me in 6 months and we can start discussing it in more detail” then it isn’t an opportunity. In 6 months a lot of things can change. Some sales cycles last more than 12 months, that is true. But in those 12 months, both parties are working on the deal. Being stuck for 6 months isn’t a definition of “moving forward with your opportunity”
Top tip: Right after you finish this article, look in your CRM, and kill all the opportunities that have been stuck for over 6 months.
3. Opportunity -> Deal
This one is self-explanatory. You found the need, motivation, collected BANT, got all the stakeholders on your side, and sold it. There’s money in your bank account. Congratulations.
What the conversion rate should be:
The numbers are roughly the same as SQL -> OPP; learning, and searching for your PMF, 30% is OK. If you know what you’re doing, 50%. And if your conversion rate is under 20%, your pipeline is probably full of ****. Start disqualifying, otherwise, you’ll live in hope and spend too much time on the wrong opportunities. You would have better chances in a Casino than with your pipeline.
Wrapping it up...
Generally, if your numbers are low in all segments or in all stages, you probably have a bad sales representative or your product is ready to be redesigned. If you’re the one selling your product, apparently just knowing all about it is not enough - revise your sales skills. If the numbers are low in a specific segment, it’s probably not your target. Do not make any decision based on your gut feeling! Collecting and evaluating data will help you move your business forward. You’ll only need a proper sales setup and a bit of discipline.
Struggling? Let us help you.
Do you feel like it’s the right time for you to adjust your CRM to the sales process, and evaluate sales results accordingly? Or just to revise your processes? Book a consultation with us. We’d love to help.