If You're Churning More Than 10% of Your Salespeople, They Aren't the Problem

Sales culture's different compared to pretty much every other function, in that it expects most people to fail or succeed almost totally on their own. Companies assume “We'll hire 10 salespeople to sink-or-swim and a quarter to half won't make it.”

CSO Insights' studies show average sales team's annual turnover of around 25% (it varies by a few points year to year), with half quitting and half fired. That means out of 100 salespeople, 25 are lost every year. So you need to hire (and train, and ramp, and transition pipeline or customer accounts for …) an extra 25 salespeople per year just to tread water.

But—what the hell? Would you hire 10 HR people and then expect to fire 3 to 5? Managers? Supply chain people? Losing a quarter of your engineering team, total employees, or customers would be a board-level catastrophe. But it's accepted, even expected, in sales.

Sales team churn is especially expensive because of the time required, the lost opportunities, and customer frustration. They are your face to customers, people!

At EchoSign, in growing from $1 million to $50 million in revenue, no one quit from VP Sales Brendon Cassidy's team. They were making a lot of money, knew what they were doing, and had fun. Why would you want to leave that?

Imagine you work at a growing company, and you might be hitting or beating team-wide sales goals. But internally the team's struggling with growing pains, such as:

• Missed quotas: 30%, 40%, or more of the sales team is missing quota.
• Team attrition: Salespeople just keep coming and going … 10 to 50% of the sales team is leaving every year (whether voluntarily or involuntarily).
• Ramp times keep lengthening for new sales hires, such as going from two to four months when you were smaller to now six to eight or more months.
• Rep count is growing faster than leads: As the team has gotten bigger, each rep is getting fewer leads passed to them. Lead generation isn't keeping up with sales team or goal growth.

And despite all this, and the other reasons, the board is still telling you to keep hiring more salespeople to drive growth! It's pouring water faster into a leaky sales team bucket.

Case Study: Scaling Sales from 2 to 350 Reps at Zenefits

Sam Blond is the VP Sales at Zenefits. He joined January 1, 2014, when Zenefits was at about $1 million in ARR, with 20 employees and just two quota-carrying salespeople (Account Executives/AEs). One year later, Zenefits passed $20 million in ARR with 80 AEs, and then in 2015 Zenefits passed $100 million ARR, with 350 AEs.

The following sections show a few things he's learned Enter Sam:

Jason's Advice To CEOs: Put Nonsales Leaders on Variable Comp Plans, Too

How can every single employee that can materially influence revenue have a variable revenue component to their compensation plans?

I know we all agree everyone in sales has to have commissions and a highly variable comp structure. What I mean is that everyone that materially impacts the plan should have some variable comp.

• Your VP Product should be incentivized to build the right features, not only to make a great product but also to hit the annual plan. How about a 15% variable cash component, and a 15% bonus for exceeding the plan, and also perhaps some downside for missing it?.
• Your VP Marketing sure better have her comp plan tied to the leads or opportunity commits that make the annual plan work. How about a 20% variable cash component? The leads aren't there, she comes up short. But if the plan is blown out, she shares in the extra revenue.
• Your VP Customer Success sure better have her comp plan tied to hitting the upsell, retention, or negative net churn goals. How about a 30%–plus variable component? Watch her sweat the lost customers 10x more when money is on the line.
• Your VP and Directors of Engineering need to build the stuff we need to hit this year's plan. How about a 10/15/20% variable comp plan here?
• Your Controller exceeds our collections goals, and you end up with an extra $300,000 of cash in the bank? How about a bonus here?

“Nah, my Director of Engineering doesn't need variable comp,” you say. “We're all in it together. She's got plenty of equity.”

Maybe.

But if nothing else, even for nonsales professionals, revenue is a concrete team goal everyone can and should get behind. And paying for performance is just something all of us sort of viscerally understand, even if we've never carried a bag. We hit the '15 plan together, you get a pat on the back, and your equity is worth more, That's great. But if they get another $20,000—just watch how people change. Maybe it doesn't change the life of some of your senior hires. But if the reward is $0—but appreciation in equity—you just won't get the same alignment to your annual revenue plans.

Later, this may get harder. Later, you may need subordinate goals. But for now, I'd suggest tying a bonus plan for exceeding the revenue plan for all your key hires, of every discipline.

Let me share two stories.

Recently, I went through this exercise with an amazing company I work closely with. We added a variable component to the VP of Engineering's comp plan. If we missed the plan, his salary dropped by 10%. If we hit it exactly, he got a 5% bonus beyond base. And if we exceeded it by 10%, he got a 20% bonus.

About 15 minutes after that, he came back. And completely changed the product roadmap for 2015.

Now, you might argue that's a mistake, with too much focus on the short term over the long term. Maybe. But at least it creates alignment, a debate, a discussion. A new sense of shared focus on really, truly, hitting the 2015 plan.

I had a similar experience myself, personally. Back during a Year of Hell when we almost went bankrupt, I waived all my salary. I worked for no cash (though I took equity instead) for about a year after we raised venture capital.

And then, in the depths of the Lehman Brothers the-world-is-over-Sequoia-says-Good-Times-R.I.P. days, I did something I was pretty proud of. I got up out from behind my Mac and got two customers to prepay an extra $600,000 in cash upfront. This happened when there was no contractual reason for them to do so, at a time the world was ending. Considering our net burn rate was low, this bought us another nine months of runway.

So I asked for a $10,000 bonus. My salary was $0. But I needed the bonus. I brought in the money. I needed a tangible, real pat on the back. In the way only a check can do.

It was a confusing discussion with the investors. You need a $10,000 bonus, but you're waiving your $120,000 salary? Huh? But I needed it. To connect my efforts to hit the plan, the $600K extra I brought in when the world was ending … with the plan itself.

So does the rest of your team. They need it, too.

Not just the sales guys.

Get them thinking directly about revenue, and it'll help revenue come.

Truth Equals Money

Anything you're doing to avoid or ignore painful truths, to hide from your weaknesses or avoid embarrassment, will make it harder to scale.

You and your company must be impeccably honest. With yourselves and your market. Maybe you already are … or maybe there's more for you here.

First, yes, it of course means eliminating any form of lying or manipulation throughout your community of employees, partners, and customers. Zero tolerance. Unless it's the first-time stupid mistake by someone who has never held a job. And if you work for a lying person or company—one that doesn't want to change—get out.

But it also means being uncomfortably honest, and transparent, with employees, customers, and investors. You probably are already … and there's always room for more.

Such as when that high-profile project you're backing starts failing, and may need to be restructured or canned. It's embarrassing. Are you so determined to make it successful, or avoiding dealing with the embarrassment, that you're intentionally ignoring danger signs? What are you doing to spot embarrassing problems early in an acquisition, investment, lead generation initiative, new hire, new office or plant, new product or management system?

There are many more ways you can expand truth in your company, such as with candid feedback reviews (both up and down) much more often than once a year. You can tell prospects in your sales cycle about what your product doesn't do well yet. Share unhappy sales surprises with investors as often as exciting news. Admit to yourself and your team or board that you're not ready to grow. That a key executive hire that you spent six months finding isn't working out. That customers just don't love the product you built. That you have concerns about your own future in your job.

We're not saying be blindly and thoughtlessly transparent. Whatever you share, do it in a way that helps you and the recipient.

Knowing the truth, even if it's painful or disturbing, serves your team and customers better than blissful (and temporary) ignorance. Because it's going to come out sooner or later anyway.

Our business culture teaches us that to be successful we can't be ourselves to succeed, that we have to look good and “position things” to get a job, close a deal, or raise money. Furthermore, we can't share our imperfections or doubts with anyone, and if we are totally honest with ourselves, our team and our customers, we'll put everything at risk. Be strong, be in control, show no weakness—or lose the deal.

Especially in Silicon Valley, where people tell each other they're crushing it in public, but cry in their beer in private. Or present sales pipelines that look busy and full, but are mostly illusion.

Companies, and especially sales leaders, need to set an example of embracing the truth—not only because it's the right thing to do, but also because it will make you money.

The difference between “shady business/sales/marketing” and “honest business/sales/marketing” can be the difference between making money at the expense of customers, versus making money by helping customers. One is a train wreck waiting to happen, and one is sustainable.

Truth has always been important in business. Truth builds trust, and customers buy from people (and brands) they trust. And when you hold back the truth, intentionally or not, that is what jeopardizes the trust and the deal. Just as any relationship (romantic, business or otherwise) that's built on lies has a weak foundation, any business or business relationship built without honesty is at risk of being easily broken.

What's the hard conversation you're holding back from having with your partner, manager, investor, or customer? Even if it upsets people in the short term, and even if some leave, it will build trust and reputation with the “right” people—they're the ones who stay. And an enormous weight will be lifted off you.

Truth and trust help keep your people and customers engaged through rough patches. This includes telling them ugly news as it happens, rather than holding back. Wouldn't you prefer to know the bad news, rather than have someone try to protect you from it?

Being uncomfortably honest with yourself and your team helps you spot and deal with weaknesses before they trip you up. It promotes trust in your team and with customers, and the softest pillow is a clear conscience.

Pipeline Deficit Disorder

If you're in sales or run a team, how do you improve your forecasting? It's always going to be off as long as you or your teams are sliding on maintaining a sparkling clean list of opportunities. There's a reason it's a universal problem.

Okay, you can easily put together a big list or report of all your sales, business, or partner opportunities. Active ones, old ones, possible ones, dream ones.

What's great about having lots of opportunities? When you have a big list of opportunities, it can be exciting! “Yes! I have a lot going on—look at the potential!”

It can help you build momentum and feel progress, which in turn can build your confidence and help you close. Finally, having a bunch of opportunities gives you more shots on goal.

Are Your Enterprise Deals Taking Forever?

Back when I was creating Salesforce's outbound prospecting team, I knew I'd cracked the code on prospecting after the fourth month when results jumped 5x. It was obvious to me. But it took Salesforce eight more months to finally decide to triple down and invest big in the team. Those were eight frustrating months! I wish I'd known better how complex buying decisions get made, and why they move fast or drag out.

Maybe you're frustrated by a similar thing: Big companies seem to take forever (6–12 or more months) to decide to buy your “no-brainer” service that—to you—they clearly need.

However, if you're an early-stage company, you may not realize that you're still figuring out if you're (a) a need-to-have or (b) a nice-to-have with these companies, and need to Nail A (New) Niche. Or, because you had a few fast Early Adopter buys, you may have totally wacky expectations on how fast your big company Mainstream Buyers can make decisions.

Remember: Big companies usually make group decisions, are risk-averse, and it can get complicated. More people involved means longer decisions. When buying something new or important, a big company might take 6–9 months to buy with more people involved, more complexity, more systems and teams affected and less tolerance for risk. The nature of the beast is it's harder for them to buy.

So, in selling to them, one of your jobs is not to “sell,” but to help them buy. This often means you need to help the primary person at the company—the one who wants your stuff—sell it internally to their peers and boss(es).

You may occasionally run across an early adopter or a visionary CEO who can push things through faster—but be prepared for the process to take longer than you'd like. Hey, they care about their timeline, not yours.

Here are five tips for accelerating big-ticket sales cycles:

1. Find a champion and help them sell internally: When you can find someone with influence at a company, rather than selling that person, plan on helping them sell you to their team. Without a champion or coach like that, at least someone who can help you navigate, you're going to get stuck. Dig into your network to get high-level referrals to CEOs and/or board members. If you have a small network, look up top executives at your targets and try a cold referral approach. Your messaging or package needs to appeal to those senior people, not just individual users. What a CIO cares about is vastly different from what an engineer cares about.
2. Focus on prospects who need you and can buy faster: Forget all the “speed up sales cycles!” tips and tricks, getting a prospect to speed up a decision-making process is like trying to speed up a traffic jam. You gotta avoid it in the first place. Focus on finding the kinds of prospects who are more likely to buy faster, which is related to the next point…
3. Clarify your “Ideal Customer Profile” and identify how this differs from companies who buy from those who just look. Go update your Niche matrix, and figure out what's different between people who buy and “tire-kickers.” Be specific. Don't fall into the trap of believing “everyone will want this” and scattering your energy marketing to too many kinds of customers.
4. Confused prospects say “No.” Whatever you wrote up to impress your professors or investors just sounds like bullshit in the real world. If a prospect is confused about what you do or how you can help them, they'll say no—even if you know they need your product. You want your prospects to understand what you're talking about, and the best way is not to impress them, but to keep it simple. Maybe you need to do a new set of interviews to help refresh your messaging.
5. Show, don't tell. Why should they believe you and your claims? The less you have to explain, the more you can demonstrate proof, the better. Especially with big companies, people tend to want to see a lot of social proof: other companies like theirs that are getting results. They aren't just risk-averse; they are also bombarded by companies pitching every benefit under the sun, and many are “all hat and no cattle.” Suggestions:
   • Case studies prove that you're not all talk: Details on how you helped ACME grow from $10 million to $50 million in two years are more concrete than “We can help you grow 500% in 12 months.”
   • References, especially if there's someone in their network who knows your stuff.
   • Can you do some free work for them to prove your claims, rather than have them guess?
   • Start your pitch with a demo or dashboards to show them what they'll get with your product, rather than a long-winded history of your company.
   • Is there a demo or visual you can show, a story you can tell, a picture you can draw, a video you can shoot?
   • Can you get them using your product hands-on—say, with a pilot or free trial? Either can be a double-edged sword. If you run one, don't assume they'll just “figure it out.” Define what a successful pilot looks like, and the steps needed to get there, before you begin.

Five Key Sales Metrics (with a Twist)

With Fred Shilmover
CEO, InsightSquared

Use these five classic metrics, but use them more insightfully than you have before:

1. Number of open opportunities in total and per rep: Measure the total number of open opportunities each rep is working at any given time, and understand how many total new opportunities they should be getting per month—not too few, and not too many.

What to do with it: Your reps should get a sufficient inflow of new opportunities to have a steady number to work in their pipeline, (a) giving them enough opportunities to hit their number, but (b) without overwhelming them so balls start dropping.

A common number for a SaaS rep doing low-five-figure deals to juggle is 25–30 opportunities. Yours may or may not be different. For yours, look to your own history. How many have your best reps juggled? Does it vary much by segment, type of customer, or average deal size? When was it too many?

This metric also gives you a sanity check if you need to grow your open opportunities a lot (by cranking up lead generation), or if your team is overwhelmed (and you need to hire more salespeople).

2. Number of closed opportunities in total and per rep: Measure total opportunities closed including both closed-won and closed-lost opportunities.

What to do with it: Your reps should be closing a certain number of sales deals each month (whether won or lost). It's a form of “throughput.” If they're not closing enough total opportunities, drill down: Are they light on deals? Not closing effectively? Is their pipeline full of “hope” that never goes anywhere? Are they not updating the sales system?

3. Deal size: Measure the average value of your closed-won deals.

What to do with it: Knowing this metric will make it easy for you to spot opportunities that fall outside the normal deal size (say three times greater than average) and flag them for special attention. Also, if the trend shows an increase in smaller deals won, perhaps some reps are focusing on small fish. Or perhaps your reps are increasing discounts.

If you see a new trend in average deal size, then you need to dig into your pipeline mix or discounting practices to understand why.

4. Win rate: Measure the number of closed opportunities, in a specific closing period, that you won (Closed Won Opportunities)/(Total Opportunities: both Closed-Won and Closed-Lost). This won't mean much unless you can watch it trend, or use it to A/B test reps with similar segments, or compare against companies similar to yours.

What to do with it: “High” win rates aren't good; “low” ones aren't bad—either one gives you a chance to get smart about your sales system, to spot areas of success or problems. For example, if your win rate is high, maybe your pricing is too low!

The simplest way to start increasing your team's win rate is to find the one or two most problematic steps in your process, and then look both “inside” (e.g., a better demo process) and “outside” the team (e.g., an easier free trial, or simpler pricing)…

It's common for sales teams beginning to scale up to see win rates drop. Is it because of the new people? Has lead quality or management quality changed? Or because of packaging, pricing, or website changes? You need to drill down and see exactly where opportunities are falling off, in order to get to the root cause.

Look at your sales funnel and understand conversions through every stage through to closed-won. If most reps are struggling in the same area, then don't blame them; it might be something outside their control. Nominate an investigator to find the truth of what's going on.

If specific individuals consistently have much higher or lower win rates, don't be too quick to jump to conclusions and criticize or compliment them. First look at their data to find out “why” and learn from it. A sales rep with highest consistent win rate may be talented at sales, or talented at sandbagging/cherry picking.

Don't “assume”—investigate. Look at win rates with other data to get the whole story. For example, win rates for word-of-mouth leads (Seeds) should be much higher than leads generated by marketing (Nets) or outbound (Spears).

5. Sales cycle: Measure the average duration or time (typically in days) it takes your team to win a deal and, ideally, how long opportunities spend in each sales stage.

What to do with it: The best use of this metric isn't to see how fast you are; it's to get smart about whether your current deals are on track or in trouble. An opportunity has lingered in the same stage three times longer than the average? Uh-oh, flag it!

Faster isn't always better; focus on learning what the “right” time frames are that create successful deals and customers. For example, sometimes customers move too fast for their own good and rush into a deal that later blows up because they didn't do their own diligence.

Our uber-point: Rather than judging these metrics as high/low or good/bad, use them to drill into your sales systems and get smart about what affects them the most.