CSO Insights has been tracking a significant increase in the number of companies that are implementing a sales enablement discipline inside their company. The reason behind this trend becomes imminently clear when look at the data from our annual Sales Performance Optimization (SPO) studies. One of the key factors we use to gauge the health of sales is to look at the percentage of sales professionals that achieve quota. Tracking that metric from 2012 to 2016 we see the following:
Percentage of Salespeople Achieving Quota
- 2012 – 63.0%
- 2013 – 58.2%
- 2014 – 58.1%
- 2015 – 57.2%
- 2016 – 55.8%
and a preliminary review of the data we are currently gathering as part of our 2017 survey shows the number continuing to head in the wrong direction.
The marching orders for sales enablement are clear – reverse this trend! How to do that is less clear. As a result, I have been fielding more calls from individuals who have been assigned to lead the creation of a sales enablement practice within their firms. Two questions often asked are “What is sales enablement and how much does it cost?”
My colleague, Tamara Schenk, who previously served as Vice President of Sales Enablement with T-Systems in Germany, offered up the following definition to help answer the first question.
Sales Force Enablement: A strategic, cross-functional discipline designed to increase sales results and productivity by providing integrated content, training, and coaching services for salespeople and frontline sales managers along the entire customer’s journey, powered by technology.
When you start to drill into the definition, and consider the need for new sales support tools and collateral, new training, a new coaching methodology, additional CRM solutions, etc., the motivation behind the second question about “cost” becomes apparent, although my opinion is that it is the wrong thing to initially focus on. Yes, sales enablement requires an investment, which may well be not currently budgeted. But before you start to determine the costs for the various resources and services needed to make sales enablement viable, you need to take the time to calculate the cost-of-doing-nothing first. So what I mean by that and how do you do it?
Sales enablement’s initial focus needs to be getting its arms around understanding what the causes are for this decline in the sales force performance. A case in point was a recent conversation I had with a newly appointed head of sales enablement for a technology firm. She was lamenting that the win rate of forecast deals was hovering at about 45%, and wanted to discuss how to fix that problem. I suggested that it would better to understand the implications of low win rates first.
When asked if win rates had always been at that level, she replied that a few years ago they were closer to 55%. Based on having those two numbers we did an exercise to calculate the cost of letting that problem continue to fester inside her company. Let me provide a generic example of what we discussed. Let’s assume you have a 100-person sales force, with the average quota being $1M, and an average deal size of $50,000. That means that to meet quota, a sales person needs to close 20 deals. Based on a win rate of 45%, each sales person would need ~44.4 forecastable opportunities in order to close 20.
Next, assume you could get the win rate back to 55%. Now instead of closing 20 deals, each sales person closes 24. Four more deals at $50K each represents $200K in revenue per territory. Multiply $200K times 100 people equals $20M. That is the cost-of-do-nothing to reverse this trend. Having that number first changed the perspective of the rest of the conversation.
She and I then went on to discuss some of the main factors contributing to lower win rates, as they had seen an increase in both competitive losses and no decisions. We explored the need for addition investments in competitive intelligence, the need for more effective value messaging, how additional CRM solutions could help analyze buyer intent through the sales process, etc. We came up with a rough estimate of the cost of an initiative to develop and deliver those services, which was around $500K. Since this was an unbudgeted number, it could have initially caused some heartburn. But went considering making that unplanned investment against a cost-of-doing-nothing of $20M, the scale was easily tipped in the direction of moving forward versus letting the status quo keep happening.
What other factors could you consider? If you are seeing the time to full revenue productivity for new sales people increase from say 9 months to a year, you can calculate that cost. If margins are eroding because sales people are finding it harder to sell value, and instead are relying more on discounting to close deals, you can calculate that cost. If voluntary turnover is increasing because sales people are feeling over challenged and under supported, you a calculate the cost associating with using a productive sales person. Determining the cost of increased customer churn is another number to get down on paper.
Having watched companies go through this process, the end result is a realization that the cost of letting problems continue is often up to an order of magnitude or more that the cost of fixing them. And sharing those insights with senior sales management and executive management can be a sloid first step towards getting sales enablement the resources they did to get things done.