{"id":1425,"date":"2011-08-26T04:17:48","date_gmt":"2011-08-26T04:17:48","guid":{"rendered":"https:\/\/www.peaksalesrecruiting.comblog\/fatal-mistakes-boards-vp-sales-will-make-peak-sales\/"},"modified":"2015-05-04T19:35:37","modified_gmt":"2015-05-04T19:35:37","slug":"mistake-boards-vp-sales-will-make-in-2012-planning-2","status":"publish","type":"post","link":"https:\/\/www.peaksalesrecruiting.com\/blog\/mistake-boards-vp-sales-will-make-in-2012-planning-2\/","title":{"rendered":"The Fatal Mistake Boards & VP Sales Will Make In 2012 Planning"},"content":{"rendered":"

Today a guest post from Aaron Ross, CEO of Pebblestorm who has just published a book called Predictable Revenue<\/strong><\/em>. Enjoy the post. My comments are at the end.<\/p>\n

\n

For companies selling products worth less than $100,000-$250,000, the old school strategy of hiring more feet-on-the-street to drive revenue growth is failing more often. Or just fails.<\/p>\n

Let\u2019s take companies in fast-growth periods who are focused mainly on adding new customers (rather than more mature companies who drive much of their growth through their customer base).<\/p>\n

The problem: the old bedrock sales principles that usually worked now don\u2019t\u2026 \u201cif I need to double revenue growth, I need to double my sales force to drive it.\u201d<\/p>\n

Wrong.<\/p>\n

Salespeople do not cause<\/em> customer acquisition growth, they fulfill<\/em> it.<\/strong><\/p>\n

Before you rush on to the next section, really consider that. It\u2019s a HUGE shift in traditional sales thinking. I\u2019m talking about root cause drivers, not correlations. Of course you need more salespeople if you\u2019re getting bigger, but they aren\u2019t what is causing<\/strong> new customer growth.<\/em><\/p>\n

Lead generation causes new customer acquisition and sales fulfills it.<\/strong> I see a future in which sales is more and more like account management, and the focus of new customer acquisition responsibility growth falls more squarely on lead generation executives (VP Demandgen\/Leadgen and VP Sales Development).<\/p>\n

OK, the Sales 1.0 thinkers out there are saying \u201cYou\u2019re crazy. I\u2019m hiring salespeople and they\u2019re adding new revenue. And it\u2019s worked for me for 15 years. Without great salespeople, we wouldn\u2019t be closing these customers. Our 9-stage sales process is really cool too.\u201d<\/p>\n

Right. That did work in the past. Things change.<\/p>\n

Here\u2019s another way to think about it by comparing two competitors.<\/p>\n

Competitor A:<\/strong>
\n* Trying to double from $10m in revenue to $20m.
\n* 10 salespeople today, growing to 15.
\n* Generating $3m per month in new pipeline through proven campaigns in leadgen and marketing (40% of pipeline), a cold calling 2.0 team (40% of pipeline), partners (20% of pipeline).
\n* Their salesperson ramp-time is 4 months (because they create pipeline for the rep to walk into).<\/p>\n

Competitor B:<\/strong>
\n* Trying to double from $10m in revenue to $20m.
\n* 10 salespeople today, growing to 20.
\n* Competitor B spends money on marketing, and salespeople cold call, but no one really tracks pipeline metrics. But the VP Sales and the salespeople have had a knack for hitting their numbers each month so far with some scrambling.
\n* They think their new salesperson ramp-time is 6 months (but really will end up at 9-15 months\u2026if their salespeople ramp at all).<\/p>\n

Who would you bet on?<\/p>\n

Here\u2019s the \u201911 scenario I personally see playing out for too many companies:
\n1. Board\/CEO sets an aggressive 2012 revenue target (mostly based from new customer acquisition)
\n2. VP Sales\/CEO divides revenue goal by expected quota to determine the number of salespeople needed to hit the target
\n3. Sales reps miss targets after ramping MUCH more slowly than planned
\n4. Everyone has an extra helping of pain and a side of stress for Thanksgiving next year (if the VP Sales is still around)<\/p>\n

Here is the root assumption that causes \u2018VP Sales roadkill\u2019 (although the board and CEO are equally responsible): Their false assumption that salespeople will find new business on their own.<\/p>\n

No they won\u2019t. Not enough to feed themselves.
\n(Ok, SOMETIMES, SOME salespeople can. Some people win the lottery too.)<\/p>\n

Here\u2019s why:<\/p>\n

    \n
  1. Salespeople are terrible at prospecting<\/li>\n
  2. Salespeople hate to prospect<\/li>\n
  3. Even if a salesperson does do some prospecting successfully, as soon as they generate some pipeline, they become too busy to prospect.It\u2019s not sustainable.<\/li>\n<\/ol>\n

    Unless all I\u2019m selling is big deals (>$250k), or in industries that truly are relationship-based (like the ad agency world)\u2026there\u2019s no way in hell I\u2019m rolling the dice on my company based on this assumption.
    \nHow boards & CEOs exacerbate the problem<\/strong>
    \nAs soon as a product is ready for market and there\u2019s some initial customer traction, the board and CEO tend to rush to set 100%+ growth targets. They arbitrarily pick goals (since there\u2019s no data to base predictions on!) and turn the screws on the VP Sales. The VP Sales sucks it up (especially when he had no voice in the goals) and gets busy hiring salespeople\u2026who miss plan. Company misses targets. Executive team is refreshed.<\/p>\n

    Why is it easier for people and companies to do more of what doesn\u2019t work than to take some time to figure out what does?<\/em> By Q2, when the sales people aren\u2019t making their 2012 numbers, there will be the push (from the board, CEO or VP Sales themselves) to hire more! \u201cWe\u2019re behind on our goals, we need to hire more salespeople!\u201d How does that make sense?!<\/p>\n

    I think people, when under too much pressure or stress, tend to retreat to the safe place of what they know<\/strong> rather than taking the risk of trying new things. It\u2019s safe, it\u2019s less scary than what\u2019s unknown. It doesn\u2019t make logical sense; it must come from the reptile part of the brain.<\/p>\n

    Some answers, kind of<\/p>\n

    Unfortunately, there aren\u2019t any quick fixes to this lead generation problem today. In fact, if you don\u2019t have any repeatable leadgen programs yet, you\u2019re already behind in getting ready for \u201912. Despite your investors\u2019 demands, it takes 12-18 months to get leadgen cranking. What can work is a mix of, for example:<\/p>\n

      \n
    1. Trial-and-error in lead generation (requires patience, experimentation, money)<\/li>\n
    2. Patience in building great word-of-mouth (the highest value leadgen source, but hardest to influence)<\/li>\n
    3. Implementing Predictable Revenue Processes (by far the most predictable source of pipeline, but it takes time and focus)<\/li>\n
    4. Building an excited partner ecosystem (very high value, very long time-to-results)<\/li>\n
    5. PR (great if you\u2019re great at getting it!)<\/li>\n<\/ol>\n

      Start with more awareness on how much pipeline you\u2019re generating<\/strong><\/p>\n

      Not sure what works today, or where to start? Begin with awareness.<\/p>\n