Many startups kick off their sales motion by simply following a round robin approach to prospecting and customer assignments for their sales teams. Specifically, an inbound lead is received, qualified by a BDR (Business Development Rep), and that opportunity is handed to the next salesperson to take it. This approach works for a period of time, until:
- You need to supplement inbound with outbound actions from both Marketing and Sales
- You need to double down and focus on your ICP (Ideal Customer Profile)
- You need to ensure every sales rep (land or/and expand) can identify a path to achieving their quota
- You need to run different sales motions based on the customers buying behaviors (i.e., land and expand play vs a nurture play)
- You need to move upmarket to higher ACV customers with more complex buying processes
- You need to create new pipeline avenues for both inbound and outbound actions
The solution to these challenges is transitioning to Account Based Selling, whereby your team’s efforts are organized around clusters of specific high-value customers. With that in mind, there are 7 steps that can help an organization achieve this new motion of Account Based Selling.
7 Account Based Selling Best Practices for Organizational Success
1. Refining the Ideal Customer Profile (ICP)
- Analyze current customer base and pipeline to identify the types of customers that align best with your product (e.g., is your product best suited to fin-tech or financial services more broadly?)
- Determine the size of companies that typically engage with your offerings, considering potential customer lifetime value.
- Develop a prioritized list of target accounts across different regions, using criteria like revenue and employee count.
2. Segmenting the ICP Universe
- Divide the ICP universe into segments based on size, location, industry, and/or other relevant factors.
- Create processes that allow for continuous updating of segment information over time.
- Define customer segments, such as Enterprise, Mid-Market and SMB, based on buying behavior and key KPIs (e.g., Average ACV, Gross Retention Rate and Net Retention Rate).
- Define role of Sales team (land, expand vs renew) by each segment. All segments do not need to be identical in the way you approach them. For instance, you may cover your mid-market and SMB customers with an inside sales team and your enterprise customers with an outside sales team.
- Coordinate with Marketing team on outbound marketing around ICP.
3. Estimating Potential Opportunity Size
- Develop a method to approximate potential opportunities within each segment based on variables such as headcount, size of key department, and revenue.
- Assign a potential deal value to all accounts to balance territories effectively.
- For example, a sample formula could be 15% of total headcount (approximating size of key dept.) multiplied by $500 per head, representing the potential opportunity size for the organization.
- These approximations help provide clarity on the sales potential and enable effective resource allocation.
With the first three steps complete, we now know the Ideal Customer Profile we are targeting (e.g., top ~2000 tech companies), what sales segments (e.g., SMB vs MM vs Ent) we will break into, which territories we will focus on (e.g., North-East, South-East, etc.), which responsibilities each sales role will have per segment (e.g., land vs expand vs renew) and approximate size of potential opportunity per target (e.g., potential opportunity size for Acme Corp is $500,000).
4. Determining the QBS Team
- Assess the size of the Quota-Bearing Sales (QBS) team to hit the financial plan for the fiscal year, accounting for any hiring plans.
- Define the potential opportunity size required for different sales roles to achieve their quotas.
- For Landers, the potential opportunity size per salesperson should be 10 times their quota (as a rule of thumb). Multiple may vary based on competitive intensity, pipeline conversion rates and vended level of the market.
- For Expanders, the potential opportunity size required should typically assume ARR expansion of 20-30% on average across their existing accounts.
- Similar formulas can be applied if a sales rep is both a Lander and Expander.
5. Establishing RACI for Inbound and Outbound Activities
- Collaborate with the Marketing and Sales teams to create a clear RACI (Responsible, Accountable, Consulted, Informed) matrix for inbound and outbound activities.
- Tailor the RACI matrix to each segment, considering that different segments may require varied approaches from both Marketing and Sales.
- Develop a comprehensive internal presentation to align Marketing and Sales on expected outcomes based on the RACI framework.
6. Allocating Accounts into Sales Territories (i.e. Territory Management)
- Allocate territories in an optimal and balanced manner, leveraging the attributes identified in Step 2. To improve efficiency and conversion rates, create territories that are close in proximity to your sales representative or align them by industry vertical.
- Only assign as many accounts as can be covered (i.e., 20-50 depending on Mid-Market vs. Enterprise split and average sales cycle).
7. Conducting Skill & Will Exercise
- Conduct an objective assessment of the sales team’s skills and motivation levels.
Evaluate the relative skills and motivation across segmented teams to ensure each team has a clear path to achieving their quota.
- If the projected performance of a team falls short of the plan, consider revisiting the team structure and personnel to address any gaps or challenges.
By accomplishing all seven steps mentioned above, you can now pave a clearer path towards organizing your team, ensuring their understanding of responsibilities, and establishing a concise game plan to achieve their quotas. It is important to note that these seven steps are not universal and don’t necessarily have to be followed precisely as outlined. Instead, consider them as a useful guide to initiate the process. Additionally, it is important to ensure tight coordination between marketing, demand generation, SDRs and sales teams to effectively enable your new go-to-market strategy.
In conjunction with this process, you will want a financial model which ties your sales and marketing changes to the P&L. Consider your expected bookings and all costs associated with your go-to-market efforts (both marketing and sales) and make sure that key efficiency metrics, such as CAC Ratio or Magic Number, remain favorable.
At Sumeru, we have successfully assisted several of our portfolio companies with this exercise, which has resulted in expanded pipelines, enhanced sales team efficiency , and sustainable overall growth. Feel free to reach out to Jackson Dibble or Pejman Pourmousa on the above topics. Happy selling!