Sales Operations & Productivity Monitoring

Sales Operations is a collection of processes, tools, and activities used to monitor, manage and accelerate the sales process and to improve the productivity and performance of the sales team.

When a Sales leader hires the first individual contributor, she needs to figure out how to train, incentivize, provide appropriate tools, territory plan, determine quota, answer procedural questions, facilitate incoming orders, and analyze the new person’s sales effectiveness. This process repeats itself with each new hire. Soon, the sales leader can no longer perform these activities plus handle her own sales responsibilities (e.g. selling, recruiting, hiring, motivating, skills coaching, forecasting, achieving quota, etc.) As the sales team grows, so does the complexity and the pressure to perform.

That’s where Sales Operations (Sales Ops) come in.

Typically the first set of responsibilities that the sales leader is most comfortable sharing or delegating entirely will include administering the CRM system and generating reports to support pipeline management, forecasting, and performance analytics. Sales Operations responsibilities are a subset of the Sales responsibilities. Sales Operations responsibilities vary widely from company to company because the tasks included in that subset are at the discretion of the Head of Sales.

Sumeru believes that a strong and well-structured Sales Operations process is imperative to the success of a sales organization enabling the sales team to run effectively, efficiently, and in support of business goals. Sales Ops brings a system to selling.

Below, we focus on one of the three core business processes as an underlying non-negotiable set of activities that Sales Ops should adopt and execute. Three core business processes:

  • Pipeline management and forecasting (the focus of this growth plan)
  • Sales capacity planning
  • Sales enablement and training

Know your Sales Operations Terminology:

  1. Sales Ops represents the structures, processes, people, and technologies that collectively enable the effective management & monitoring of the sales process.t
  2. Sales Enablement focuses on the processes, tools, and content for the ongoing training and support of the front-line selling organization. efficiency and performance of sellers and the satisfaction and experience of customers. Sales Enablement is a subset of Sales Ops
  3. Sales Capacity Planning represents the understanding of how much revenue each rep is capable of bringing in, and learning how to expand the total amount of revenue your team can bring in. Simply put “ it is the process by which your Sales can accurately determine how much input it needs to maximize output”. Tactically, it involves sales performance analysis, bookings analysis, capacity modeling, quota attainment, turnover, win rate, etc.
  4. Sales Compensation Design is the combination of base salary, commission, and incentives that are used to drive the performance of a sales organization.
  5. Sales Funnel is a representation of the customer journey, depicting the sales process from awareness to action. Also referred to as a marketing funnel, revenue funnel, purchase funnel
  6. Cumulative Pipeline Value (CPV) is the aggregate value of all active opportunities at each stage in the sales pipeline. The metric is appealing because of its ability to directly pinpoint marketing and/or sales influence on revenue
  7. Deal represents a method of identifying a qualified lead as a sales opportunity.
  8. Stage is a defined step in the overall sales process. Usually between 5-9 stages that map out to a prospect journey with well-defined sets of activities and outcomes per stage.
  9. Pipeline is a representation of sales prospects and where they are in the purchasing process. It also shows a sequence of actions that a sales rep takes in order to move a prospect from one stage to another, starting from the beginning,a new lead, to a closed deal, a customer. The sales pipeline aggregates individual deals into a composite picture that measures the health of all sales prospects.
  10. Forecast represents a subset of the sales pipeline. It should show the state of the pipeline in the most advanced stages pertaining to the current quarter. It’s helpful to share which deals in the forecast are in a committed state, a most likely state, or best case state to close within the current quarter. Each one of these states has its own definition depending on the nature of the business and the sales stages.

Enterprise vs. SMB sales motion require different sales ops processes

  1. In Sumeru portfolio companies, we typically see two sales motions – Sold Deals and Bought Deals.
  2. The key difference between these motions is Velocity of the Sales Cycle and the Depth of Buyer Consideration
    Velocity Of The Sales Cycle Vs Depth Of Buyer Consideration
    Figure 1. Velocity of the Sales Cycle and the Depth of Buyer Consideration
  3. Sold Deals
    1. Sold deals (often correlate to Enterprise deals but not always) take more time to realize, have a lower sales cycle velocity, because of the complexity and depth in the buyers’ consideration process. Increased consideration is typically driven by:
      1. number of stakeholders
      2. size of the organization
      3. deal size (+ amount of value asserted)
      4. proof of value required
    2. As a result, sold deals are treated on a one-off basis and progressed through the pipeline stages with greater intent and deliberation. This constitutes the basis for deal-based pipeline management as the most effective methodology to track enterprise deals.
  1. Bought Deals
    1. Bought deals (often correlate to SMB deals) are more transactional in nature, with higher sales cycle velocity, and the depth of buyer consideration is typically much lower.
    2. In transactional deals, the time from lead to close is considerably shorter than in sold deals. As a result flow-based pipeline management (also referred to as ratio-based pipeline management) is the best way to monitor and manage these deals. For example, sample ratios for bought deals could be:
      1. Inquiries to Lead (MQL or SQL) for inbound lead
      2. Calls to Lead for outbound leads
      3. Lead to Demo
      4. Demo to Close
      5. Of course, these ratios are monitored on a by channel basis, and not just of effectiveness, but also efficiency (i.e. how much is each channel costing)

Pipeline Management & Forecasting

  1. Given a sales methodology, it is critical to understand the pipeline to manage deal movement and velocity from lead to close – a key enabler to predicting revenue and identifying roadblocks in the selling process.
    1. Sales Methodology is developed by the Head of Sales. Identifying natural sales stages in the pipeline is the responsibility of Sales Management.
    2. Deal stages (or sales stages) are the steps in the pipeline that signify an opportunity is moving toward the point of closing.
    3. Depending on what the sales strategy is, graduating from one stage to another could entail a different amount of risk. Proof of value in one stage could be a call, on another stage could be a demo, on another one could be a big sophisticated model.
    4. Every stage has a set of subprocesses (key activities) associated with it. Both Sales Management and Sales Ops should work collaboratively to define these activities. The goal is to be clear and specific with each activity to ensure Sales Reps quantitatively understand where a deal is at any given time so they can objectively move an opportunity through the pipeline (“Don’t rely exclusively on sales reps, trust the process you put in place”).
      Sample Pipeline Stages Activities And Outcomes
      Figure 2. Sample Pipeline Stages, Activities, and Outcomes
  2. Pipeline analysis and monitoring
    1. To best measure key activities and deal movement across stages, consider both ongoing analysis (daily, weekly, through the quarter) and periodic analysis (on a quarterly basis). Time dimension is critical to pipeline monitoring. Generate an in-depth view of current quarter, while forecasting revenue ahead in the future.
    2. It’s important to remember that no playbook will have 100% of the KPIs you need. The guiding principal should be to develop metrics that measure the perceived value and the perceived problem you’re trying to solve.
    3. Sample Ongoing Analysis (Daily and Weekly Operational Analysis & Forecasting) to manage though the quarter:
      1. Total Pipeline (vs Budget) for Q, Q+1, Q+2
        1. Number of deals and dollar value
        2. Number of deals and dollar value in each stage (vs. Budget) for Q
        3. Top 10 Opportunities in pipeline
      2. Activity metrics
        1. Number of emails, calls, meetings, demos, proposals and other business-specific, relevant activities within each stage
      3. Pipeline velocity:
        1. Number of monthly new deals (and dollar value) introduced into sales pipeline by sales rep
        2. Number of days in each stage
        3. Average days to close a deal
        4. Week-over-week change (New Pipe+Reduction+Vertical Movement
      4. Pipeline quality:
        1. Closed deals/total pipeline
        2. Conversion rate from lead to opportunity deal
        3. Conversion rate from opportunity to closed deal
        4. Conversion rates by stage (closed deals/stage deals; number’ %)
        5. Conversion rates by lead source
        6. Number of deals (% of deals) where there is no competition
      5. Win/loss drivers: Frequency of “listed/categorized” reasons and drivers of outcomes
      6. Forecasting:
        1. Pipeline Accuracy – variance of the projected forecast to the actual number for a given period
        2. Pipeline Variance – distance between the commit and the upside in the pipeline. It also measures how much the sales forecast changes from the beginning to the end of the quarter
        3. Pipeline Linearity – A forecast may be weighted more heavily toward the end of the quarter or spread evenly throughout. Avoid closing a large % of business on the last day of the forecast period
    4. Sample Periodic Analysis (Quarterly Analysis & Forecasting)
      1. Forecasting
        1. Pipeline Coverage & Mix – pipeline coverage is the leading indicator of the health of the forecast and the probability of success. But while coverage is important, the pipeline is only as good as the quality of its mix. Swing deals — or elephant deals — may help crush your number, but logo velocity deals will consistently exceed it.
          1. What is the right pipeline coverage ratio? 2x, 3x, 4x, 5x? The answer depends on close rates, average deal sizes, and length of sales cycle. For example, if the pipeline includes renewals or expansion sales with existing customers, higher close rates may also lower the ratio.
          2. Pipeline Coverage ratios must be set on day one of the quarter or earlier. This will enable better predictability and consistent results quarter over quarter
      2. Compliance and Commitments
        1. This analysis indicates whether all sales team members have submitted an accurate forecast and proper close dates for all committed opportunities.

Evaluating Sales Operations

  1. Sales Operations teams produce and analyze dozens of metrics and KPIs related to the productivity of the sales team or qualitative measures regarding other aspects of Sales. Rarely does anyone measure Sales Operations’ impact. How is Sales Ops doing? Are they adding value? Are they optimized?
  2. Below are a few standard questions or metrics that apply to all Sales Ops teams.
    1. Sales Process
      1. Are the sales stages effective?
    2. Relevance, accuracy and timeliness of pipeline and forecast reporting
      1. Is the data an accurate reflection of sales team input?
      2. Is the reported data appropriate for the audience?
      3. Are the sales metrics actionable?
    3. Sales Enablement
      1. Training
        1. Validate sales training in creating impact
      2. Policies
        1. Validate Legal/Finance policies (Terms and Conditions) are essential and not merely created to shift work to sales.
        2. Validate that the risk mitigation created by Legal & Finance policies is appropriately balanced.
        3. Does Sales compliance with these policies materially impact bookings?
      3. Operations
        1. Quality, accuracy and timeliness of lead assignments after handoff from marketing.
        2. Are leads of the agreed quality? Are leads fresh? Are leads delivered to the right person? Is the contact data current and associated with the correct account?
      4. Sales Territory
        1. Accuracy and transparency of sales territories and account assignments
      5. Sales Compensation
        1. Compensation plan alignment with corporate goals
        2. Accuracy of quota setting
        3. Accuracy of commission calculations
        4. Accuracy and timeliness of sales commission reporting

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