"The Qualified Sales Leader" Summarized (Part 1)
How to do enterprise sales
The following is my own summary from “The Qualified Sales Leader” by John McMahon, who basically wrote the playbook for SaaS enterprise sales. It was so good that I decided to rewrite parts that made an impression on me as a layman in B2B sales. I’ll be summarizing the latter part in the coming few weeks.
Chapter 1: The QBR
Every sales force runs a Quarterly Business Review (QBR) each quarter, where sales reps are expected to give a rundown of their current pipeline and potential client status, especially so that sales managers can give an accurate forecast of expected sales numbers in the coming months.
Sales reps tend to struggle when managers hammer them with inquiring questions, but learning happens in the struggle.
For the QBR to be a learning sessions, the sales reps need to accept that they aren’t the only ones with account issues. They need to learn from mistakes — theirs as well as others’. For every rep who presents a specific account situation for the first time, there are other reps who have already experienced that situation. And still others who will see that same situation in the future.
The QBR should be utilized to coach reps and analyze their sales knowledge and sales skills. The manager-rep interaction shouldn’t be a one-way interrogation. But, in many instances, that’s how it evolves.
The QBR is essentially a white, hot spotlight on the rep’s capability to build pipeline, qualify opportunities, and sell effectively. No rep wants to forecast less than quota for the quarter. Thus, many reps stretch the truth in their forecast presentation.
Some sales reps exaggerate and embellish deal scenarios and potential closing outcomes. Others may have had confirmation bias, or “happy ears”, when they called on accounts. They heard what they wanted to hear and saw things through rose-colored glasses, believing certain accounts will close in the quarter, when in actuality they won’t.
In an effort to sandbag their quarterly quota, a few reps have qualified deals properly but mask the true potential size of the deal and its probability to close.
The combination of “happy ears”, rose-colored glasses, and sandbagging efforts forces managers to qualify the accuracy of forecasts by listening to fictional stories and searching for the truth in the forecasted opportunities.
Ineffective QBRs only ask superficial questions
When you only ask superficial questions like below, you won’t really be able to accurately forecast revenue from sales accounts - if they come in at all.
Who will approve the purchase?
Why do you think you’re going to get the deal?
How long have you worked on this deal?
When do you think the deal will come in?
Do you think they’ll buy this quarter?
Who is the competitor?
Is there anything you’re worried about?
Common situations with sales reps
The sales reps would try to assuage your worries by saying they have a Champion on the inside, or that there’s no competition… while not having an answer as to why they would want to buy the product.
For deals that came up a couple of times in previous QBRs, reps might say that there’s been no contact with the potential buyer (but not to worry about it), or that the buyer wants a 70% discount to buy, or that the buyer decided not to buy due to a lack of decision.
Bringing up previous deals and forecasting it for a few quarters is a common tactic for sales reps. Quarter after quarter, the deal size diminishes, slips into the next quarter, and then eventually disappears. The managers are now left with the task of reconciling their own quota with the current reality. Time kills all deals. All bad deals die a slow death.
When asked with next quarter’s forecast, reps might forecast close to their quota. If the quota is $300k, they might say “I forecast $250k, with a shot for $300k”. As a safe choice, reps probably won’t be annihilated for forecasting the figure, giving the management team hope that they’d make the quota, while making only $200k gives them a plausible deniability of 1 deal slipping.
While reps may sandbag their forecast (saying that they’re only comfortable with forecasting $175k and absolutely being the hero when they make the $300k quota), sometimes bad managers might bully reps to forecast a higher number. What usually happens is that right before the next QBR, reps drop their forecast to the lower number anyway, and managers struggle to make up the difference.
Some sales reps who are new and inexperienced may say that they’re winning a lot of new deals this quarter, believing that responding to RFPs (Request for Proposals) and running POCs (Proof of Concepts) are a positive indication of winning deals.
However, running POCs without a success criteria means that you’re only blindly going through the motions without a clear indication when the POC stage is over. The reps were simply hoping that the customers wanted to buy after playing with the software, without articulating what the customers wanted to test and why. Customer becomes blind to product capabilities, and reps become blind to customer needs.
What managers should figure out from sales reps
While sales jargons like champion, coach, Economic Buyer, technical buyer, POC, etc. fly around between managers and sales reps, it’s imperative to have the same definitions so that everyone is communicating at the same level.
Some common themes for each deal that managers should try to understand:
Did the sales reps have a coach or a Champion?
What information did they lack?
Why did the customer have to buy?
Who had final budget approval?
Who controlled the deal?
What is the urgency to buy?
How will the customer justify the purchase?
What is the customer’s evaluation process?
Were they winning or losing?
Were they in control?
What happens when QBRs are ineffective
In an ineffectual QBR session:
The management can only ask the rep: how much are you going to forecast?
The reps didn’t learn to become better salespeople. They felt like they were only being used for the managers to showboat and commit to an unrealistic forecast number
The managers didn’t garner any new information to help them forecast accurately, or to coach their reps better.
When sales managers can’t forecast accurately, the game restarts again, except this time the review is between the managers and their directors. When you can’t forecast with reliable numbers, the only way to go is forecasting low and finishing high. After the managers’ numbers are set, now it’s the sales directors & sales VP’s turn to play the game with the CRO (Chief Revenue Officer), and eventually the CRO with the CEO, who commits the final number to the board of directors.
What CEOs need to do
Before scaling the sales team, the CEO has to give the sales force a structure, so that they could communicate and operate effectively as a unit. The CEO needs to codify their sales process, selling motions, and the analysis of sales issues into a systematic, structural arrangement.
Measurement is the first step that leads to control and eventually to improvement.
If you can’t measure something, you can’t understand it.
If you can’t understand it, you can’t control it.
If you can’t control it, you can’t improve it.
A sales force needs to implement foundational methods and realize specific metrics before they can scale:
A measurable sales process
A means to analyze the sales process and effectiveness of the sales force
Consistency and repeatability in rep performance across the salesforce, with:
An increasing average new deal size,
An expanding up-sell deal size from existing customers,
A measurable improvement in quarter-to-quarter average sales productivity
CEOs need to update the sales process as company grows
When a company rapidly grows, there would be obvious knowledge and skill gap. What made a sales rep successful 2 years ago and now is entirely different, especially if the company used to sell small deals to low levels within accounts.
If the product line has expanded and matured, moving from a simple product to a more tightly integrated platform of multiple software products, the sales force needs to advance up market as well as move up within organizations to sell to larger companies — where there are more experienced and sophisticated buyers that care about business value. You’ve shifted from a single-stakeholder sale in small companies to a multi-stakeholder, multi-level sale in large companies. From low-level product sales to high-level business sales.
Your reps and managers need to learn how to speak to different buyers at different levels of organizations. They need to understand how to effectively message to each buying persona and specific use cases. They’ll need to learn how to qualify different types of opportunities at multiple levels of larger accounts.
When a startup grows very quickly though, the biggest issue that the CEO may face might not be the changing product or market — but with the sales managers. The first-line sales leader has the most profound effect on the recruitment of reps AND the overall success of failures of sales reps.
2 years ago, the first-line sales leaders might have been sales reps when the company only had a simple product, selling product features in small accounts to a single, low-level stakeholder. At the time, gaining sales success was possible through sheer activity: making more cold calls, sending more emails, connecting to more people on LinkedIn.
To be successful as a growing company, the first-line managers need to change:
Stop confusing activities with accomplishment.
Stop pushing reps to rush through the sales process.
Master the customer conversation with specific personas and use cases.
Understand how to sell business value, using a repeatable process.
Learn to qualify deal advancement issues in account situations.
Coach reps on how to control an opportunity.
Understand how to forecast accurately.
What happens when the sales process doesn’t scale with the company
The CEO would otherwise be stuck in a catch-22 situation: while the average sales productivity remains low, it’s very risky to hire new sales reps without any indication of an increase in productivity. Without the ability to hire new reps, the business can’t scale.
Some other problems that may contribute to the lackluster productivity:
Company not defining the ideal target customer:
Every account looks like a great prospect, so the sales force hang onto accounts that will never buy, wasting time and resource.Small average deal sizes:
Makes it difficult for reps to meet their quotas and increase productivity, and when only a small percentage of sales reps hit their quota, the majority aren’t making money… leading to high turnover in the sales forceCustomer churn:
If the churn rate is 1/3, that means for every 3 customers that the sales force brings in, 1 will be gone in the next quarter.
High customer churn might also be caused due to selling too low in companies for small dollars:
Selling small deals at low levels in a company, without the customer understanding the tangible business value of the product, causes a high degree of customer churn. If a customer doesn’t understand the business value of a subscription product, the customer won’t renew their annual subscription.
For a SaaS company, accurate forecasting is paramount, since the majority of the costs are tied to salaries. If the company hires too many people while quarterly bookings come in short, the burn rate will increase.
Chapter 2: Managers
Importance of training the sales force
Investing in the training of the sales force is of utmost importance. Without sales leadership training, managers would be lacking the knowledge:
To recruit grade A players
To assess each reps’ strengths and weaknesses
To train the reps on what to do — the knowledge of each step of the sales process
To coach the reps on how to do it — the skills to execute steps in the sales process
To utilize a methodology to quickly analyze deal advancement and account scenarios
To forecast accurately
To understand the difference between managing and leading
While some sales managers think managing means becoming a rep’s friend, reps don’t need more friends. What they need is someone to teach, coach, motivate, and lead them. Someone to help them develop their sales craft, make more money, and win. Reps need someone they can respect.
Sales managers need to realize that the success of their reps come from how well the managers train, develop, and coach the reps. They need to know that their reps all have different strengths, weaknesses, desires, and motivations, and they need to manage accordingly.
Managers shouldn’t be glorified scorekeepers
When managers lack training, they may only look to measure more activity (e.g. email, cold calls, demos, POCs), since they believe more activity = more sales. The reps in turn responded to what are measured.
Activity metrics without an association to indicators of deal advancement are hollow KPIs and are useless in accurately forecasting outcomes. The managers are glorified scorekeepers. And glorified scorekeepers make horrible forecasters. For a sales leader, forecast accuracy is a preeminent indicator of how intimately they understand their people and the accounts on the forecast.
When managers become glorified scorekeepers, reps don’t learn anything from their managers, becoming unfulfilled and thus leaving the sales force. While the average sales rep attrition rate in SaaS companies is around 20~25%, it’s very problematic when the attrition rate exceeds the new hire rate.
When reps walk through their deals, managers should ask proper inspection questions that probe deeper. Root questions that involve second-, third-, and fourth-level analyses. Questions that drive to the heart of selling issues in each account to understand why a deal is, or is not, progressing through the sales process. And provide coaching on the next logical step in the process.
Even when you have a CRM system in place, it doesn’t qualify reps or deals. A CRM system is incapable of analyzing the selling situation in an account. It is simply a dumb repository of information. Sometimes, a CRM also doesn’t give real-time information, possibly giving management the wrong information to act on. Reps are also free to place a deal in the CRM system at any stage of the process, meaning they can intentionally or unintentionally (“happy ears”) place deals into later stages of the sales process to inflate their forecasts.
Each manager in the sales organization needs to have consistency. Everyone needs to use the same version of the sales process. Furthermore, they need to have a constructive method to analyze every deal, to effectively find accurate assessments of the progress of deals.
Priorities as Sales Leaders
As a sales manager, your compensation plan would tell you that you’d maximize earnings by helping the sales reps sell. The more they sold, the more you’d get paid. However, there’d be other paperwork, other things that other people would request from you as a sales manager.
However, as a sales manager you should stand your ground and ask yourself:
Why is it important?
Is it urgent?
Who says that it is important?
Why do I need to do it now?
Will it help my sales team sell more?
The majority of the time, it wasn’t that important, nor was it urgent, and it wouldn’t help my team. It was driven by a low level person trying to look busy.
Through this process, I discovered what was truly important. And that most things were unimportant because many people ask you to do things for their reasons. They wanted to look busy. It all told their boss they were doing something meaningful.
Many sales leaders take the bait, but most compensation plans for sales leaders are pretty clear-cut: your reps sell; you get paid. The compensation plan should drive sales managers to do what is fundamentally necessary to help their people maximize sales.
I quickly realized that I was paid to recruit, train, and develop my people to maximize sales and so they could eventually take my place when I get promoted.
Responding to a multitude of meaningless phone conversations, bureaucratic conference calls, and internal meetings with no specific prerequisites, written agenda, or defined outcomes wasted my time. So, I stopped.
When I focused on recruiting grade A players, developing their knowledge and skills during sales calls, and leading them, we all became better at selling as a team. When I taught my team to master the fundamentals of the game, they performed better. They learned new competencies. We sold more. They made more money. We all grew and made more money.
The Basics (as a Sales Leader)
Basic #1: A common vocabulary
Without a common definition of vocabulary, communication breaks down. Without it, it’d be impossible to operate a sales force, describe an account scenario, qualify a deal, or run a forecast session.
Basic #2: Listening
When reviewing accounts with sales reps, be patient and listen to what they say first. There’s no benefit in simply telling someone to perform better when they’re struggling. You’re yelling “SELL” to a struggling sales rep, it’s like yelling “SWIM” to a drowning man. More efficient questions are formed when the manager seeks to understand, not to be right.
When you really listen and try to deeply understand, you ask better probing questions. What was the rep leaving out of their description? What did they really mean by that last statement? What is actually happening in the account?
Ineffective listening generates ineffective questions.
Basic #3: Be here
To be a great listener, you have to be present. Turn off all the other distractions and be in the moment. Managers must immerse themselves in the story the rep tells. Picture the rep at the account.
Where are they in the sales process?
Were they speaking with a coach, a Champion, or the enemy?
What level of the account were they speaking?
What were they trying to achieve?
What did they do to succeed?
What caused them to fail?
What were the surrounding circumstances?
What were the account dynamics?
Basic #4: Intuition
To be an effective sales leader, you need to use your intuition to help you perceive the situation. Most people only analyze situations and make decisions with their head. They never rely on their second powerful decision engine: their gut.
Intuition is an effective ally when used to qualify opportunities coach reps and sell. It helps any salesperson or leader sense the exact status of the situation. Intuition helps us “feel” a situation.
When combined with the situational facts your brain processes, your intuition allows you to ask more perceptive questions. Triangulate between the rep, your mind and your gut. Triangulate to the right conclusion.
To utilize intuition, first, you have to trust it. Then, you need to be here, present in the moment. Listen to understand, listen to feel, listen to sense. Don’t listen to talk.
Basic #5: Self awareness
Managers need to take some time to reflect and understand how their own character traits effected the people on their team.
What are your positive characteristics, and what role do they play motivating your people?
Which of your negative character traits may have a detrimental effect on the willingness of your people to engage you in discussion and utilize your coaching during sales calls and forecast reviews?
Basic #6: Transformational mindset
As managers, your position as leaders provides an inherent power over the reps. But when forecasting sessions become one-way interrogation, reps will tell you what they think you want to hear.
When you only use the power of your position, your interaction and relationship with your reps become transactional. Reps give you what you want in return for not being punished. They don’t need penalties, interrogations, or simple transactions with you. They need coaching. They want to learn. They want to be developed.
You want your reps to be comfortable giving bad news, early. I have a saying that "Bad news can’t wait”. As a leader, I want my reps to be able to share bad news quickly so we have enough time to remedy the situation. If your reps are in a transaction-oriented relationship with you, they aren’t going to feel comfortable sharing bad news for fear of penalty.
If the reps knew what to do, they wouldn’t need you.
Time to step up. Time to be a leader, a coach, not someone who only penalizes. Being a true leader is the opposite. A leader’s relationship with their people should be transformational, not transactional.
The leader needs to have an intimate understanding of how their people work. A leader aligns motivations and desires and shows the rep why it’s in their best interest to do what needs to be done. The reps know that if they can achieve the leader’s vision, it will in turn transform their abilities, their knowledge, their careers and lives.
That is a transformational mindset.
It all starts with understanding why they joined your company. What they hoped to achieve when they made the decision to work for you. Sit down with them and document their annual goals, financial goals and career goals.
It’s your job to coach your reps based on careful analysis of account scenarios and their skillsets. The interaction needs to be an equal exchange: coaching advice for account information. They should be comfortable when they give you their honest assessment of the account, not feel like they’ll be penalized. In return, you assist them, help them develop and win for their own advancement and the betterment of the team.
As leaders, transformation needs to be our purpose.
How will we know when we’ve totally transformed our people? When they are self-sufficient. When they no longer need you, your job is done. When you know that they can take your place as team leader, your job is complete. When that occurs, it’s a win-win. Not only do your reps win, but you win because you’ve maximized the productivity and performance of your team.
Basic #7: Don’t be a glorified scorekeeper
Managers become glorified scorekeepers when they manage people only through activity, without any analysis on why they achieve or don’t achieve the KPIs. Or even without understanding how effective the KPIs are to closing deals.
You’re not inspiring your people or developing your reps so they can succeed. How long do you think people can work for you when all you do is inspect activity only but not inspire, coach and develop?
First, you start with inspiration. When you become intimate with your people’s strengths and weaknesses, goals, aspirations, frustrations, insecurities and fears, you know what drives and inspires them.
Second, by knowing the strength of their knowledge and skills to effectively execute the sales process, you’ll need to constantly coach and develop them for success.
Third, only after you’ve inspired and coached have you earned the right to inspect them. You want to inspect the WHY. Why deals progress and why deals stall. Analyze the WHY, help your people understand the WHY. Then coach them on how they need to change, what they need to know, and what their next logical step should be.
This is not a one-time thing, it’s a never-ending, personally tailored loop: Inspire, Coach & Develop, Inspect.
Basic #8: Intentional outcomes
As a leader, your interaction with your people can’t be transactional. It needs to be a win-win. Start with an objective for every meeting. As a leader, you can’t just show up for a meeting without intention. You need to understand what you expect from your people, and they need to understand what to expect from you. You need to understand how you will add tangible value and how to drive towards a desired outcome for you and the rep.
Basic #9: Keep it simple
As a sales leader, your job is to take complex things and make them easy to understand for both your reps and your customers. Communicate clearly and in simple terms for people to understand.
Basic #10: Urgent curiosity
As sales leaders, your questions need to originate from a point of genuine curiosity and a longing to understand why. Why the reps are struggling in their accounts. What do you need to do to help them change the situation? Good questions arise out of a genuine interest, a genuine curiosity to understand.
The reason that you and your reps should have urgent curiosity is because time is your enemy. In an average quarter, there are only 61 working days. Rep productivity is turbocharged when you and your reps have an acute curiosity to fully understand a sales situation.
90 days in quarter - 24 weekend days = 66 days to sell.
66 days to sell - 3 holiday days (average) per quarter - 2 vacation days (average) per quarter = 61 selling days in a quarter.
Benefits of Sales Process
Beneficiaries of a sales process and following them:
Sales Reps:
- Results in higher win rates, larger deal sizes, increased deal velocity.Sales Managers:
- Consistency across the sales force
- Having a common playbook with a common language to discuss accounts
- Setting tangible evidence necessary to complete each step
- Seeing which step the sales rep is facing difficulty completing —> understanding the knowledge/skill gap that needs to be addressedExecutive Management
- More efficient use of resources, increased productivity
- More accurate revenue forecast, consistency, predictability
- Gain insight into people/process/product issues that affect the sales orgThe Customer
- Understands how the product solves their pain, and difference with other products
The sales process needs to be a functional part of operating the business. Each sales stage needs to have defined, tangible action steps. Each stage should have exit criteria based on verifiable customer events. To move to the next step of the process, reps need to accomplish the exit criteria to open the next “gates”.
Gates can have KPIs to measure effectiveness and deal velocity, e.g. percentage of deals from one stage to the next, and how long the transition takes.
Without a coherent sales process, inaccurate forecasting quickly balloons up. e.g. 5 reps each misrepresent 1 forecasted deal at $100k, totaling to $500k. Assuming 3 first-line managers and 15 reps, that adds up to $1.5M misrepresentation per quarter, which may influence the decision made at the CRO & CEO level.