How to maximize your speed of sales
How to maximize your speed of sales
Build momentum to compress the time between buying stages
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In this week’s issue of The Revenue Architect, we look at the role of speed in your GTM motion; how to measure it, how to benchmark it and how to improve it.
Speed is the key to growth and profitability; the faster you can move buyers and customers through your customer journey, the more efficient you will be, resulting in higher revenue per rep, lower customer acquisition costs and faster expansion.
For context, most sales motions can be distilled down to 4 types of metrics:
Volume—of leads, deals, wins, renewals, expansions.
Conversion—from buying stage to buying stage (e.g. prospect to lead, lead to opportunity, opportunity to win, win to renewal etc).
Speed—how quickly you can move a customer from one buying stage to the next.
Deal Size—how much revenue you generate per deal, expansion etc.
To illustrate how Volume, Conversion and Speed fit together, I’m going to reference the data model shown below, from the Science of Revenue website:
(source: thescienceofrevenue.com)
The data model reads from left to right and maps to a stages a customer goes through with your business from initial awareness to post-sale expansion. The volume metrics are represented by VM1-8, conversion metrics by CR1-7 and speed metrics by T1-7. We are going to focus on T1-7, so let’s look at each of them in turn:
T1 is the time between a prospect learning about your business and engaging with your business.
It makes sense to track this if you are doing account-based or campaign-driven marketing such as regional TV or direct mail, where you can measure the population exposed to your marketing and the number of leads generated from that population.
It’s very hard to track if you are doing always-on marketing like Adwords or Facebook, as those platforms don’t tell you how many people were exposed to your ads.
T2 is the time between a prospect becoming a qualified lead and agreeing to have a conversation with a sales rep. The common scenario in SaaS is the conversion from a Marketing Qualified Lead to a Sales Qualified Lead.
For inbound motions, T2 should be short, <10 days. Otherwise, its a sign that either your MQL criteria are too loosely defined, or that your inbound prospecting motion is not focused on prompt follow up. Remember, inbound is all about capitalizing on momentum, whereas outbound is all about creating momentum.
For outbound, T2 should be <30 days, as outreach sequences shouldn’t be more than 30 days long. If they are, it’s a sign that your Ideal Customer Profile needs refining and that your outreach sequence is not sufficiently customer-centric to quickly engage your prospects.
T3 is the time between a prospect agreeing to a sales call and having the sales call.
Most SaaS companies measure this by creating an opportunity when the meeting is scheduled, advancing it after the meeting is held and measuring T3 as the time spent in that initial stage.
T3 should be <10 days. Anything longer is a sign of lost momentum; your prospects are not fully engaged, your reps haven’t validated that your prospects really have the situation and pain your solution addresses, and in some cases a poor handoff between your SDR and AE.
A long T3 is very common in sales cultures that emphasize activity over outcomes (“more calls, more emails, more meetings!”) and is often correlated with a large % of opportunities lost at the initial stage due to non-responsiveness.
T4 is what most sales teams describe as their sales cycle; the time taken to win a deal.
T4 is correlated to complexity of the buying process (more stakeholders = longer process), which is in turn correlated to order size (more money = more stakeholders). Ranges to aim for are <30 days for up to $25k deals, <60 days for up to $50k, 60-120 days for up to $100k, 120-180 days for $100k+.
The range for $100k+ can be longer when selling to regulated industries or to the public sector, where more red tape is involved.
If your T4 is exceeding these ranges, its a sure sign that your reps are relying on a single persona to advance the deal instead of engaging all stakeholders early in the sales process. You can correlate this with a high % of deals being lost to non-responsiveness/going dark/ghosting and only a single contact attached to an opportunity. The more stakeholders you engage earlier in the process, the more momentum you create to carry the deal forward.
T4 can also be skewed by the commission pay period if reps are accustomed to throwing discounts at customers to close at the end of the month or end of the quarter (Btw this is a terrible practice).
It’s also important to track T4 for your closed lost deals, as its often hard for a rep to admit that a deal is lost rather than just stalled. However, all the data I’ve seen across hundreds of thousands of opportunities of all deal sizes and in all industries shows that when the age of an open deal exceeds 2x T4, the likelihood of winning the deal is basically zero. Leaving it open only inflates your forecast and provides a false sense of security.
T5 is the time between a customer signing a contract with you and seeing the impact they were expecting to get from working with you.
Most SaaS companies don’t measure T5, as they assume that a signed contract can’t be canceled and most onboarding processes do not have clearly defined “first impact” milestone where the buying team validates that they are starting to get the impact they expected. (Most onboarding processes are skewed towards provisioning and training rather than towards demonstrating initial impact).
If your business is based on usage-based pricing, it’s critical to measure and stay on top of T5, because it is the key to near-term retention and future expansion.
T5 needs to be as short as possible because you want to build on the positive momentum from signing the deal and avoid any risk of your customers losing focus or worse, developing buyers remorse. A good range to aim for is <45 days for models that require manual onboarding.
For product-led growth and self-serve models, T5 should be shorter (<20 days) as in most cases your customer is already using the product.
T6 is the time between demonstrating first impact and demonstrating recurring impact.
In the early days of SaaS, this would have been tied into the renewal process, as customers switched vendors less often, which meant vendors could focus most of their GTM efforts on acquiring new customers.
In modern SaaS companies, demonstrating recurring impact needs to happen well before renewals get discussed, as it creates the momentum needed to have expansion discussions, and expansion is the key to revenue growth.
This means that you should aim for your (T5+T6) < (Contract term - 90 days), as the closer you get to the renewal date, the later you are leaving it and the more objections you will run into during the renewal process.
T7 is the time between identifying and closing an expansion opportunity.
T7 shares the same characteristics as T4, except it should be shorter as you are already doing business with the customer and therefore more likely to have demonstrated impact to accelerate decision making and a master services agreement to speed up procurement.
In an ideal world, your expansion opportunities are closed counter-cyclically with your renewals, so that contacts are laddered and the renewal becomes less of an all-or-nothing decision.
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