The 4th Quarter started with a Bang
Our client was about to close the biggest deal they ever won. It was a whale. And no ordinary whale at that.
“If we can just close this one account it will transform the business” said James, the Sales Manager of a web development agency.
And they were right
Just one account was about to transform the business. They were about to go from years of scraping for every single and double they could find, to hitting a grand slam, more like 3 of them.
“I also have 3 more lined up like it” said James, and so they proceeded to expand the delivery team to support this new customer, and get ready for a new level in business.
If we can just close this one account it will transform the business
Company Stats:
Industry | Web Dev |
CRM | Salesforce |
Revenue | $6 mil |
Employees | 30 |
Years | 4 |
The only problem is, it wasn’t yet their time.
…
Getting Objective
When we’re working hard closing deals, we usually can only see what is right in front of us. Worse still, we all have the Last Sale Bias that makes us feel like the success we just had is going to continue.
But with Objective Sales Management, we always have to ask ourselves what would have to be true for my intuition to be correct?
Choosing Our Intuition
In this case, the intuition is - We’ve just won a whale, I’ve got 3 more whales in the pipeline, I think we’re going to have a great year
So what would have to be true for that intuition to be correct?
- Our deal flow should include these whales and not be shrinking
- Our average amount won should be increasing
- Our conversion rate should be the same or better
- Our New Value should be increasing after this sale
Uncovering the Cause
Let’s take each factor and look at the actual stats. Starting with the original intuition, here are the months leading up to and including the whale
The Whale
It certainly looks impressive. For many quarters the team tried to get traction. And finally, this huge sale, larger than everything else combined, puts them on the map.
But again, what has to be true for our intuition that this will continue to be correct?”
Checking in on New Deals
Now lets look first at New Deals. Looking at the same period, we only have one spike, the spike from the whale. There are no other whales that have actually qualified. So although this huge whale qualified and entered the pipeline, there is nothing yet else coming in behind it.
This is a common sales person bias. To factor in unqualified deals into their intuition when those deals have not yet actually qualified. In order for a deal to be likely, it has to be qualified. Those other whales did not qualify, and so they did not enter the deal flow.
How’s the Average Amount
The next thing that should be true is the Average Amount should be increasing. In Objective Sales Management, we are looking to improve the performance of the average, not just relying on whales. What does the average show us?
So this is very good. Average Amount won has more than doubled. This means that they are getting into larger deals which is going to help their pipeline
Are we still winning?
Next lets look at Win Rate, which is the number of deals won over those closed. Is that increasing? It looks to be pretty flat over time, which means that Win Rate is not going to a play a big factor in this situation.
There must be New Value
Lastly lets look at New Value, it should have increased and stayed that way if the performance was going to continue. But when we look 4 months into the future, New Value has started to trend back down.
Bringing it all together now
What is the final result? They first had the spike in the Net New Deals from the whale (grey bar), which resulted in the New Value (blue line), it resulted in a big sale (baby blue line) but did not materialize into consistent pipeline performance. For the following 3 quarters, New New Deals were negative, New Value collapsed, and sales did not materialize
What we would have needed to see
In order for that whale to be a sign of things to come, they needed to see consecutive months and quarters of large positive Net New Deals, which would have led to positive New Value, and then eventually, positive Amount Won.
What to look out for in your sales pipeline is that: new qualified deals are entering the funnel, not just that you’re closing a big deal today.