Optimize Strategy Performance
Growing faster and predicting revenue performance
In the previous blogs in this series, I have laid out the essential steps for accelerating business growth.
- Build the correct systems infrastructure
- Create a growth strategy
- Develop process and model growth
- Align teams to execute strategy
Now the magic happens. If you have done the above well, you will be set up to optimize your strategy over time. You will have the model and data to be able to answer the following questions:
- Which markets should I focus on to grow faster?
- Which characteristics of those markets or prospects give me the highest probability of closing a deal?
- If my close rate is not where I want it, what part of my sales process is the problem?
- Which marketing programs are making clear contributions to bookings?
- How much should I invest in sales and marketing to hit my bookings targets?
- How likely am I to hit my targets for the coming year? What should those targets be?
Understanding the performance of your strategy
When you have your strategy documented in a system and tied to your sales performance through your execution teams, you will have clear visibility into the components of your strategy that are impacting pipeline and bookings growth the most. When we think about optimizing strategy, this is critical, especially in companies with constrained resources. If you want to grow faster, focus on the markets and prospects that have the highest probability of close, lead to the largest deal sizes, shorten your sales cycle length, and grow your sales pipeline the fastest.
This concept seems simple enough, but it is virtually impossible to answer these questions in companies that lack the proper infrastructure – at least without dedicating resources to the task for a long period. Imagine if you had those answers at your fingertips. That is Strategy Automation.
Why your model is critical for predictable revenue
If you completed Step 3, you modeled your bookings pipeline based on your sales process. In most cases, historic data did not exist for you to determine your actual pipeline characteristics, most notably sales stage lengths and sales stage conversion rates. Your initial model is typically a combination of estimation and aspiration – what you think your sales process should look like.
As you execute sales cycles and track them in your properly configured CRM, you will gain visibility into your actual characteristics. When you compare your actual performance against your model, you begin to see the most important areas to focus on to improve your close rates.
Let me give you an example: One of our clients modeled a 70% conversion rate from their Sales Stage 3 to Sales Stage 4. They expected 70% of their Stage 3 opportunities to convert to Stage 4. When they looked at their conversion rate performance against their model, every stage was at or above target, with the exception of Stage 3. Their actual Stage 3 conversion rate was 32%. With so many deals dropping out that stage, their pipeline of Stage 4 and Stage 5 deals was way under target, even though their lead generation had been expanding their sales pipeline dramatically.
So, what was happening in Stage 3? In this case, Stage 3 was where sales engineering gave a full demonstration of their product to the prospect. It was the demo that needed improvement. With that knowledge, the executives mobilized a team of sales, marketing, sales engineering, and product management to drastically improve the demo.
You can see from the example how understanding your pipeline characteristics can focus resources on the areas that matter most. But there is another reason the model is so important.
If you recall in my blog on Step 3, if your model is correct, and your actual performance meets your model, you will achieve the bookings target. This is a mathematical fact. As you execute a significant number of sales cycles, your actual performance can replace your initial targets in the model. As you get more accurate with your model, you get to predictable revenue.
Sales and marketing optimization
When we think about growing faster, we think about the components that improve growth. More opportunities and higher close rates. If you optimize the factors that contribute to those, you will grow faster.
Optimizing marketing has historically been exceptionally difficult. I always think of the CEO’s question, “I know that half of my marketing is contributing to sales, I just don’t know which half.” The reason this has been so difficult is the common gap between marketing systems and sales systems. I had to solve this problem by hand for over a decade among the marketing teams I led.
That is why I envisioned ayeQ so many years ago. We had to connect marketing tactics to real results – closed revenue. I always challenged my teams with, “If it isn’t contributing to revenue, why are we doing it?” The whole purpose of marketing is to scale sales faster than you could by hiring more sales reps. And the “effectiveness” of marketing should be measured one way – the acceleration of sales. Period.
Connecting marketing programs to opportunities generated to closed deals is difficult. But optimizing marketing programs based on the many facets marketing has in its tool kit is even more difficult. This is another key component of Strategy Automation. You have to break marketing programs into their components, and analyze those components based on their contribution to actual closed revenue. This is where you gain visibility into the programs and tactics that are actually working, and you can shift your resources to those programs and tactics.
This not only allows you to optimize your marketing spending, but it will tell you how much you need to invest in marketing to hit your bookings goals. This part takes a little more time, but it is a huge benefit of Strategy Automation.
Optimizing sales is also key, given you typically have some of your highest priced resources here. Using your model, you will understand how many opportunities you need in your pipeline at every stage at any given time. You can also model the staffing you need to manage that many deals. I have seen quite a few companies overhire in sales to achieve accelerated bookings, only to burn through cash unnecessarily.
Beyond what I described above, comparing your model against actual performance, and comparing the performance of your sales resources against each other (territory or rep), helps you get to the most effective sales team quickly.
There is a lot more science to strategy and growth than is often acknowledged. When we build the appropriate infrastructure and systems to enable strategy and growth, the process becomes so straightforward. Building ayeQ to support Strategy Automation was complex, but using it is very easy. Our vision for Strategy Automation is to simplify the process of accelerated growth. It was built on the principles and processes described in this blog series.