Why A Formal Sales Process Is So Critical
Working in sales allows for a certain degree of independence. After all, salespeople are generally alone when identifying prospects, presenting, and closing. Anyone who loves to “work alone” might be initially attracted to sales for that reason.
However, the independence that comes with sales does not negate the need for structure, what we call a formalized, milestone centric sales process. In other words, you can’t just wing it, even if you’re an elite salesperson.
In fact, a formal sales process -- a set of repeatable steps that a salesperson executes to take a prospective buyer from the early stage of awareness to a closed sale -- is what will make your team more effective, improve performance, and even help you close sales quicker.
Typically, a sales process consists of the following: research/preparation, initial approach, questions to qualify opportunity, presenting ideas and solutions, test closing, handling objections, closing, and follow-up.
Most sales leaders and their teams are aware that they go through these steps, but not many of them decide to outline them and spend the time necessary to strengthen each step of the process, leaving it all up to individual sales reps to decide what steps to take and when. And, some reps attempt to take shortcuts in a failed attempt to speed up the process.
The importance of a formalized sales process cannot be understated. Consider the following:
Sales Management Association reports that 90% of all companies that use a formal, guided sales process rank as the highest performing.
The TAS Group, with reference to the Dealmaker Index Study, states that 70% of the companies that follow a structured process in sales are high performers; over 70% of business forecasts were accurate for the companies with a defined sales process.
A study by Harvard Business Review (HBR) showed that businesses with a standardized sales process see up to a 28% increase in revenue as compared to those that do not.
In another study, HBR reveals that 50% of high-performing sales organizations admit having “closely monitored, strictly enforced or automated” sales processes. Meanwhile, 48% of under-performing organizations have non-existent or informal sales processes.
What these numbers show is that three main sales parameters – revenue, sales performance, and forecasting accuracy – tend to go significantly up when a company adopts a formalized sales process.
Yet, according to my partner organization, Objective Management Group, a whopping 68% of all salespeople do not follow a sales process at all! Do yours?
This represents a significant opportunity for you to differentiate your company from the competition.
A formal, defined sales process can help you do the right things at the right time with the right people and know for sure what works and what doesn’t.
Your sales team can:
maintain a healthy sales opportunity pipeline,
increase sales forecasting accuracy,
increase profitable sales revenue,
nurture and secure referrals,
create and maintain long-lasting customer relationships,
ensure higher customer lifetime value
As a sales leader, following a standardized sales process allows you to concentrate on the things that matter most: planning, distributing leads, prioritizing tasks, managing your team’s time and workload better, as well as making more accurate sales forecasts and smoothing out the onboarding process. And perhaps most importantly, coaching each rep up to the next level of performance.
Here are the five best practices for sales process implementation:
1. Understand that pipeline management ≠ sales process.
Pipeline management is about how the sales pipeline is designed, how it is measured, and how it is used to drive the sales team’s performance. It is not the sales process itself. It’s just a representation of it, albeit one of the most important.
A formalized sales process, by contrast, is about having clearly defined stages and milestones that are universally understood by your salespeople -- stages so understood that no one ever has to guess where a particular deal stands or how they should be managing deals in each stage. In addition, a formal sales process aligns with how your customers (no one else’s) move through the buying process. Forget generic sales processes; they produce generic results! That’s why we stress so heavily the need to work with a coach to develop and implement a unique sales process for your team and organization.
2. Devote time and proper attention to pipeline management.
HBR reports that companies that spend at least three hours per month managing each rep’s sales pipeline see 11% greater revenue growth than those that spend less than three hours per month. That’s really encouraging news. Three hours a month is not daunting.
But, time on task isn’t everything. How you spend that time is critical.
If your pipeline management review involves only close dates, probabilities, and deal sizes, then you are not focusing on sales development. You’re simply “inspecting” data.
Pipeline management requires that you spend your time discussing the overall health of your sellers’ pipelines and how they can shepherd more deals to successful closure. Focus less on scrubbing CRM data and forecasting revenue and more on how to help move deals forward.
3. Provide sales managers targeted training on pipeline management.
HBR reveals that companies that train their sales managers to manage their pipelines see their revenue grow 9% faster than those that don’t. But, not just any training will do. Sales managers need specific, regular training sessions to address specific pipeline management challenges.
This ties into the point above about CRMs. Most pipeline training for sales managers is limited to how they log in to their CRM tool and generate reports. That’s not enough. To really see the needle move on revenue, what you need to provide for your sales managers is training on how to make better pipeline management decisions and understand the story each rep's pipeline tells. For instance, what is the ideal pipeline size for each rep? At what point in the sales process do actions have the biggest impact? How should weekly pipeline review meetings be structured so they enable coaching rather than inspection? How will you hold sales reps accountable? These are the questions your sales managers need to be able to answer to really increase sales force performance and results.
4. Take your sales meetings to the next level.
An effective sales process incorporates 3 types of meetings: weekly one-on-one performance review and coaching, inspirational sales meetings that focus on learning and the sharing of field experience, and an end of the month “numbers” meeting where individual and team sales performance are reviewed.
Mixing the agendas into one meeting dilutes the meeting’s effectiveness and erodes your efforts to create a culture of performance and personal accountability.
5. Structure your compensation plan to drive the right behaviors.
Compensation plans are more than ways to pay salespeople. They are a recruitment tool, a motivator, and a culture driver.
There are 4 basic compensation elements that can be leveraged to motivate sales professionals: salary, commission, bonus, and profit-sharing. Your deal size, margins, and length of the sales cycle are 3 of the top elements that need to be taken into consideration when designing your compensation plan. Also, whether the rep is a “hunter” or an “account manager”.
Start with a clear understanding of what the company needs to accomplish, and using the 4 elements, design a compensation plan that ensures you will reach your corporate profit goals while sufficiently motivating your sales team. Keep in mind, it's normal and acceptable to make changes to your compensation plan annually; roughly 80% of corporations do.
Ultimately, a formal sales process is what will increase your team’s performance and help you realize more revenue. You must define your sales process, commit to good pipeline management, and enable your managers to carry it out. And, you must realize it is never set in stone! It needs to be revised and adapted regularly, making sure it reflects the current state of the market, your customers’ changing needs, your team skills, and your business specifics. It should always remain a work in progress.
When you adopt and implement a formal sales process, you can expect to hit your forecasts, hit your quotas, and see your sales reps succeed beyond what you thought possible.
Are you ready to get started? Give us a call.