By Josh Davis
It’s that magical time of the year again for strategy and planning. As I speak to a lot of our reseller partners who are doing exactly that, I’ve been asked a lot of questions around typical net new customer sales metrics that their companies should be incorporating as goals. There are consistent problems across many payroll companies though, that are causing these companies to loosely estimate their goals based on increases from previous years’ sales.
So, how should payroll and workforce management providers be planning for 2015 sales goals?
Ensure Your Marketing Funnel is Laid Out – The core aspect of planning your goals comes down to process, and many service organizations do not have a clear cut path from the time a company is identified as a prospect to that prospect either becoming a customer or being rejected because they are not an ideal customer. Sirius Decisions has a demand waterfall model that’s easy for businesses to replicate. Here’s a quick breakdown:
Inquiries – Inquiries refer to companies that are coming to you for more information about your services (such as downloading a whitepaper from an email, filling out a form on your website, calling you directly, etc.), or they are companies that you find (whether online or offline) as potential prospects.
Marketing Qualified Leads – These leads meet the parameters of what you are looking for from an ideal customer perspective. So marketing and sales must agree on exactly what these leads “look” like. Additionally, we try to follow a model where our sales team is only following up with “hot”, prequalified leads, so consider this a telemarketing level. We have lead development representatives calling and verbally qualifying these leads to ensure there’s interest in payroll, time and attendance, or some other aspect of our workforce management platform. This way, sales can spend time on actual revenue opportunities.
Sales Accepted Leads – Once pre-qualified, the sales person can evaluate the lead and essentially confirm that there is an opportunity here, and that they’re going to attempt to qualify it from a sales perspective with a discovery call.
Sales Qualified Leads – After their discovery call, the sales person can add this lead to their pipeline because they’ve confirmed that this company is not only an ideal prospect, but also has a need for the solution that they’re actually selling. Otherwise, as with each other step, they reject it.
Closed/Won Business – If you need help identifying this one, you’ve got bigger problems than planning for next year. But quite simply, this step entails that there is a signed contract in place, and the new customer has been passed to an implementation / new customer team.
Determine Your Conversion Rates – Once your company can lay out this process, or if you’ve done so already, you can see the total number of leads coming through your business, and how many are making it to each step within your funnel. You can compare your conversion rates to the industry standard conversion rates from Sirius Decisions to see if you have any serious problems that need to be addressed in your funnel. And note that if you are one of our reseller partners, and receiving Marketing Qualified Leads from us, you’re likely closing these leads at a much higher rate than the rest of your leads, so it may skew your numbers quite a bit if they’re included in your calculations. Starting with 1,000 inquiries over the year, here’s what you can expect as each type of sales/marketing organization:
Average: ~3 Deals (.3 percent overall conversion rate)
Strong: ~6 Deals (.6 percent overall conversion rate)
Best-in-Class: ~13 Deals (1.3 percent overall conversion rate)
As some perspective, you may be able to go much higher. Through our leads program, we see approximately 27 Deals – a 2.7 percent overall conversion rate – which is double the best-in-class standard.
Uncover Your Average Deal Size – This is something you should already have a handle on, but what is the average contract value (ACV) of each new customer that comes through your door? This will give you an idea of how much business was actually booked (i.e. bookings) during the year. If don’t already have a handle on this, you need to attain a customer relationship management (CRM) solution to easily understand this. Otherwise, you’ll have to dive through the data within your account or billing software.
Work Backwards and Understand What’s Possible – Now you want to work backwards and understand what are achievable goals for your business:
- Revenue Goal Theory: Let’s say you’re targeting $500,000 in new business for the coming year because you know you booked $400,000 this year, and you want to grow 25 percent year over year (YoY).
- Average Deal Size: You take a look at your ACV and find that each new customer is $10,000.
- New Customer Target: You now understand that you need to generate 50 new customers to hit that goal.
- Inquiries Needed for Customer Target: Now you can figure out based on your particular conversion rate, how many inquiries your marketing efforts need to generate to meet that new customer goal. Keep in mind that some types of inquiries will convert better than others (customer referrals or existing customer upselling for instance). So, your marketing team will want to create a healthy mix of quantitative and qualitative inquiries that can be qualified and passed to the sales team. An organization with a strong conversion rate, as defined above, would need marketing to generate roughly 8,333 additional leads in order to add 50 new customers.
This allows you to ensure that if every function of your sales and marketing team has goals that you can monitor, you can understand whether or not the company will be able to hit the sales goals you put in place – allowing you to turn success into more of a science.
What’s your approach to determining goals?
About Josh Davis:
Josh is the Channel Marketing Manager at Kronos SaaShr, and is responsible for driving the marketing strategy and plan aimed at increasing the growth of existing channel partners in addition to the recruitment of new channel partners.