Defogging the Crystal Ball

By the end of the second weekend, I had achieved my primary objective – beating my son Will in the NCAA Men’s Basketball Championship Pool. The fact that I was then well-positioned to win the $1,500 first prize in the Pool the following weekend was less significant than my closing the deficit to just two, 8-6, in our 14-year rivalry to pick the right winners in the 64-team field.

This long-running on-line competition, the creation of our friend Sergio, rewards creativity in the selection process: points are awarded for each victory based on the round (1, 2, 4, 8, 16, and 35 points for the six rounds, respectively), plus the value of each winning team’s bracket seeding. So the victories of 12th-seeded Cornell in the first two rounds were worth a total of 27 points for me. Thus, a strategy of picking mostly favorites usually guarantees that your $50 entry fee will end up in someone else’s bank account.

Now I am not a rabid follower of college basketball, except perhaps during the last two weeks of March. But the fourteen-year history of picking more winners than losers in the Tournament – though still not as many as Will – has resulted from combining objective (like strength of schedule) and subjective (like having an experienced point guard) elements to inform my selections. Drawing from multiple on-line resources plus USA Today’s annual Tournament Preview, I can usually put together a competitive “card” in a couple of hours.

Much of the same approach describes the process that the best of my small business clients over the years have adopted in predicting their wins and losses in the tournament of the marketplace. In each case, there’s been an experienced sales manager as “point guard,” developing selling tactics and passing the ball to those in the best position to score. More importantly, however, these successful sales managers keep score and make sure that the rest of the management team knows the score.

Like NCAA Tournament web sites, there are all kinds of CRM (Customer Relationship Management) software packages available which seek to involve everyone from the receptionist to the shipping clerk in the process of tracking and recording each contact with the customer. The problem with this approach is that in compiling a thorough relationship history, your players turn into scorekeepers, creating information overload for the average small company management team.

As the Financial Manager, I want the sales team to keep the Sales Manager and me posted on the score, both today’s successes (shipments; deals that close; bookings received) as well as tomorrow’s prospects and suspects. In a simple Excel spreadsheet, here’s what comprises the scorecard at the Monday morning sales meeting:

  1. Last week’s total invoiced sales – what actually went out the door and was recorded as revenue.
  1. Month-to-date and year-to-date sales compared with the same period last year.
  1. Last week’s total bookings – new orders received, but not yet shipped. The total of all firm orders not yet shipped comprises the backlog.
  1. The expected gross profit for each booked sale.
  1. Month-to-date and year-to-date bookings compared year over year.
  1. Importantly, the book-to-ship ratio (total new bookings divided by sales for the same period) for week, month, and year-to-date. If you can keep it above 1.0 while recording steadily growing revenues, you’ll stay in the ball game.
  1. A tally of each of the above, attributed to each salesperson.
  1. The list of prospects, coupled with (a.) the likelihood of your team’s closing a sale within three months (greater than 50% probability percentage for each); and (b.) the dollar amount of each prospective order.
  1. The list of suspects (less than 50% probability) with the same dollar/probability assessment.
  1. A running commentary of notes next to each prospect/suspect updated with the latest status report from the salesperson. With this history for all to see, accountability takes care of itself.
  1. The total probable revenue, which is the product of the likely dollar amount of each order times the probability of its closing, all added together.
  1. The closing ratio, which is the dollar value of contracts won, divided by the dollar value of contracts bid, usually calculated and compared quarterly.

With this kind of data set to provide individual performance history, trending, winning percentages, and the like, I wouldn’t need ESPN or to make me competitive in the NCAA Tournament Pool. Using this approach, my clients have become genies with the crystal ball – there are very few upsets in their brackets.

Unfortunately for me, form prevailed at the wrong time last weekend. Those Blue Devils from Duke bottled up my genie, and the Mountaineers from West Virginia failed to scale the championship heights I had predicted for them. So it’s over. It’s time for sales teams everywhere to forget the score-keeping and get back to scoring…

Alligator Bites

“Who wants to dwell on a major sales defeat? You fought the good fight, now it is time to move on, right? A thorough post mortem can be painful, and there is always the next big deal to chase, another hot prospect in the pipeline to pitch. But moving on without reflecting on why you lost a sale can be a mistake, sales experts say. By analyzing the accounts that got away, a sales manager can uncover underlying weaknesses in his or her offering, identify areas upon which the sales force can improve, and learn valuable information about key competitors.

“Quantum Digital, a direct-marketing agency based in Austin, has done a win-loss analysis for the past two years. Sales reps report on their wins and losses at weekly pipeline meetings and, about once a month, they do a deeper analysis of a juicy deal that got away from them. The company sends a questionnaire to sales leads that did not close, and follows up with an interview. The data is analyzed and reported back through the sales organization.

“The company has changed its sales strategy in part because of the information gleaned through win-loss analysis. ‘When we lost, it was usually because we didn’t have a good enough appreciation of exactly what the client wanted,’ says [Eric] Cosway, the company’s chief marketing officer. So the company instituted a system for grading prospects on seven criteria, in order to head off a ‘bad fit’ before it had the chance to go into the loss column.

“So how do you get started implementing a sales- tracking system that incorporates strong win-loss analysis? Here’s a step-by-step plan…”

– by Susan Greco, for

Draining the Swamp

SBANE 2010 Membership Outlook Survey:

  • Respondents expecting improved business conditions: 64%
  • Respondents anticipating staff additions: 42%
  • Respondents anticipating selective staff reductions: 19%
  • Respondents planning base pay increases: 43%
  • Respondents freezing base pay in 2010: 41%
  • Respondents’ assessment of employee confidence level in their jobs and the state of the company –
  • Confident: 47%
  • Worried: 30%
  • Don’t know: 16%

Source: Survey conducted by the Smaller Business Association of New England and Insight Performance, Inc.