Selling During Covid-19, Your Questions Answered
The COVID-19 pandemic has delivered two massive challenges for IT staffing sales professionals: reduced IT budgets and selling virtually. For many staffing sales professionals, the idea of selling virtually was unheard of just a few months ago. To top it off, half of B2B companies have reduced their budgets by 40% and overall IT spend is predicted to drop 8% in 2020.
There is a silver lining, however. Downturns often drive dramatic change in markets. Incumbents get dethroned. The 2008 recession for example enabled SaaS providers to become the new incumbents, over-taking on-premise software providers. Today, more than ever, organizations are leveraging technology and accelerating technological transformation to reduce costs, better utilize assets, increase revenue and market share and improve customer retention. While overall IT budgets are smaller, public cloud services are expected to grow 19% this year, and many companies are investing in software automation and remote collaboration tools. It is not all gloom and doom, there are sales opportunities out there to be had.
Over the past four months I have spoken with sales leaders and business owners from across the country including enterprise executives and startup founders to understand what is happening in the market. In this post, Selling During Covid-19, Your Questions Answered, I answer questions regarding how to sell and lead your sales team through the Covid-19 pandemic. I also share insights that I’ve gleaned from the work I do with other IT staffing sales leaders. I start with trends that I’m seeing in the sales funnel and offer tips for managing the funnel, then I look at sales quotas and compensation, and touch on a vertical sales strategy and how to handle contract renewals and negotiations.
Trends I’m Seeing in the Sales Funnel
In working with sales leaders and CEO’s from IT staffing firms across the country, I estimate that most firms are seeing about a 25% reduction in cash flow as actual payments (actual recognized revenue) are being delayed or deferred, starts (onboarding) are being delayed or pushed out and total contract value (reduction in client bill rates, shorter term contracts) is reduced. Adding net new opportunities to the sales pipeline is also down significantly, especially for those staffing firms that rely exclusively on their sales team to generate new sales leads (no inbound marketing, PPP advertising, etc.). Additionally, I’m also seeing and hearing that deals are becoming more complex as CFOs, HR, Procurement and other executives become more involved in the approval process.
How Should I be Tracking, Measuring, Managing My Sales Team?
Your sales pipeline is your leading indicator for how the remainder of 2020 will play out for you and your business, so be sure to watch it like a hawk and track the numbers. First and foremost, monitor the accuracy of your sales forecast quarter-to-quarter, month-to-month, and week-to-week. You can learn more about sales forecasting here.
The accuracy of your sales forecast is a tell-tale sign of how well you understand your customers and what is going on in the marketplace. The accuracy of your sales forecast tells you a lot about your salespeople. Look at the top of your sales funnel and ask yourself the following questions:
- How many new qualified sales leads are being added to your sales pipeline (or your CRM or ATS)?
- How are you validating that your new qualified sales leads are in fact, qualified?
- How frequently are your salespeople uncovering and discussing new IT projects with new sales leads?
- How frequently are your salespeople reporting back to you “customer admitted pain” from those new sales leads in association with those new IT projects they’ve uncovered?
- How many new deals are being added to your sales pipeline each week, by rep?
- How accurate are you in converting deals down the funnel from one stage to the next (do your customers tend to agree with your salespeople regarding where they’re at in their buying process or do your salespeople tend to be overly optimistic)?
- How accurate was your sales forecast last month? Last quarter?
- What is your sales pipeline telling you to expect for the next 30 days?
- What is your sales pipeline telling you to expect 60 and 90 days from now?
My Team is Struggling to Fill The Top of the Sales Funnel, How Can I Fix That?
Where is the first place you go for expert advice or an answer to a burning question? My guess is either Google or YouTube. Guess what, you’re not alone! Google alone answers over four billion search queries everyday. When you enter a question into the search bar, those links that appear in your search results are content. Whether you know it or not, you consume content on a daily basis.
- This blog that you’re reading right now….content.
- The video tutorials you watch on YouTube on topics like how to build a shed ... content.
- News stories, Instagram feeds, blog posts, cat videos, GIFs, memes ... all content.
I can’t imagine a better time to start creating informative online content to educate your buyers. Creating online content that's informative, resourceful, and responsive to what is most important to your ideal, target buyers is valuable to both current customers and potential prospects.
In addition to creating content, ask yourself, “who are the key influencers and thought leaders in markets I’m interested in, and how can I gain their trust to help me win over the broader community?” Your customers want to talk to each other, so how do you create a platform or a place for them to collaborate? Think of ways in which you can get your customers to collaborate with one another and share ideas and best practices. In general, they’re all trying to solve the same or similar problems and they’re all striving to achieve the same or similar goals. Who are the thought leaders in those markets that your customers know and respect? Seek them out and create a virtual event to build the top of your sales funnel. Remember, you don’t have to be the “solution architect,” you just need to be the “connector,” the person who brings everyone together to learn from each other. Not only will they appreciate your efforts but they will thank you for your efforts in the form of business and customer referrals.
Scrubbing, Inspecting and Validating the Middle of Your Sales Funnel
As mentioned previously, you need to be consistently validating the validity of every qualified sales lead including and all of your sales opportunities. Deals that were certain two days ago may have evaporated as budgets have been pulled or new and additional approvals are required. Many large organizations are now requiring CFO sign-off on all expenditures.
For those reasons you need to be sure to be continuously qualifying and re-qualifying your opportunities. Even if your customer told you two days ago that they have a $90.00/per hour budget approved, reconfirm with them again today what their approved hourly budget is and make sure the funding is still available. As you communicate with your customers through the sales process be sure you’re always asking them “how is Covid-19 affecting our project?” Be sure to document the responses in detail in your CRM.
Until you are confident in the accuracy of your sales forecast and sales pipeline, remain close to your front-line salespeople and account managers and ask them what they’re seeing. The sentiment from those on the front lines will likely be the best leading indicator of what is going on.
Should I Adjust My Sales Quotas, Sales Compensation and Sales Forecast to Account For Covid-19?
The short answer is YES. Several sales leaders and business owners have asked me (in one form or another) the following: “If I had a sales revenue forecast of $100 million pre-Covid and now I have gone back and re-forecasted for $80 million, do I keep the $100 million as the quota for the sales team or do I adjust down? And if I adjust down, how do I do that?”
This is a great question. Remember, you want to set goals that are achievable and realistic, not “pie-in-the-sky” numbers. Not only because people need to get paid, but because great salespeople-top performers-need to win. Top performers think and operate much like a professional athlete in which confidence is a huge part of their game. Winning and achieving their goals is very important to them. The best way for you to build confidence and keep morale high is through winning. Confidence is what gives salespeople their “swagger.” When salespeople, particularly top performers miss their number, it crushes their soul.
Sales leaders who set unrealistic goals and expectations with their people KILL morale and suck the life out of their people. The LAST thing any sales leader wants to do right now is lose face, credibility and respect from their salespeople by setting unrealistic expectations and by being “out of touch” with the realities of the market.
Instead, you need to support your sales team by keeping their confidence high and that starts with a sound sales quota and sales compensation plan and having an understanding of what’s going on in these sales cycles. It’s a fluid situation, and it’s not something you can predict, so focus on keeping your team focused on where they’re going to be most effective.
As a general rule, I suggest not lowering your sales quotas all the way to the same extent as your sales forecast but instead lowering it to around 85% or 90% of the original quota. If you lower your sales quotas too much and the team is hitting 300% of quota it will cost you a fortune. At the same time, you don’t want to keep the quotas too high and risk killing people's confidence.
Here a couple of specific options to consider, depending on your situation.
Track and Index The Performance of All Sales Reps
Try rank ordering your sellers by comparing them to each other and determine the median of the team's performance. Then make the sales quota 80% of the median of your team's performance. This would reset performance levels and payouts. The one thing you need to be careful of with this approach however is if you have a superstar sales rep(s) that is way ahead of everyone else in terms of quota attainment. This can really skew the numbers. If this is the case then you will need to factor in a "handicap" to ensure the watermark you establish is a fair playing field for all participants.
Mix Up The Guaranteed or Fixed Income vs. Variable (incentive) Income Ratio
With sales pipelines drying up, the opportunity to earn commission dollars is also drying up. This can have a HUGE impact on a high performer’s income where a high percentage of their total compensation is upside paid out on performance. Leadership can and should consider shifting some of the potential incentive dollars to fixed dollars. The increase of guaranteed or fixed income compensation will help manage the stress level of your sales team. For instance, a sales rep's pay mix might be 50% guaranteed salary and 50% incentive. A shift to 60/40 or even a 70/30 ratio will increase the fixed amount and reward the rep for value-added activities and other revenue generating activities.
Increase the Commission Payout Percentage
You can also consider a higher commission payout percentage for performance under goal. For example, if a plan usually pays $.50 on the dollar for performance under sales quota, you could shift it to a 1:1 payout for reps above a specific threshold such as 90%. Another consideration could be lowering or removing the threshold altogether and paying from first dollar.
SPIFFs & Contests
It probably seems counter intuitive to provide additional incentives when sales revenue targets are being missed. But SPIFF's (sales performance incentive funds) provide people with another opportunity to earn income and they align income and pay with performance. They also motivate and keep spirits high. If you go this route I suggest you focus on immediate, short-term behaviors such as pipeline activities, customer success stories, value content creation, or outright wins. The key to SPIFFS is they are clearly defined for a short-term behavior change. SPIFFS are not not supposed to bridge 100% of a sales reps income.
If you do find that quota attainment is low and you risk attrition you could always put activity based spiffs in place to help give your salespeople another avenue for making money. Just make sure you set clear expectations that the spiffs are temporary or time-based and that once the market “returns to normal” (whatever that may mean) that the quota’s return and the spiffs are no longer available.
Finally, one of the interesting things I have learned from following SaaS companies is their approach to sales planning and setting sales quotas. They no longer do annual planning. They’ve learned that if they start building out their 2021 sales plan in August or September of 2020 that what they predict 12, 16, 18 months out will not hold true. Instead, many have shifted to a four-quarter rolling plan, where every quarter you project four quarters out. This allows you to scale territories and capacity up or down, based on what you’re seeing in the market. Something for you to consider.
Which Vertical Markets Should My Sales Team Focus on?
As your sales team brings in new opportunities-and you should take any new opportunity that you can get your hands on – use that to shape your vertical sales strategy and learn where there is opportunity and figure out the best way to sell into those verticals. I have several IT staffing customers who have had great success with this strategy. They recognized early on that they just needed to get revenue in the door so they shifted their resources and their focus and were able to close large deals (opportunities that Covid-19 created) in areas in which under normal, (pre-Covid-19) conditions, they would have never even considered.
You need to keep a close on the markets and understand which are struggling and which are expanding. Financial services, gaming, robotics, ecommerce, online grocery and last mile distribution centers all seem to still be buying. On the other hand, hospitals are under tremendous pressure because their primary revenue and profits come from elective surgeries and they can’t do those elective surgeries because their beds are being used for Covid patients.
How and to What Degree Should I Hold Customers Accountable to Contractual Agreements?
This one has come up a few times with customers and it seems to create a lot of heartache. Remember, the beauty of contract staffing is that it’s a recurring revenue stream. However, it’s not a recurring revenue stream until the revenue actually recurs. In a downturn it is FAR easier to retain an existing customer and maintain and renew existing contracts than it is to acquire new customers. Extending flexibility to customers, when you can, will win you customer loyalty and referrals in the long-term.
When renegotiating or changing contract terms try to consider other elements of the contract besides price such as flexible payment terms rather than changing the price. As customers tighten budgets, we’re seeing a number of cases where customers simply can’t pay, particularly in hard hit sectors like travel and retail. In some cases, we are seeing payment terms exceed 180 days.
Just remember that once one sales person gives something away to close a deal, that incentive can quickly become the new standard for all deals. You need to be sure that you have a process or system in place for managing this. You might want to implement a deal desk in which you have a chain of command sign-offs for deals over a certain threshold, or that include certain or unusual terms to maintain deal integrity to prevent reps from giving away too much.
The bottom line is that COVID-19 is a health crisis, and the timeline for economic recovery is dependent upon a vaccine. For B2B companies, this means preparing for the worst case scenario and planning what you will do if that happens, while also recognizing that with this disruption comes the opportunity for new ways of thinking and dethroning legacy incumbents.
You probably have other sales and Covid-19 related questions, so let's start a conversation in the comments section below.