Predictable Revenue - by Aaron Ross
READ: November 9, 2015
90% of businesses fail because they can't get anyone to buy, yet for all the books available to entrepreneurs on pitching, product development, and persistence – there are few great resources that a show you how to acquire customers systematically.
Predictable Revenue is that book, as far as outbound sales is concerned. Predictable Revenue is not a book about cold-call opening lines or sales psychology. Rather, it is a book that teaches you how to create a systematic sales process that's disciplined and rigorous.
I read this book after feeling lost trying to design an optimal outbound sales for my B2B software business, and the book addressed most of my questions. There are certain implementation details which are not covered such as what your cold email content should be, or what follow-ups to send, or how to get fully up and running with sales automation software. Luckily there are a lot of up-to-date resources online to fill these gaps.
The book is repetitive at times, repeating topics in different chapters, but months after reading this book, I'm happy about it because it helped engrain key points.
Here were some of my key takeaways:
- Outreach to start conversations with the appropriate people and identify opportunities should be its own dedicated work stream, separate from the process of nurturing and closing deals.
- A key part of having an efficient sales process is knowing and being systematic about which people/accounts to NOT spend time on (lead qualification).
- As a corollary, being targeted by defining and working off of a Ideal Customer Profile (ICP) is critical.
- Generating predictable revenue takes time and trial-and-error.
- Use voicemails as a tool to increase response rates from emails rather than to attempt to get people to call you back
- Obsess about the decision making process, not the decision maker
- Prospects should earn proposals (get something in return)
The biggest impact / lowest hanging fruit for generating predictable revenue is creating an outbound sales development team that focuses 100% on prospecting.
The shift from organic growth (getting customers through founders and hustling) to proactive growth based on investing in programs that generate predictable growth requires new habits, practices, and systems, causing a lot of delays and frustrations. The shift does not happen overnight and can take months or in many cases years.
Adding salespeople and working them harder != more revenue. For companies selling products worth less than $100K - $250K, more "feet on the street" fails more often than not. You need great salespeople to close customers, but the better your lead generation is, the less dependent you are on the quality of your salespeople and sales process.
Most salespeople won't generate enough leads on their own... they're terrible at prospecting, hate to prospect, and as soon as they do generate some pipeline, they become too busy to prospect.
It can take 2-12+ months to get lead generation cranking and generating predictable revenue. What works:
- trial-and-error in lead generation
- "marketing through teaching" via regular webinars, white papers, email newsletters, live events to establish yourself as the trusted expert in your space
- patience in building great word of mouth
- cold calling 2.0
- building an excited partner ecosystem (very high value, very long time to results)
- PR (its great when it, once in awhile, generate actual results)
Ensure awareness and focus on your team:
- Does your executive team and board know how much new (qualified) pipeline the company needs to generate per month?
- Is the "new pipeline generated per month" number tracked at the board level?
- Common definitions for "prospects", "leads", and "opportunities"
Cold Calling 2.0
Cold calling 2.0 = prospecting into cold accounts to generate new business without using any "cold calls". "Cold call" = calling someone who doesn't know you and who isn't expecting your call. No one enjoys this – neither the caller nor the person being called. Buyers are sick of being sold to and become more resistant every year to classic sales and marketing methods.
Cold Calling 2.0 works if your customers are worth more than $5,000 (otherwise its harder to make it profitable).
Breakthroughs that led to "cold calling 2.0":
- Realization that most of the time cold calling was spent hunting for the right person to talk to
- Mass emailing c-level fortune 5000 executives with specific kinds of emails generated 9%+ response rates
- Sending emails to high level executives to ask for referrals to the best person in their organization for a first conversation lead to great results
- "Sales Development Representative" / Outbound Sales rep - Focused on Cold Calling 2.0 and just generating outbound leads
- Account Executive - a quota carrying salesperson
- Market Response Rep - inside salesperson who only qualifies leads coming in from a website
Account Executives should not make cold calls because 1) they don't like to do it, 2) they usually aren't any good at it, 3) it's a poor use of company resources by using the most expensive sales role to do lower-value work.
Account Executives should prospect:
- A short, targeted "Top 10" list of strategic accounts to penetrate
- Their current customer base
- Developing referral or channel partners
Executing Cold Calling 2.0
Before you begin, you should have:
- At least one person 100% dedicated to prospecting (even if they're part-time).
- A proven product or service that has generated revenue.
- CLTV > $10,000. The process will work if your LTV is lower (especially if you're a single-owner business), but it becomes more challenging to make it profitable through hired salespeople.
Implement Sales Development to prospect for new clients and generate qualified leads, and Market Response to qualify inbound leads. Having one team do both significantly drops productivity.
One Sales Development Rep can typically support 2 - 5 Account Executives.
For every 400 leads per month that require human attention, a company needs one Market Response Representative. Removing unqualified opportunities out of the pipeline early increases focus.
Ramp-up time: Time it takes for a new SDR to ramp up
Prospecting cycle length: time from a) prospect first responding to a campaign to b) when a qualified opportunity is created or re-qualified by the Account Executive
Rule of thumb: 2 - 4 weeks
Sales cycle length: time from a) opportunity being created or qualified to b) when it was closed
1. Define your ICP (Ideal Customer Profile)
Make note of red flags and deal breakers... eg. "They just installed a _____ kind of system"
Also define ideal buyers/partners, eg. "Our ideal contact is a VP Sales who is new to their role (less than 90 days in) who is looking to make things happen. They are process-oriented, report to the CEO, and love data and reports. Their challenges include not being able to give accurate reports to their CEO because of problems with their sales system or the data in it..."
Limit yourself to 1 - 5 types of profiles.
Reinforce and validate profiles by learning and asking...
- What are your greatest challenges?
- What keeps you up at night?
- What do you spend money on?
- What are your main frustrations?
2. Build lists
3. Run outbound email campaigns
Aim for sending 150-250 outbound emails per week (50-100 per day), over the course of 3-4 days with a goal of having 5-10 responses per day (10% resposne rate, excluding bounces). Getting more responses than this will lead to prospects falling through the cracks.
Limit to 3 contacts per account.
Guidelines for emails:
- Send before 9am or after 5pm, avoid Mondays and Fridays.
- Look as if they are a single email that came from a salesperson (text-based)
- State simply and clearly why you are reaching out
- Offer credibility
- Ask just one simple-to-answer question (such as for a referral)
- Capture/log all responses.
Use voicemails as a tool to increase response rates from emails rather than to attempt to get people to call you back. (pg. 69)
The goal of every email should be to establish and close a prospect on a next step. The next step should be EITHER:
- Who is the best point of contact for...? (get a referral)
- When is the best day/time for a quick discussion around...? (set up a conversation with the prospect)
For #1, when you obtain the right contact, you can email the new contact directly while mentioning or cc'ing the individual who referred you. Internal referrals create the highest likelihood of getting a response.
For #2, setting up a call, the objective is to set up a quick time to see if there's a high-level fit between your company and the prospect's company. This call should be focused entirely on their business – not your business. Lead the conversation and ask open questions that encourage them to talk about their business.
"No" doesn't matter until you hear it from the CEO or ideal decision maker. Even then, when you get a No, you should figure out why to determine if its an objection you can handle. Oftentimes prospects misunderstand what you do or what value you offer.
If someones opened your email more than once, call them.
4. Determine mutual fit and interest
Be hard on determining if there's a good fit. It is better to pass fewer, better opportunities to your Account Executives.
Once a prospector connects by phone with a prospect to find out if there's mutual fit, the biggest challenge is staying focused on the prospect's business and not selling yours. Ask open-ended questions about their business first before moving on to ask about challenges.
Ask 3 - 4 questions like:
- How are your __ teams/function organized?
- How does our __ process work today?
- What systems do these teams use for __?
- What are your challenges now?
- Have you been looking at alternatives yet?
- Have you tried and failed with other solutions? Why?
- Where does __ fall on your priority list? What is higher?
- What would an ideal solution look like to you?
- How will your decision-making process work?
- Why did you buy the old system? Who made the decision to purchase it?
- What is the probability a project will occur this year [in the next six months]?
- Why do it now? (Or why wait until later?)
Typical call flow:
- Opening "Did I catch you at a bad time?" and introduction
- Discuss prospect's current business situation (authentic curiosity)
- Probe for prospect's needs (and confirm understanding of needs)
- Positive solution to meet those specific needs
- Handle objections
- Next steps
- Get then talking about their business and then listen!
- Call low before a C-level conversation so you can find out how the business works and current challenges
- Ask for referrals. Who else should you talk to at other divisions / teams?
- Always work to schedule your next step while you're on the phone.
If the prospect is a good fit for your service, do NOT sell... rather, 1) help the prospect create a vision of a dream solution that will solve their problems; and then 2) connect your product to their key business issue(s) and dream solution.
If the prospect is interested but isn't ready, or they need to convince more people on the team, then turn your focus to developing your contact into a champion who can do the selling for you. Focus on what will make that person successful, and ask them how you can support them. Give them time.
5. Pass the baton
An SDR should pass an opportunity to an AE when:
- The company fits the ideal client profile
- SDR is speaking with someone with influence or power
- There is clear interest in a next step, usually in the form of a discovery call or demo with an Account Executive
Hand-off via hot-transfer or schedule a time on the calendars of your sales rep and new lead for a scoping/discovery/demo call.
The opportunity should be passed as a "Stage 1: New Prospect" opportunity and upgraded to "Qualified" when an Account Executive re-qualifies the opportunity.
Prospecting Best Practices
Create a "Day In The Life" templates (see pg. 78) that map out daily tasks, goals, and breaks.
Common prospecting mistakes:
- Expecting instant results... it can take 2-4 weeks or longer to develop a new qualified opportunity
- Writing long emails. State simply why you are reaching out and make it easy for them to respond by asking one simple question.
- Going wide but not deep (eg. hitting lots of accounts but only one contact at each and no follow-up emails)
- Giving up too quickly at ideal targets. Be "pleasantly persistent" and keep working to understand if there is a fit or not until you get a no from a real decision maker.
- Not giving up quickly enough at non-ideal targets.
- Depending on activity metrics rather than a proven process. "Dials per day" isn't nearly as useful as tracking "call conversations per day" or "appointments per week".
- Call/email high and get referred down to the right person
- Be a non-threatening researcher, not a pushy salesperson.
- Always set up a next step... frame in a way that's valuable to them: "The best way for us to save time...", "Here's how I can help you get to a decision faster..."... "What we've found as a best next step is to..."
- If a prospect has a strong opinion on the next step (eg. "I'll need to see a demo"), don't fight them, take their next step with them and enhance their idea with what you want: "I'd be happy to set up a demo. As part of that prep process, it'll help make our time more productive if you fill out these five questions..."
Lead with the line "Did I catch you at a bad time?"... takes prospect off the defensive and shows respect for time by asking permission to chat. If they say no, "When would be a better time to talk? Do you have your calendar handy?"
Tell them, honestly and directly, why you're calling... "I'm doing some research on your company to determine if we're a fit or not..."
Start with an easy question for them to answer, such as "May I ask how your [sales team | marketing org | research efforts...] is organized/structured?"
People like to talk about their business and it's harder to begin with a "What are your top challenges?" question because a) they don't trust you yet, and b) they may not have thought about their challenges.
If you've talked with someone who's helpful, but not the right person at that company... "If you were me, how would you approach your organization?"
Do you have your calendar handy? - never schedule by email if you can help it. Always get the next step on the calendar.
Sales Best Practices
Traditional "Always Be Closing" sales results in a lack of empathy with the prospect and tactics to generate short-term results like "buy now and get a month-end discount". Customers don't care at all whether you close the deal or not – they care abut improving their business.
Sell "past the close" with a "Success Plan"–a plan that paints a picture of the basic steps beyond deployment to actual client success. Success is not when your service is launched; it's when your service is successfully impacting the customer's business, such as when your software is adopted. The "plan" can be a half dozen bullet points in an email, agreed on with the client. Keep it simple. It should include a definition of what success means to the client, a few key milestones, and some responsibilities of both your company and the client.
You should also have a plan for client's ongoing success? Do you have a role in your company dedicated solely to helping customers become successful in using your product or service?
One of the tricks in "selling to success" is to not care too much about the close. Caring too much about the close will cause you to give off subconscious signals to the customer that you really don't care about their success, you care more about getting paid or getting your manager off your back.
If you and customer create a joint vision around how your company will make them successful, and they believe you, then the close becomes just a logical step in the progression to achieve that dream.
Obsess About the Decision Making Process, Not the Decision Maker
More and more, decisions are made collaboratively with influencers. It's perfectly good for a decision maker to refer you to their "get it done" people.
Avoid asking "who is the decision maker?". Instead, ask:
- "How have you evaluated similar products or services?"
- "What is the decision making process?"
- "Who is involved in making the decision?"
- "How will the decision be made?"
- "What are the steps to have a check cut or funds released?"
When asking bold questions, it's not what you ask, it's how you it. Ask it easily and confidently, and it can close the deal. Ask it in an insecure way and it will hurt you.
Design Free Trials to Maximize Conversion Rates
- Understand the prospect's true business issues before you begin
- Agree with the prospect on where the free trial fits in their buying process
- Focus on proving success with the fewest key areas/features.
"3-Hour-and-15-minute sales process"
Reps tend to waste a lot of time chasing early and stalled deals ("Hi Bob, just checking into see if anythings changed yet over there...")
Step 1: Take 15 minutes with them to figure out whether or not it's a waste of time to speak further. Lay out the process for the prospect in the best way to mutually figure out the fit, and position it in a way that benefits them. "We've found the best way to quickly figure out if there's a real fit or not just takes two steps: first, a more in-depth 'discovery' call with yourself and any other people you want to bring in. And then if that call goes well, a follow-up group white boarding session or call with the key people on your team who'd be involved so that we can determine if, how, and when we should work together".
Step 2: One hour qualification/discovery call with one or two of the prospect's point people. They want to see if they like you and what you're doing... your goal, if there is a fit, is to create a plan with the prospect to organize a working session that brings in their key people and decision makers to meet and create a vision together to determine if you should work together or not.
Step 3: Working session to create a joint vision together... walk them through a design process on how they can and will become successful with your product. Coach the vision out of them rather than telling it to them. White boarding is ideal, but it can be done over a call.
Prospects Should Earn Proposals
If you give out proposals too soon the prospect doesn't value it or your time, and you lose the chance to set up a specific next step that would help them earn the proposal.
Example: You do a demo, at the end of a demo they ask about pricing or a proposal, you say you'll include a proposal with a follow up email, you send the materials, you never hear from them again.
If you're not winning at least 50% of the proposals you're giving out, you're too easy.
Instead, next time when the prospect casually asks about pricing or getting a proposal, don't give it to them until you know they want it. Tell them you'd be happy to, and to do that, you'd need to set up a scoping call with them and the key people, to ensure the proposal is accurate and meets their needs.
If the prospect declines – then either they aren't a great prospect, or you didn't prove your value to them in your prior calls or demos.
If the prospect wants what you have, now you have another chance to focus your time with them and the other key people on creating a vision of how you can specifically solve their problems... and generate a proposal that nails it for them.
Lead Generation ("Seeds, Nets and Spears")
Teams commonly lack a shared understanding around lead types (what they are and what's different, eg. how well they qualify, how fast they close, ROI). "Seeds, Nets, and Spears" gives teams a simple way to come to a common understanding of their leads analysis:
- Seeds take a lot of time to cultivate and to ramp up, but once they get going, they are unbeatable with the highest conversion and close rates. Examples: happy customers (word of mouth), SEO, publishing expert content.
- Nets are marketing programs where you cast a wide net to see what you get, eg. conferences/events (see pg. 129), advertising, ppc.
- Spears are targeted outbound efforts.
Building mutual trust and commitment over time
Prospects like to get to know you first before they buy, and they want to do it on their own terms, and in their own time.
Give up trying to control how long someone takes to move forward. You'll have to accept that most prospects who initially sign up for a blog, trial or demo just won't be ready to do anything. Don't try to force them, instead consider if there's another onion layer you can create to offer to make it easier for them to take another step. Make it easier for prospects to "choose their own adventure" in how they get to know your company and its products (make sure you're also progressively getting to know prospects better as they get to know you). If you see prospects getting somewhere in your layers, consider redesigning your next-step offers. Trust that if there's a good mutual fit, and you keep nurturing them, and your "layers" are relevant and useful, they will become a customer someday.
Inbound Marketing Methods
In order of its ability to generate leads more easily:
- Free tools/free trials
- Permission-based direct email marketing is still THE most important marketing technique to develop new leads and nurture old ones. Email marketing is important to establish your expertise, build relationships and trust, promote your webinars, and promote your products. At minimum, all you need your email system to do is share your blog posts via email and to invite people to events or webinars you're holding. As a rule of thumb, send an email at least one per month, and no more than 2x per week.
- Webinars get prospects coming back and interacting and learning from you, and offer an easy and compelling reason to spread the word to their friends about what you're doing. TEACH people something useful in the webinar. Make them "bigger than you" – eg. hold webinars in which customers are the presenters.
- PPC - some B2B companies with simple products or services use PPC as their sole or primary online marketing activity. The more trust-building and education your prospects need, the less likely PPC leads will convert into customers. While PPC sometimes can be a source of leads-on-demand, be careful to track their quality in terms of conversion rates to qualified opportunities and to closed deals.
- Affiliate Marketing / Joint Ventures - The best partners are bloggers or companies with large and trusting email audiences, and whose interests and values align with yours. Co-market or partner with them on a (disclosed) pet-for-performance basis in which they help promote your company in exchange for pay-per-lead or percentage-of-revenue basis.
- Social Media
Each method not only attracts new prospects but helps nurture existing ones.
Marketo Case Study
Market's "revenue funnel" has six stages: Awareness, Inquiry, Prospect, Lead, Opportunity, Customer
- Awareness: stage at which prospect first discovers the company, typically anonymously. Market tracks "Awareness Activity" by a) observing the number of known or anonymous visitors, or b_ searching for the keyword, "Marketo". Market believes that their "Modern B2B Marketing" blog is the main reason the market's awareness of them grow so quickly.
- Inquiry: stage at which anonymous lead becomes known by registering with a name and an email address for content, newsletter, etc. Market uses "progressive profiling" to ask for a bit more information each time a person registers for different pieces of content.
- Prospect: potential buyers with fewer than 56 pints based on lead scoring. Scoring is based on factors such as keywords, behavior/actions, demographics, etc. (pg. 122)
- Lead: prospect that scores above 65 points. The sales team knows it is definitely worth their time to follow up on the lead to qualify it and move it into a sales cycle. Closely track the percentage of new leads which turn into qualified opportunities by source (Marketo's conversion rates below)
Once a prospect becomes a lead, Marketo starts an automated 21-day lead lifecycle process. The process has multiple tracks and three outcomes.
Fast Track: If a lead archieves a score of 65+ AND fills out a contact me form or requests a free trial, these leads receive personal follow-up within five minutes of their activity (sales reps get an instant alert)
Normal Track: If a prospect reaches 65 points but doesn't match the fast track behavior, a sales task is set for the sales rep telling them to interact with this prospect within 24 hours. Sales rep does research and crafts a customized intro.
Marteko's qualification criteria
- Is there a Compelling Event?
- Has a Clear Key Pain or Need been identified?
- What are the current marketing tools and processes?
- What is the timeframe?
- What is the annual revenue/size of the company?
“21 Day Follow-Up” Campaign (For Prospects)
- Day 1: Evaluation: Over 65 points?
- Day 2: Market Phone Call and Send First Email
- Day 5: Content Offer Email (invitation to receive more content)
- Day 9: Phone Call
- Day 16: Email
- Day 21: Recycle
After the 21-day process there are three possible outcomes. A lead is either:
- Disqualified: A small fraction of leads that will never be a good fit.
- Converted to Opportunity (and handed off to a Account Executive)
- Recycled: Leads that aren't ready to engage with sales (eg. due to timing, lack of a clear need). These leads receive ongoing nurturing through email marketing... can have specific follow-up tasks/dates or reps can wait until a lead takes a new action and is again flagged as an active lead.
“Stay in Touch” Campaigns (For Prospects) “Drip Campaign”
- Prospects who do not actively engage go here
- Leads need time to ripen
- The key objective here is to build trust over time
Effective Prospect/Lead Nurturing
- Its about quality over quantity
- Make it valuable to them, not just you
- Make it bite-sized
- Match your content to buyer profiles
- Match your content to buying stages
- Get the timing right
Seven Fatal Sales Mistakes CEOs and Sales VPs Make
- Not taking responsibility for understanding sales and lead generation. Everything begins with the CEO. Even when a CEO hires executives to run lead generation and sales, the CEO cannot delegate their own understanding of how lead generation and sales works. The CEO must take responsibility for educating themselves and understanding the fundamentals in order to set effective goals, coach executives, and solve revenue problems.
- Having Account Executives be jacks-of-all-trades
- Assuming channels will do the selling for you. Channel partners usually won't or can't (because they're not good) sell for you.
- Hiring or promoting the wrong people, insufficient training, misguided ramp-up time expectations
- Not focusing and speaking to a targeted audience - how clear is your Ideal Customer Profile?
- Sloppy tracking and measurement
- Command-and-control management
Nine principles of building a sales machine
- Be patient. Developing a sales engine can take 4-12 months.
- Experiment constantly.
- Don't take on unrepeatable, one-off projects unless its an experiment to learn something for the future
- Get out of excel - operate out of your sales force automation system
- Sketch out how things work and what your processes are on a flow chart. If you can't sketch out your lead generation or sales process, that's a problem.
- Focus on results rather than activity.
- Track fewer, more important metrics (new leads created per month by source, conversion rate of leads to pop., volume and dollar value of qualified opp. created per month, conversion rates of pop. to closed deals, booked revenue)
- Pay special attention to "batons" that cross functions (marketing handing leads to sales, sales passing clients to account managers, ec)
- Take baby steps.
Separate the four core sales functions. Inefficiencies created by lumping include lack of focus, harder to develop talent, unclear metrics, and less visibility into problems. Four core roles: 1) inbound lead qualification, 2) outbound prospecting, 3) account executives, 4 account management/customer success
"We're too small to specialize yet"
Second person you hire, after a salesperson who can close, should be a SDR. Alternatively, use the 80/2/ rule. When your reps are, as a group, are spending more than 20% of their time on a secondary function, break out that function into a new role.
The best salespeople are the ones that have grown up in your company, and know it, your products, and your customers inside out.
The best kind of sales training is role-playing. (pg. 159)
Retaining Start Employees
Measuring satisfaction of your key employees (from First, Break All The Rules):
- Do I know what is expected of me at work?
- Do I have the materials and equipment I need to do my work right?
- At work, do I have the opportunity to do what I do best every day?
- In the last seven days, have I received recognition or praise for good work?
- Does my supervisor, or someone at work, seem to care about me as a person?
- Is there someone at work who encourages my development?
- At work, do my opinions seem to count?
- Does the mission/purpose of my company make me feel like my work is important?
- Are my co-workers committed to doing quality work?
- Do I have a best friend at work?
- In the last six months, have I talked with someone a bout my progress?
- At work, have I had opportunities to learn and grow?
Company vision/goal planning method: "Vision, Values, Methods, Obstacles, and Metrics"