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| Home - Industry Article - Jan 05 Issue |
Key Value Drivers: How To Assess It & How To Fix It
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One software tool company with which we are familiar depends almost exclusively on Google ads to generate leads. We’ve helped the sales people better qualify the incoming leads and even to convert more leads to licenses. But there is a bigger challenge for them. They are only going to successfully grow their company if the quantity as well as a the quality of the leads improves. Although they do some “enterprise” business as a result of a lower-level IT person finding their tool on Google and recommending it upstairs within their company, the tools company isn’t filling their pipeline with genuine enterprise opportunities, because they have no initiatives in place to accomplish that. The good news is that they recognize the opportunity and are putting the appropriate resources and plans in place to tap into their market from a different direction, which will result in more leads, each having greater revenue potential than they have now.
Take the time to perform this assessment on your lead sources. Devise a plan to get you where you need to be. The very effort involved in planning has value, even if you are unable execute at the present time.
About the Quality of Your Pipeline
What is the value of your pipeline? We’ve heard VPs of sales tell us, quite proudly, that they have a $10 million pipeline as of this quarter, whereas a year ago it was only $2 million. To say that we’re skeptical would be an understatement. A pipeline is worthless unless it is filtered through a comprehensive assessment and qualification process which calibrates the potential value of each opportunity. That qualification process must be based upon objective criteria culled from your knowledge of how your target customer buys (or doesn’t buy) your products.
When a qualification process is functioning effectively, suspects don’t even make it into the pipeline until they have met the qualification criteria for the first phase of the customer acquisition cycle. Perhaps for your company, that might be 1) a customer need is identified and discussed with your rep, 2) your rep has evidence that funds are allocated, and 3) resources have been assigned to an evaluation of yours and other products. Once an opportunity like this is in the pipeline, ongoing qualification by the salesperson and adherence to the steps in your sales process will enable the opportunity to remain in the pipeline.
If your salesperson checks with a prospect to make certain that the budget allocated for their investment in your software is still there and the prospect says no, that would immediately trigger two events. First the salesperson would devise and execute a plan to get those funds re-appropriated. Second, whatever classification was attributed to that opportunity would have to be modified, because now, by definition, it is less qualified.
Forecasting (Part 2)
A formal, continually improving sales process supports accurate pipeline management, and that drives credible, accurate forecasts. There are a number of forecasting methods favored by software company executives. Whether you use ABC, “Percent Complete,” or “Likelihood of Winning,” you need to be sure that your forecast is based upon the highest degree of objectivity possible. Having a sales manager tweak each rep's forecast based upon their
subjective assessment of that rep's opportunity portfolio is no way to grow a company, not to mention impress potential suitors.
So, the value contribution of credible revenue forecast to your company valuation is significant. Again, it’s a Key Value Driver and will be scrutinized by potential suitors. It’s worth spending the time in getting it right as soon as you can. With that in mind, there is an added benefit: The sales, qualification, and other processes that result in an accurate forecast more importantly result in your company winning more business, sooner, and with a lower cost of sales. Now that’s real business value.
Dave Stein founded his New York-based consultancy, The Stein Advantage, Inc., in 1997, Dave Stein held many diversified positions: programmer, systems engineer, sales representative, sales manager, director of worldwide sales development, VP of sales, VP of international operations, VP of client services and VP of strategic alliances. The Stein Advantage is a New York-based consultancy. The Stein Advantage offers companies diagnostic and remedial expertise to hire top sales professionals, better position themselves in the eyes of industry analysts, overcome tough competitors, motivate their sales forces, and refocus their selling efforts to achieve new levels of credibility and differentiation with higher-level executives to whom they are selling. For feedback email dave@HowWinnersSell.com. His website is www.HowWinnersSell.com.
Henry Bonner the Principal of Fairlead Capital Management advises entrepreneurial software and service companies in the financial services technology sector on realizing maximum equity value. Henry founded the company with 17 years experience in the financial services and energy trading technology space. Working with company principals, Fairlead enhances stakeholder value in anticipation of an exit, by implementing a series of proven operational refinements around product, sales and marketing, operations and finance/legal functions. Additionally, Fairlead develops and executes acquisition strategies and acts as a source of growth capital. A British National, based in the New York area, Henry Bonner’s global business outlook focuses on Trans-Atlantic software and services in the financial services sector. For further info email on Henry.Bonner@FairLeadCapital.com and his website is www.FairLeadCapital.com.
 
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