BY GREGORY SOLOMON
Even in normal times – and these are not normal times – deal optimization is an opportunity too-frequently overlooked by revenue and sales leaders. CEOs and CFOs see the negative impacts of poorly optimized deals on the P&L – when it is too late to materially shift course. During the disruption of COVID-19, the importance of deal optimization will increase as organizations, rightly, focus on liquidity management. The pandemic will also challenge organizations to re-consider what defines a deal itself. Now is the time for revenue, sales, and marketing leaders to adopt a new set of emerging best practices for deal optimization.
For more information on how to advance your late-stage deals, join our webinar on April 10th at 12 pm ET for best practices you can leverage immediately.
COVID-19 is putting increased pressure on sales teams to close later stage deals in the pipeline – SBI hears from its community phrases such as “at any cost” and “just to keep the lights on.” These pressures are real as companies work to do right for their workers and their families. However, companies should maintain the sentiment and flip the mindset: from at any cost to at the right value.
More Demand for Insight
Prior to the emergence of COVID-19, SBI’s benchmarking and observations indicated that 40% of Sales Operations teams had minimal or no involvement in deal optimization. Yet these Sales Operations teams were simultaneously being asked to provide insights to sales and revenue leaders for decision-making. We calculated that less than 20% of companies had fully evolved deal desks able to leverage customer data from across the enterprise. For the other 80%, leaders were left to rely on the biases of front-line salespeople and managers, foggy organizational memory, and their own intuition. Post the emergence of COVID-19, as leaders are forced to make a series of daunting decisions, the demand for data-based insights will only increase.
Deal Desks in Name Only
Though many organizations established deal desks in recent years, there is room for improvement. SBI’s analysis reveals that companies – even companies that perceive their deal optimization to be mature – have significant gaps. These include deal discounting that is disconnected from value drivers such as deal size, volume, customer revenue, customer opportunity, or competitor displacement. We also observe a limited accounting of profit leakage from extended payment terms, free services, the bundling of ancillary products, etc. And many deal desks have limited, undefined, or fungible approval criteria, processes, and decision-making.
- Stand-Up A New Deal Team – Consistent with SBI’s Framework for Managing Through COVID-19, we recommend standing up a new or enhanced deal desk or deal “SWAT” team. We recommend that all these groups have a seat at the table: finance, marketing, sales, sales operations, and customer success. All these groups have (frequently siloed) data and perspective to contribute. For those companies who have established deal desks within their Sales Ops departments, don’t tear them down; instead, re-engineer them. The SWAT team is organized to gain a more holistic view of customers and prospects, a clearer line of sight to company data, and a more holistic definition of customer value.
- Implement New Customer Segmentation and Deal Triage – As discussed on a recent community webinar, we recommend implementing a new customer and prospect segmentation model as COVID-19 has radically impacted historical buying patterns and willingness to pay. The new segmentation will alter both the stage of deals in the pipeline as well as their projected win percentage. The new segmentation should inform COVID-19 deal triage.
- New Definition of Value – During these unprecedented times, companies must redefine the value they seek to negotiate and extract from the deal. These definitions are foundational to developing the approval or “go or no” criteria for a deal. They will improve and accelerate the deal process and reduce the risks of a breakdown in deal desk governance. We define value across three time-horizons. Some examples include:
- Short-Term Value
- Break-even point (deal economics) or MVD (minimal viable deal)
- Cash flow (timing of payments)
- Customer retention
- Profit/cash relative to company headcount
- Deal to company activity (how many people does this keep active to boost morale)
- Medium-Term Value
- Customer Lifetime Value (CLV)
- Deeper relationship with the customer
- Broader/new relationships with the customer (new division, new part of org., etc.)
- Entry into new customer type and/or vertical
- Entry into new buyer type or persona
- Competitor displacement
- Potential case study
- Potential referral
- Automatic renewal
- Test user for new products or features
- Long-Term Value – (When customers are challenged to pay in dollars, what else could become an explicit and mutually agreed upon form of payment?)
- Customer Lifetime Value (CLV)
- Longer-term contract
- Co-marketing activities
COVID-19 has changed ideal customer profiles, spending habits, and willingness to pay. COVID-19 has also drastically altered the shape of companies’ pipelines. Following these recommendations will help companies win deals on favorable terms for the short, medium, and long term.
We encourage you to join the community, engage with your peers, and share leading practices in SBI’s LinkedIn Group, “Inspire Others,” as we navigate these unprecedented times together.