Metrics are used all over in sales organizations:

• How many calls did you make?
• How many connects did you make?
• How many meetings did you schedule?

Metrics are how managers feel good about how people are doing – its how they can point to things and say, “look – my people are working.”  Often, tt is how managers and CEO’s can turn to their board and investors and say, “I have no idea how we didn’t make our numbers this month, we made 4,000 outbound calls!”

Its no secret that I’m not a fan of managing to certain metrics in a start-up like number of dials.  Yes – track them, but do not necessarily manage to them.  In a start-up or growth business, there is only one real metric that matters: quota.   The bottom line metric for any and all salespeople is their quota.  I don’t need busy salespeople who don’t close.    Ask yourself which salesperson you want on your team… the one that makes 5 calls a day and closes 5 big deals OR the one who makes his defined 60 calls a day – but only closes 2 deals.

Too many times, I see managers who focus on the wrong metrics and force behavior that ultimately leads to less (or worse) sales.  Especially in the start-up phase, you need those dials to be learning lessons so that you can get to the very repeatable sale.  Its certainly true that in a more established business with an established product that is well known by your prospects, you can draw a conclusion that x dials yields in $y in sales – but this is rarely true in a start-up and in fact leads your sales people to have the wrong behaviors.

In a start-up, you need to sell value to your prospect.   In order to sell value, you need to understand your prospect – their needs, their corporate goals, their issues, their problems.  This takes some research time.  If you expect your salesperson to make 60 calls a day, guess how much research is done prior to making that call on their list… NONE!  Oh maybe a real quick google search – but that is it.  Essentially, your salesperson will dial each person blind.  Therefore, most of those calls will be wasted.

There doesn’t exist a good sales intelligence tool, yet, that can bring all of that information together quickly and concisely for the salesperson so that they can make all of those calls quickly, and also be informed.  Be informed about any personal connection with that client.  Be informed about their corporate initiatives that match your product.  Be informed about where the person being dialed fits into the organization.

Being armed with good information is key to making sales more quickly.  Make sure that your salespeople are doing this.  If you are a salesperson… do this.

And make sure the metrics that you are tracking don’t get in the way of this.

One of the most frustrating parts about being a salesperson is the constant rejection, the constant stream of failure.  The more neophyte salespeople I work with, the more I see the frustration over this simple fact of sales.  Sales is a numbers game.  You can’t win them all, and you have to get out there and talk to lots and lots of people, to find those people that need your solution, have the means to pay for your solution, and decide that you have the correct solution against all the other alternatives.

Your failures teach you important lessons about how to listen to the rejections and get the yes, and your track record will certainly improve over time.  Great salespeople use their sales managers and mentors to refine their pitches, and constantly learn how to get better – but the ugly truth is that you will probably fail more than you will succeed.

As I was watching a baseball game recently, on the big board came a statistic for a player who will certainly someday be a hall-of-famer, and very likely a legend in baseball.  This man had just slightly less than a 300 batting average.  This means that for every 10 times he has gotten up to bat, he has failed 7 times.  For every 10 times his fans, his coach, his manager, and his teammates counted on him to perform at bat, he let them down 7 times – yet he will become a legend.

Go back in history… very, very few of the legends we know did much better than this.  Ty Cobb’s lifetime batting average is 0.366.  Only a handful of players ever got over .400 for a single season, and no player has ever finished a season above 50%.

The fact of baseball, is that, just like sales, the system has built into it the knowledge that individual failures are part of the game – and therefore the game and season have built into it the concept of individual failures – and that when you look at the team under the long term lens, that the best still rises to the top.  The same is true for companies and their sales organizations.

Thinking about the reasons for individual batting failures:

• Sometimes, the failure is just because the player is off his game.  Its certainly very difficult to be at your best all the time when you play many, many games each week.  The same is true of sales.  Not every salesperson will be able to find the right pitch, the right words, the right counterargument every time.  But in both cases, practice is essential to get better.
• Sometimes, the failure is because the pitcher is just having a great day, and can outsmart the batter – or knows the batters weaknesses and takes advantage of them.  In sales, your competition is working the same prospects as you.  Its essential to know everything about them, their products, and what their pitch is so that you can be prepared to overcome that.
• Sometimes, the batter is dinged because someone else fails (error).  In sales, there are a lot of times where there are very obvious wins, that are lost OR cases where you get moved forward in a pipeline discussion because of your competition’s mis-step.  Its important to capitalize on these – but never assume they will happen.

Of course, its the constant stream of failure that makes a win taste that much more sweet.   Hold on to that when your batting average takes a dip.

A sales person that used to work for me called me last week to get my opinion on a new position he was considering.  We chatted for a while about the position and the opportunity, and I was very excited for him.  Its a great company, a great product, a great team – and I think it will afford him quite a bit of opportunity to advance his career.

Then we started to figure out if the comp was right for him.

He explained to me the compensation plan that was presented to him.  As he spoke, I said, “wait… I have to get a pen and write this down so I understand.”  OK – the fact that I had to say this is 100% a clear indication that this is a bad compensation plan – but nonetheless I attempted to understand the plan.  The plan paid out upon a rolling average of monthly sales over a three month period and provided incentives on this and that.

After I thought about the plan for a while, I said, “OK.  I get it and from my calculations, its most likely a very generous plan – but its sort of hard to tell – and its going to be very hard to know what you will get until the end of each quarter.”

I certainly appreciate that the CEO of this company was trying to create a generous compensation plan, and I honestly think that he believes that he is encouraging the right behavior but the problem with the comp plan is two fold.

1)  It is so hard to calculate and know what you are getting paid on each deal – that the sales rep will spend too much time thinking about what he will or wont get paid instead of just focusing on closing.

2) By making the plan based on a rolling average, the “cha-ching” factor after a deal is closed is gone.  When a deal is closed, what does it mean to the rep?  Who knows until the end of the quarter so its not as exciting when a deal closes.

Here is my bottom line on comp plans.  Make them simple and easy to calculate.  Give me a cha-ching when I close that is very clear what I get and when I get it.  This will motivate me to close more and faster.  I see something I want to buy?  How do I do it?  Close a deal at this amount and I will get enough to buy it.  Want to make more money than that other salesperson.  How?  Close deals totalling X to get there.  This is how we think.

The more time I have to spend on math, the less time I spend on closing.  The more time I’m wondering about what I get paid, the less likely I am to close it.  When I don’t know what its worth to me personally – I have less drive to bring it home.

Perhaps these sound like strange concepts to non-sales types, but this is what motivates us.  The hunt.  Make it like a hunt and we will hunt it down.  Make it like a complex problem with too many goals and triggers and we will be less motivated and driven.

I think that my guy will do well in this role, and I actually think he will make quite a bit of money.  I also think he has the drive to succeed in this position regardless, but in general, I think that this comp plan should be tossed out and replaced with something simple that provides cash directly tied to an action.

I can’t name a single business that has failed as a result of over-paying sales people.  Its probable there are a few, and I’d love to hear that story if you know of one.  Its certainly possible to create a sales compensation package that is overly generous – but in general, commissions are designed to be a percentage of sales.  Therefore, by definition, if commissions are rising, then so are sales.

I want to clarify that I am talking about normally designed commission plans.  I do completely understand that you can design a compensation plan that doesn’t take into account the cost of doing business, etc. so much so that even as sales rise, you wind up killing your business.  However, what this post is about is not poorly designed commission plans, its about what you as a sales manager and entrepreneur are focused on when you think about paying commissions.

What will kill a business significantly faster than paying commissions is LOW SALES.

Recently, I was talking to an entrepreneur whose business had next to zero sales.  He looked to me for advice.  My advice was to make his sales compensation plan more generous.  He nearly had a stroke.  He picked and prodded at every suggestion until he essentially killed all improvements I attempted to make.  The crux of his argument was that he was able to identify a potential way for salespeople to take advantage of any improvement I was trying to put in place.

For example, there was one instance where he wanted to make sure we did not pay a sales rep double commission, if they sold double the items to a single client.  He wanted to make sure we were discounting (or actually NOT PAYING on) multiple sales.  I explained that in his early stage, the last thing we wanted was an disincentive against getting lots and lots of sales.  We were too young to be thinking with that much granularity.  I figured out that IF every sale by EVERY rep committed this sin, he was going to pay $7,000 in extra commissions that month – and in that case, we could institute new rules at that point.  He disagreed, because to him, paying extra commissions was the worst thing that could happen.  Salespeople should NOT be allowed to take advantage of him.

I sat there, looked at him and said, “If I said that I could deliver to you the perfect sales solution for your company right now, would you pay be $40,000 on the spot?”  He said “Of course!”  I said, “So then why would you not risk, at max, less than 25% of that amount to let the sales reps run and maybe learn something about your product, how its sold, how people want to pay, how much they want to pay?”

Critical to any start-up is the ability to let the reps run and learn from how they sell.  Last year, another start-up I worked with, experimented like crazy and paid lots of commissions.  In retrospect, some of the commissions paid were probably too high – but the end-result?  They are a profitable company with a great sales team and a great compensation plan.  Had that client worried too much in the beginning about optimizing his process to NOT pay sales commissions, he would likely be dead by now.

The main point here is that, in the beginning, you need sales.  Without sales, you are a product not a company.  Without sales, you will die.  I don’t think any start-up should overpay salespeople just for the sake of it – but I encourage startups to not optimize for NOT paying salespeople.  Optimize for getting the most sales – you can always scale back if you see something is too generous.  (Of course, there are challenges here to not destroying morale which I will discuss in another post.)

If you do optimize and determine how to make sure that salespeople do not get overpaid, the most likely solution is that you will have a salesteam that doesn’t deliver breakout sales, and ultimately, a company that can’t survive.

Video games certainly have changed since I was young.  Today’s video games have over-arching stories, character development, video interstitials, plots and sub-plots, awards and minigames, social integration, challenging gameplay, and certainly lots of amazing graphics.

In the 1980′s, video games all nearly had one objective, and then you got to repeat that objective over and over again, at an increasingly quickening pace, until you lost.  You couldn’t “win” at any game because these games didn’t really have an end.  And, when you did lose, you threw in another quarter and tried again – trying to get further and further along.  Pac-Man, Asteroids, Space Invaders, Donkey Kong, etc.   They all operated like this.

Sales is kind-of quite like that.  You repeat your pitch over and over again, trying to get better and better with each attempt.  When you lose one or win one, you do it again.  And no matter how many times you do it, there are more dots to eat, and more ghosts chasing you.

This isn’t meant to discourage anyone, its just a simple fact of the persistence needed to keep going.  Even though you KNEW you had to do the same thing over and over again, you still wanted a portion of your allowance in quarters.  You still wanted to try to beat that game.  That’s the fire that every salesperson needs in their belly.

Several years ago I joined an internet company as a sales rep, and in about 3 months, I became the top salesperson.  At the national sales meeting, one of the other reps came up to me and asked how I was having so much success.  I responded, “I’m honestly not that sure that I’m ding anything revolutionary.   It just seems that these people are happy to take my call and after explaining the product and how it solves their problems, they are willing to buy.”  He stared at me blankly for about a minute and then said, “…You call them?”

I’m very much in favor of the trend to social tools.  Social tools has given tremendous power to sales people.  LinkedIn, Jigsaw, Twitter, Foursquare, Facebook, etc.  are all great ways to research, network and get yourself into a company in ways that were not possible 20 years ago.   However, there is this trend in younger generation people on the over-reliance on these tools to get the job done.    Its true that many younger people will meet their spouses on-line, and will keep in touch with people on-line, and will continue to interact on-line, but deals get done when people talk to people.

The best salespeople that I have dealt with aren’t afraid to pick up the phone and talk to people – and are especially not afraid to get in front of people.  When I started in sales, trying to get a sale over email was frowned upon, yet today I meet salespeople who don’t leave email / twitter / facebook to try and get 90% of the way to a sale.  Its this over-reliance on the tools that holds them back.

I see start-up after start-up thinking that the magic of “being viral” and the social glue will propel them in sales.  These Sales people and start-up founders think that somehow the magic of the social internet will make their company profitable.  But far fewer companies succeed in this way.  Sales people need to reach out and connect to get the product sold – and cannot be afraid to do so.   The more successful the salesperson, the more likely that person is out talking to people.

In order to crush sales, you need to be a social being.  And that does NOT mean that you have 600 friends on Facebook, 10,000 followers on twitter, and 800 connections on LinkedIn.  It means that you are actually connecting with people one on one.  That device in your hand is a phone – and it has voice capabilities – so use them.  Its very likely that you will see your sales explode.

I wrote a guest post on Frank Peters’ blog yesterday on my thoughts on entrepreneurship in Jordan and the rest of the Middle East.

You can read the article here: http://www.thefrankpetersshow.com/archives/2011/03/jordan.html

In order to be a great salesperson and/or a great entrepreneur, you have to have conviction.  You have to believe in your own vision, and in your own ability to execute on that vision if you have any chance of success

When I was in my first start-up, I had a particular vision for my product and my company.  I had a particular vision of the design of my software, and exactly how it would and should work.  I had ideas about how it should be priced, and how it should be sold.  Turns out… I was wrong on nearly every one of these points to a particular degree – but the great news is, as a sales person at heart, making the necessary modifications to my thinking, my product, my pricing, etc. was not a hard chore for me.  I found no shame in adapting my product and my company vision over what I learned from the marketplace.

As I engage with more and more non-sales minded entrepreneurs, I find it interesting in how these people think about the market, and how they should react to it.

Its great to have a vision – and to believe you are going to change the world, but more often than not… you are going to be wrong.  Whether or not you succeed is going to hinge very much on your ability to react and adapt to these things when you are wrong.  And… more often than not, its your sales team that will hand you the critical information to make the right decisions.

Yet… what I see often, is entrepreneurs sticking to their plan – sticking to their vision – in such a way as to be obstinate - and its extremely frustrating to the sales team and its most certainly a recipe for failure.  I call this syndrome:  “dead right.” When you are dead-wrong, it usually means that you are so incorrect in your thinking that it leads you to your demise.  Dead-right is exactly the same thing.  It means that while you may be 100% sure that your vision will change the world, and you may be 100% right that this is the way your product should work and be sold, you fail in the mean-time by not being able to react to your market.  You can stand by your convictions, and sometimes you win, but more often than not, you will fail.  What’s more important – being right on everything or being able to survive long enough to deliver your ultimate solution?

When I work with an entrepreneur, I usually can understand their vision, and I can typically see where it is they want to go with the market.  Then, we get started selling their solution.  What typically we find out is that the market thinks about things differently.  Entrepreneurs who work with the sales team to figure out to take slight detours on the path to success, usually find better adoption and growth.  And sometimes we aren’t even talking about a deviation from product vision – but instead a reaction to HOW the product is sold.

For example, a while ago I had two clients that I was working simultaneously.  One, was very market driven.  He had a vision of where he wanted to go with his product and how he saw the world changing.  We worked together closely, and with each sales win and sales loss, we adapted the product and pricing in ways that would make it more sale-able, but wouldn’t compromise too much the ultimate direction.  This entrepreneur was never at risk of being dead-right, and we never lost a sale due to this factor.  We changed and adapted from a large ticket annual price, to a per-user fee, to a monthly all you can eat model, and everything in-between as we learned about the market and what and how people wanted the product.  This entrepreneur is now running a very profitable company.

The second entrepreneur was a very technical entrepreneur and looked at every sales problem as an engineering equation.  He also refused to bend in his thinking about how the product should be sold, and how it should be delivered.  In a pure sense, I think that his vision was correct, and would have loved it if the prospects would have just bought into the vision because they would have benefitted in the long-run, but they just wouldn’t do it.  I could not get him to bend.  For nearly 9 months, sales lagged, and the company struggled.  Finally in despiration when it looked dire for the company and I was nearly ready to give up myself on him, he agreed to try some of my thoughts out, and suddenly we started making sales.  Now the company is doing very well and is back on its original trajectory to delivering the solution in the way that they always wanted to deliver it.

The second entrepreneur came very, very close to being dead-right.  How many don’t make that last final desparate change, or leave enough runway to be able to make those changes?  The entrepreneur and the sales team have to work together to find the ways that the product can sell, and get it sold.  Its so sad to see entrepreneurs that are SO close to success and they can’t see it because they are so stuck on their idea of what should happen, that they can’t get outside themselves to find out what the market needs.  That is what the sales team is for so use them for it.

I know I will get flamed in the comments telling me how people like Steve Jobs stuck to their vision regardless of what the world told them and they changed the world.  Yes, this is mostly true but 99% of entrepreneurs out there are not Steve Jobs, Bill Gates, Steve Case, Mark Zuckerberg, or any of these exceptional people and there are more stories of people who stuck to it and failed than those that stuck to it and won.  (And… I would even argue that these people reacted to their markets as well in their path to success.)  So if you really, really believe you are the next person on this list, then by all means risk being dead-right – but understand that it is a very big risk.

Better bet?  Listen to your market and adapt.

In an established company with an established product, you can count outbound calls, and you can require minimum amounts of calls, because you have a defined product, a defined market, a defined price, and a well-defined pitch. When all of those are in place, then you can very easily dictate that it is simply a numbers game – and you insist on driving as many calls as possible to get the required results. It will be well defined, that 100 calls leads to 10 sales, or something like that.

In a start-up, the dialing is about learning, so that you can get to the defined pitch, the defined price, the defined market and the defined product. If you force a number of calls, then its possible you aren't listening enough and learning enough, and rather than using those calls to learn, you are just feeling good about driving thru a number of calls – for which you can pat yourself on the back and say "well at least I made 100 calls today". I say… who cares if you made 100 calls if you didn't learn anything about how you are going convert more of them. This is critical in a start-up. Slow start so that you can crush the numbers later on.

So, indeed you need to have every start-up sales person dialing, but its ridiculous to try to grab metrics around # of calls in the initial phases when you still don't know if you have a repeatable sale. If it were my start-up, and the sales person made 4 calls in a day, and came back with 4 very useful lessons about how, when and for what amount people would buy and no sales, I would take that over someone that blasted thru 100 leads and gave me 1 sale – but no lessons.

As you get further along, you also need to take pause in using dialing metrics to judge salespeople. I worked in one situation where I had two salespeople who worked for me. One salesperson was a machine gun. He pounded thru a lead list and dialed like mad until he made sales. The other person was an elephant hunter. He researched each and every client he was about to call, and carefully prepared each pitch. The results were that while the second guy made significantly fewer calls, the actual cash in the bank was nearly equal. Results are what matter in a start-up and really in any company. If a person makes 10,000 calls and no sales and another person makes 10 calls and 9 sales – which salesperson will you keep? If you answered the second guy, then ask yourself why you are focused so much on call metrics.

The bottom line in a start-up… hire good people and let the comp plan and results dictate your metrics – not some arbitrary number of calls.

Do all great startup salespeople make a certain number of outbound calls and emails a day?