I’ve often said that if salespeople were half as good at actually selling your company’s services as they are at selling YOU on the B.S. of their pipeline and opportunities that are “just about to close,” they’d ROCK their quota. Alas, most salespeople in this industry are being managed by NON-salespeople (the owner) and therefore find it easy to “sell” them on keeping them on the payroll another couple of months while they fritter away doing sweet-ef-all.
So this month, I thought I’d share with you a quick tip, given to me by Pete Peterson, CEO of MERIT 2.0, a successful and growing MSP in Virginia Beach that is also a part-time sales consultant for TBG. But before I do, a little groundwork to make sure you’re actually doing the things a sales manager SHOULD be doing in the first place. Without these fundamentals, you’re pretty much guaranteed failure in building a sales department.
Give Your Reps A Quota:
This is SO simple, but I’m shocked by how many MSPs hire reps and don’t give them a sales performance quota to keep their job. Specifically, a quota is a performance goal your rep must meet in order to keep their job. For example, if you have a rep who you’re paying $50,000 as a base, I would want to see them bringing in a minimum of $150,000 in gross margin a year (3X their base). If you’re generating 55% gross margin, they need to bring in about $273,000 in new MRR annually – and if your average MRR is $24,000 per year ($2K per month), that’s roughly 11 clients, less than one per month. This is a big, WIDE generalization and is not a “one size fits all” scarf. Explaining a good compensation plan is complicated and not something I can do here (but WILL do at Boot Camp this year). Point is, you need to figure out how much money your rep needs to bring in to justify their existence at your organization.
Track And Measure Activity, Working Backwards From Quota:
The only thing you and your sales reps have complete and total control over is sales activity. You cannot control the clients’ budgets, their needs, their desire to buy, etc. Yes, you can (should) influence it. But you cannot control it. Therefore, the correct way to manage your reps is to manage and track their activity. For many of your reading this, you don’t have accurate sales pipeline numbers – specifically how many prospects your reps need to call on to get an appointment, how many appointments sit, how many move to a qualified opportunity, how many opportunities they have and the dollar amount, and how many actually close.
Let’s say for simplicity you close about 25% of the FTAs (first-time appointments) you go on and your average MRR is $2,000 per month. If the goal (quota) is to bring in $300,000 in new MRR per year aggregate, you need 12 to 13 clients. That means you’d need 48 to 52 FTAs a year (assuming the 25% FTA-to-close ratio) or four to five FTAs per month. Let’s further suppose you get roughly 5% of the people you prospect to book an FTA. That means to get four FTAs a month, you need to prospect at least 80 people a month, or at least 20 a week, to get one FTA a week. Again, this is ALL back-of-the-napkin rough math. YOU need to do this for YOUR organization and use YOUR math.
The point is, once you figure out how many prospects you need to reach out to, your rep better be doing that activity every month or they won’t make it.
A few years ago we had a rep who was being managed improperly by their manager (now gone). I was reviewing their numbers after a few months of not hitting quota and asked the manager to pull the activity reports. Lo and behold, they were nowhere NEAR hitting their activity quotas, which made it obvious why they weren’t hitting quota. When I pressed for the rep to start hitting activity quotas, they quit – not a bad thing. The manager didn’t last too long after that either, because HE was failing to do HIS job as well. I recently had this same conversation with another member who felt as though her rep wasn’t going to make it but wanted my opinion. When I sat and did the same math as I’ve been explaining here and looked at their activity reports (which the owner WAS tracking, thank goodness), I immediately spotted that the rep would not be able to hit that month’s or next month’s quota due to a GIANT dip in their activity (turns out they were actively looking for another job and had stopped prospecting altogether). This is why you need to manage ACTIVITY in order to drive performance.
Now, the brilliant tip I spoke of at the opening of this article: If you have a rep who is showing you a big pipeline of opportunities, take the top five they have as “about to close” and personally call those prospects with the rep sitting in your office. Introduce yourself as the owner and say something to the effect of “Hey, Mr. Prospect, this is <<Your Name, CEO of Your Company>>. I know you’ve been working with Billy-Bob, our sales rep, and are considering hiring us to be your IT department. I just wanted to call and say thank you for the consideration, and we’re thrilled to have the opportunity.”
How the prospect responds will reveal how solid or real the deal is. If they say, “I told Billy-Bob that we wouldn’t be making a decision until our contract is up in eight months” or similar, you can reply, “Yep! That’s exactly what he told me, and I have it here in the notes. However, I believe in developing relationships and STILL wanted to reach out personally to thank you for this opportunity, even if it’s not a done deal and won’t be considered for eight-plus months.”
This will not only reveal if those deals are solid but will also be a nice personal touch from you, the owner. I would suggest doing that at some point during the sales process IF you have someone other than yourself closing the deal.
Hear from other owners and founders of multi-million-dollar MSPs on how they ensure their sales rep’s pipelines are real during our 2-day exclusive event at a city near you. Register below using promo code TMTDISCOUNT to attend for $19! We are hitting 10 cities and you do not want to miss this opportunity to learn from the best in the industry.
