February 16, 2017
How MSPs Can Measure Sales Success
Carrie Simpson is the founder and CEO of Managed Sales Pros. She has over 20 years of cold calling experience, and supports a team of 30 lead generators. Her team makes over 40,000 outbound MSP prospecting calls monthly.
A major challenge MSPs face is hiring and managing sales talent. Many MSP founders were techs, and they have grown their business through referrals. Those who made a successful transition from passive (referrals) to proactive (outbound prospecting) either had a flair for sales or made major investments in sales programs and processes. If MSPs didn’t start with a natural advantage and haven’t yet made an investment in sales education, what happens when it’s time to add to the team and grow the MSP?
To measure success, many MSPs rely only on the KPIs of “first sales appointments monthly” and “MRR added monthly.” These are important numbers, but these numbers just don’t exist for a brand-new team members. Inevitably, they let sales reps go after six months of no closed deals, or complain that outsourcing to lead generation firms doesn’t work out as planned.
If we can drill down into the cause of these failed attempts at sales growth, we can usually track them back to these three issues:
The MSP hired staff before they had a clearly defined sales process – a new sales team member is hired and left to “figure it out.”
Unrealistic expectations – if a business has been fueled by referrals to date, many MSPs expect that sales reps will close deals as quickly and easily as they closed referral leads. So, first-year targets for new team members aren’t based on facts or the achievement of previous sales team members. They’re based on the referral business generated by the business owner.
MSPs don’t begin to look at numbers until after it’s too late to fix the funnel for the year.
Many MSPs place unrealistic expectations on new hires, they have no day-to-day plan for success communicated clearly with new hires, and they have no process in place to track or measure success. It may take a year to train a sales team member who produces reliably and it will take the MSP longer if not full prepared.
The first step to creating a successful sales-focused MSP is understanding the sales cycle. Remember, the displacement sales cycle is often upwards of one year, so measuring a new sales rep on what they close year one doesn’t work. The next step towards sales success involves developing a sales process built around activity levels, data integrity and consistency, where you are able to track and measure everything.
Measuring the correct key performance indicators (KPIs) is one of the things great MSP sales organizations do differently than less successful organizations. When you begin to create your sales process and define the things you’re going to use to measure sales reps’ performance, I find it helpful to think of your sales funnel as not one funnel, but three:
Funnel One – Data Integrity Stages
All net new prospects start in funnel one. Your first three months with any new sales team member will include a lot of dialing with very few lengthy conversations. Expect short and frequent interactions with little to no time in between outbound calls. Too much time in between dials means your rep is spending excessive time researching when he should be interacting. If your prospecting process expectations aren’t clearly defined and communicated to new reps, you’ll get far more researching than dialing. Funnel one is about qualifying/disqualifying and creating connections. One quarter with no net new dials equals a full year of nothing to follow up on. Don’t neglect the first funnel when funnel two and three begin filling up.
Key KPIS to watch: dials per hour, time between dials, data points collected, follow up activities scheduled
Funnel Two – Lead Nurture Stages
Nurturing requires longer conversations, building on your initial connections and following up reliably. Dial counts in funnel two will be lower. While you want to track total activity in this funnel, you especially want to be mindful of open activities and past-due activities. Too many open and due activities means sales reps aren’t following up with prospects regularly and is ignoring your defined process. Too many short interactions in this funnel should set off alarm bells. Your sales reps could be cherry picking, dumping calls to make their numbers look better, or giving up without attempting to handle objections. You will see small amounts of activity in this funnel by month two and it should end up being 2/3 of your sales funnel by around month six.
Key KPIs: Consistent and predictable disposition ratios, activities cleared on time with appropriate conversation lengths, consistent percentage of follow up activities moving to appointments.
Funnel Three – Closing Stages
The first sales appointment (FSA) is the beginning of the third funnel. You should be accompanying new sales reps on all FSAs until they have closed several deals. Remember, prospected leads are not referral leads. Nobody has introduced you, and you haven’t built trust. This is where the work begins. If your sales rep hasn’t qualified prospects well in the previous funnels, you’ll go on meetings that aren’t anywhere near buy-ready. If your sales rep is qualifying too stringently, you’ll miss opportunities. (And if your sales rep hasn’t documented anything about a given prospect in the previous two funnels, and the meeting doesn’t result in a sale, you’ll have no idea why!) This is the funnel that most people measure to, but success here is highly contingent on the execution of process in the first two funnels. If you nail down process in funnels one and two, funnel three becomes shorter and more predictable.
Measuring The Right Things
Here are some things to be mindful of as you create your new sales process:
Activities – longer interactions reduce the total number of interactions – are you measuring your sales reps to KPIs that are unrealistic and inflexible? If your rep is great at initial engagement, his or her first funnel may look nothing like the first funnel of a brand new never-dialed-before team member.
Data integrity – are you rewarding your sales team for “showing their work”? Without data, you have no long- term sales pipeline. Data integrity disqualifies early in the sales process, meaning less wasted calls and no wasted afternoons out of the office chasing deals that don’t exist. It creates predictable sales forecasting.
A brand new sales rep will spend most of the first three months in funnel one, with some activity logged in funnel two. By the sixth month, a sales rep should have activity in all three funnels. In month twelve, if your new sales rep is ignoring funnel one entirely in favor of funnels two and three, you’ll have some new deals the following quarter, but then a long stagnant period.
You should communicate your expectations and your company sales culture clearly with your new hires. You should never have to wonder where your new rep is or what he or she is doing. The rep must be doing things that you can track and measure. Measuring the right KPIs will allow you to quickly see – whether it’s month one or month 21 – if you have made the right hire.
Read Carrie's previous blog, How MSPs Can Successfully Handle Outbound Prospecting.