Missing the Number: Diagnosing What's Not Working

So you missed your 2022 number. So did most of your peers, according to Bravado's 2022 Revenue Recap. But in the midst of a pandemic hangover, threat of recession, daily outrage over inflation & the looming potential of war - how does a business leader go about diagnosing & fixing whatever it is that's broken? 

• Is it the Economy? Maybe people just aren't spending right now.
• Is it Marketing? Maybe our messaging and focus isn't quite right.
• Is it Sales? Maybe they're not connecting with our prospects in a meaningful way.
• Is is Product? Maybe we haven't quite achieved product market fit.

If you've been exploring these exact questions, keep reading.

First, know that missing quota is usually a product of how the organization plans and manages quota targets. So if your company missed, you cannot ignore this part of the problem. Let me explain:

You've probably heard that quota setting is both an Art & Science. Believe it or not, you're probably messing up the Science piece. I bet your process looks something like this:

What did we sell last year? Calculate the reasonable desired year-over-year growth, and then find a way to make the math work. You can admit it, it's just you and I here. "But no!" you'll say. "I took the average deal size & sales cycle into account. I mathematically derived a realistic expected close rate from the funnel we plan to produce based on our marketing budget. I even accounted for ramping AE's needing more time to get up to speed."

Ok. That used to be a pretty good way to get started. But now, we know a LOT more. Here are some ideas you can use to strengthen your process:

EVALUATING TRENDS IN SMALLER PIECES

Looking at year-over-year trends is not enough. "What you know" is changing - and much more quickly than that. Break trend data down into smaller segments of time & look at many different attributes for analysis to truly understand seasonality, market trends, buyer behavior trends, and more. I recommend starting with: New opportunities generated, time between stages/steps in the sales process, conversion rates for each step of the funnel, win/loss data + how it correlates to different market segments, comparison of Closed Won deals against your original predictions/data/ICP, individual performance metrics, cohort analysis, disqualified leads (who was dq'd before Stage 1), etc. 

• In comparing year-over-year, quarter-over-quarter & month-over-month data- what can you learn about how buyer's progress through your funnel and how that has changed over time?

• • Maybe you will pick up that the close rate you're using in your assumptions was actually only true through Q2 of last year, when it tanked 
  • Maybe you'll find that half of your "qualified" leads don't ever show up past the first meeting, if you're lucky enough to get them on the first call
  • Perhaps you'll notice that the ACV you were using is no longer accurate because your larger deals that offset all the tiny ones are no longer closing in the same timeframe assumed in your plan

VALIDATION OF INSIGHTS & ASSUMPTIONS

Part of the problem with gleaning these insights is knowing what to do with them. You can't just take everything you see at face value. Part of my process to validate insights involves looking for additional support data points that affirm my assumptions. A simplified process would look like this:

Investigate outliers above/below specified variance % (I generally use 10%) > Look at the same time periods before and after to compare > Look at data sources external to my dataset for additional validation (economic factors, calendar impact, other decisions that were made in the business around the same time, bringing these findings up in 1:1's with team members, etc.)

• Once you have validated a few learnings that you want to incorporate in how you plan quota, consider the following:
  • Are you in a market or industry going through a lot of volatility? Consider issuing quota more frequently, in smaller bite-sized pieces. You could do quarterly quotas (or even monthly) instead of annual quotas until predictability has returned.  While it may be a bit more administrative work, something like this can benefit the company and your sales team. While you always have the option to amend quota in the middle of a plan period (and if you were way off, you should really consider it), this tends to have an impact on how seriously the team takes quota in the long-term.
    
  • Are you targeting the right folks? Maybe you'll realize your recent new buyers don't really look like the ICP (Ideal Client Profile) you've been chasing. You could funnel that information back into your Demand Gen approach to do testing in new segments or with different messaging.
  • What does your sales process look like? When is the last time you shadowed some calls? Joining calls with your sales team to observe (not to take over - because you're looking for validation, remember?) is one of the best ways to diagnose if there is a serious sales strategy issue. What did they expect on the first call vs. what did they get? What % of the time does the prospect spend talking vs. your sales team member? Did the prospect say  "oooh and ahhh" at all the places you'd expect during the demo? These are just a few areas to examine for potential tweaks to your sales strategy.
  • Are there things that get asked about on every single call that you have to say "no" or "not yet" to? Do you get a lot of feature/functionality requests from the sales team and current clients that look nothing like what you're doing today or take more than a year to deliver? How many prospect and client discovery meetings is each product manager tasked with completing every month? Do you have to drag new customers through onboarding or are they pushing you? What % of clients choose to renew or buy from you again? Assessing product market fit is an ongoing task that needs to be focused on by the product team in the same way pipeline is focused on by the sales team.

And it's possible that after doing all of the above, you still come up with the same quota, validating your original strategy was carried out in the best way possible. But if we're being honest, you're going to find something to improve on, a lightbulb moment, or new ideas to test and iterate on based on the above exercise. At minimum, you'll be more confident in rolling out quota because you will be able to paint the picture that you really did put thought & care into the number, even if it is exactly 20% higher than last year.  😉