By Jim Watson, General Partner, CMEA Ventures, and By Tate Holt, Author, Prescriptions for Growth
An effective sales and channel management plan is difficult to develop for a couple of frequently-overlooked reasons. Given the fact that all plans stem from certain assumptions, the first challenge is to make sure that the baseline assumptions are objective and reasonable. The second reason -- and even more important -- the planning process is so difficult is that all of the factors are hopelessly interrelated. If any part of your plan is absent, isolated, or disintegrated, the performance of your sales and channel won't be predictable. Have you ever thrown a bowling ball with a dent in it? Chunkity, chunck, chunck -- gutter ball. An effective plan, however, has the power, panache, and pleasure of a strike.
Bowling can be summarized in ten words; "Aim. Roll the ball and knock down all the pins." Ten words for creating a plan might be, "Communicate how you deliver your product benefits to your customers." Of course, neither is as simple to do as they are to say and both are infinitely more frustrating. Why is such a simple thing so difficult? Because any minor error in either pursuit will magnify itself. Let's take a look at a couple of little things that can derail your planning efforts.
Assumptions are the banana peels of life...
One of the most common planning mistakes is mismatching territory and quota assignments; two independent factors that are inextricably linked. Let's face it: defining territories can be a brutal and tedious task, one that is easily put off to another day -- or, better still, another person -- and, as a result is often grandfathered among very basic plan assumptions. Why? Partially, because it's hard to do correctly. It's time consuming, and it can be somewhat arbitrary. Like a bowling ball with a dent in it, this particular problem is guaranteed to have a negative ripple effect on the rest of the plan.
Assigning quotas is a similarly sinister process and shares many of the same burdens. Of all of the assumptions made during annual sales and channel management planning process, quota is the 'baseline' figure that is most often assumed. Maybe this is because we feel we have to start the plan with at least one 'constant'. It could be because we all think in terms of 'standard' industry measurements or that we naturally want to do a little better than our toughest competitor. Whatever the logic, the quota figure rarely gets approached from the bottom up.
Compounding the error, most of the software companies we see start their planning processes by assuming that the existing territories are correct, viable, or fair, and start the ball rolling by plugging in a presumed quota figure. Unfortunately, this is very much like picking up and starting to launch a bowling ball without first making sure you're on the right lane. If you're not careful, you might hit some poor guy down the aisle bringing back a couple of beers for his buddies.
You might consider reversing the sequence in which you do these two planning tasks. Establish your sales productivity target first, and then define the territories. Ask yourself the following questions:
1. Given the activities required by your sales cycle, what can a reasonably proficient salesperson do over the course of a year?
2. Given your product realities, how many prospective customers are within their reach?
Remember your second planning obstacle; that all of the parts interact with each other. Let's illustrate this point by using the simple example above. OK, you've figured out what productivity you expect from one of your people and have associated a territory with it. What happens if you double the size of the territory or have a superstar performer assigned to it?
The answers might surprise you. Although it might sound counter-intuitive, our experience is that an average performer will actually do worse with a larger territory. On the surface, more territory with more leads should equal more sales. In reality, however, larger geographies create time and activity management conflicts that are beyond the grasp of all but the best performing salespeople. Poor performers can hide behind bluebirds in big territories and rookies often 'stake out' their geographic boundaries with activity that is better concentrated centrally. Effective plans are based on the assumption of average productivity and those plans are exceeded through a combination of good people and superior execution.
Said another way, if you roll the ball down the center of the lane, you're bound to knock down a bunch of pins. And, in bowling if not in planning, you get a second chance if you don't get a strike.
So far, we've used only two factors, so let's introduce one more variable; compensation. Don't worry about whether it's for direct salespeople or indirect channels for the moment. How do you know if your compensation plan is fair? Try charting three elements on a graph: by territory, compare revenue and total commission earned (you'll probably want to use a separate Y axis for the commission data to make the chart easier to read). If there's a clear correlation between revenue and reward all across the board, consider yourself lucky. Most of the companies we see have more than their fair share of mismatches -- cases in which lower performers happen to have high earnings, and high achievers who earn less commissions than some of their peers. Sometimes tidbits of information like this get lost in the cracks, but if you chart your results, any mismatches will stick out like a sore thumb.
What can you do to make your plan predictable?
Don't plan in a vacuum -- get multiple opinions early and often. Complete your first draft, but don't try to perfect it. Make 'coaching' and review a part of your planning process. Here's how: Take your draft plan and host a 'rip it apart' session. You're looking for holes at this point, not elegant refinements. Get people together from finance, development, customer service, marketing, marketing, R&D, and quickly summarize the plan for them.
Instead of simply asking for group input, however, structure their reaction. If you don't give them structure, the strongest personalities will prevail, and that may doom the exercise. Instead, ask them all to look at the plan through the lens of a single perspective. Go around the room and get their reaction to each question before moving on to the next. What will the existing customers think? How will they react to the enhancement installation schedule? How will prospects react? What about your sales and indirect channel - what will they like and dislike? You might be surprised to find that your finance person doesn't believe your product delivery assumptions, or that your customer service guy knows your star salesperson is looking for a job... Whatever you learn, it's vital to get it on the table early.
The more 'fresh eyes' you have participating in your planning process, the more likely you will avoid forgetting something.
At the end of the general feedback session, share the bowling analogy. Describe the ball as the sales and channel management plan. The pins can be prospects or competitors, to be either amassed or destroyed. Any month you make plan is a spare or a strike. If this approach doesn't help you to better communicate the complexities of the planning process, at least it'll bring a smile to their faces. Better still; take them down to the lanes and bowl a couple of frames.
Jim Watson joined CMEA Ventures as General Partner in 2001, and is on the Board of Directors of Apriso, iSuppli Inc., Key Research, and Teros. Prior to joining CMEA, Jim was consultant to several professional services firms and venture capital partnerships in the areas of strategic planning and partnering, board development, and supply chain management. Jim was also one of the Founders of Monterey Bay Partners, a venture management firm specializing in high technology start-ups. Prior to that, Jim founded Skyway Systems, a high technology logistics company. Jim can be reach for article feedback at jim@cmeaventures.com
Tate Holt has nearly thirty years of successful leadership in positions ranging from executive and general management to marketing, sales, product development, and finance, as well as being a member of the Board of Directors of several public and private companies. His experience ranges from Fortune 100 companies to startups and from managing turnarounds to rapidly growing companies. He has led business development and operations in more than 40 countries, and been involved in dozens of mergers and acquisitions. Tate can be reach for article feedback at tate@thebusinessdoc.com
