Fix Your Sales Process Before Investing in Lead Generation

The Issue

Lately, I’ve been following many sales and revenue gurus on LinkedIn.

The #1 topic that is constantly discussed is dropping conversion rates in cold outreach and how difficult it is to secure high-quality inbound leads.

Having worked in the industry for many years, I can admit that demand generation is now more challenging than ever.

Many sales and revenue leaders still rely on increasing lead volume as the primary source of growth. And it makes sense at certain points in a company’s trajectory.

However, let us stop for a moment and think about our sales process performance.

Are we sure we can close leads efficiently?

If not, then why are we so obsessed with boosting lead volume instead of removing inefficiencies in our sales process?

I decided to write this article to discuss some common inefficiencies in sales performance that may cost you a lot of potential revenue.

Example

Let’s consider a very simple example to demonstrate how increased efficiency can boost your sales.

Before Improvements:

• Your monthly marketing budget is $10k.

• You generate a $100k pipeline monthly.

• Your current close rate is 10%.

• You close $10k of revenue monthly.

After Increasing Sales Performance:

• Your marketing budget is $10k.

• You generate a $100k pipeline monthly.

• Your improved close rate is 20%.

• You close $20k of revenue monthly.

I know this example is overly simplified, but it conveys an important message.

Doubling your sales doesn’t always mean doubling your lead volume.

Common sales performance gaps

Now let’s discuss sales performance issues that are particularly common for companies that don’t have a dedicated SalesOps or RevOps team.

Too many opportunities per 1 sales rep

This is also known as overcapacity. Sales representatives should be flexible but not overly burdened. If a salesperson has to handle too many opportunities at once, they will not be able to serve all potential deals equally and with the required level of quality. 

As a result, some deals will be lost simply because they are underserved.

What can you do?

1. Calculate how much time one sales rep spends on one opportunity monthly (it’s best to analyze historical data and successfully closed opportunities).

2. Estimate the average number of effective hours per sales rep monthly.

3. Divide the effective hours by the time needed for one opportunity in the pipeline.

This will give you the maximum number of opportunities one account executive can efficiently manage at once.

Next, estimate how much revenue a sales rep will close by considering the target close rate, average deal size, and the number of opportunities calculated above.

If the revenue is not sufficient, investigate what consumes the sales rep’s time and whether it’s possible to spend less time on a deal while maintaining high-quality negotiations.

Poor lead qualification

It's a significant issue in many companies. Some time ago, I coined the term "walking dead deals" to describe those deals that will never close. These are the deals that constantly slip or where communication with the customer is broken.

The #1 reason these deals appear in a pipeline is improper qualification. Sales reps qualify opportunities that shouldn’t be qualified.

What can you do?

1. Conduct thorough research to uncover the reasons behind these deals.

2. Define clear, straightforward, and strict qualification criteria.

3. Experiment with different qualification frameworks and create a list of effective qualification questions.

4. Develop, implement, and automate a lead scoring system.

Improper lead distribution

Are you sure you are passing highly potential leads to the right people? This is a significant issue in many companies where good and hot leads are managed by low-performing sales reps. 

Sending such leads to mediocre sales folks is like making bets in a casino. 

In this case, you rely more on luck than on a predictable system.

What can you do?

1. Implement lead scoring to evaluate the potential and complexity of each lead.

2. Use performance-based routing, taking into account close rates, average deal size, and sales cycle length.

3. Implement round-robin lead distribution to ensure fair lead routing, while prioritizing high performance.

4. Utilize AI and machine learning to continuously analyze historical data and adjust lead routing on the fly.

Pipeline Stages Issues

We all know the old idiom, "The devil is in the details." 

Often, overall sales process inefficiencies are related to specific bottlenecks hidden within particular pipeline stages.

For example, an issue with preparing and pitching proposals may lead to low conversions at the Proposal stage. 

A lengthy sales cycle can be shortened by streamlining paperwork at the Contracting stage. 

There are various issues that could be described.

What can you do?

1. Build a system where you can easily understand how each stage contributes to the close rate and sales cycle length.

2. Develop comprehensive reporting on pipeline stages.

3. Implement tools like Forecastio to spot issues early and gain insights into the root causes. This can help you prevent revenue leaks in the future.

Summary

Of course, there are many more inefficiencies that need to be discussed. 

I have described just a few very common reasons why companies lose potential revenue. 

Before you decide to scale your lead generation activities, take a moment to evaluate your sales process.

If you find it difficult to assess, refer to industry benchmarks. Is your close rate good? Are you capable of closing deals quickly enough? Is your average ramp-up period for new sales hires too long?

Make efficiency as important as lead generation, and you will be amazed at how quickly your business can transform.