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Give Your Sales People All the Knives
As Q408 stumbles to a close, I’m seeing a distinct trifurcation of sales performance among the companies I’m working with. I’m pleasantly surprised by the companies that are solidly outperforming their Q4 plan, especially since Q4 is the hardest quarter to outperform (since the plan is now typically great than 9 months old.) Some are fighting to get to their Q4 plan and some are going to fall short regardless of what they do between now and the end of the month.
This is in direct conflict with what you might think if all you do is read the newspaper and watch television. If this is your information base, you’d conclude that no one could possibly have a successful Q408. Not true!
That said, in all of the companies I’m involved in, people are being very cautious about Q109, even in the ones that are outperforming Q408. Anyone who has ever played the MIT Beer Game understands how multi-stage supply chains can mess with your mind (if you don’t have any idea what I’m talking about, grab three friends and play the online beer distribution game.) Every startup is now living in an extreme version of this with a severe bullwhip effect.
Sales organizations – and decision making around them, especially in the forecasting part of the cycle – are especially susceptible to this phenomenon. Since most companies are now working on their 2009 plans, paying special attention to this on the top line is especially important this year. While talking through this at one of the SaaS companies I’m involved with, I made the comment "give your sales people all the knives."
In the software business, we’ve been struggling for the past few years with the transition from traditional perpetual software licensing to subscription based licensing. Layered on top of this is the split between desktop software, server-based on-premise software, and SaaS-based software. All are valid deployment, sales, and pricing approaches although on some days of the week you’ll notice that religion takes over, especially when VCs tell you "we only are funding SaaS-based software companies" or "enterprise software sales is dead." Ok – whatever.
My solution is to give your sales people all the knives. I’ll be more specific in another post, especially since it won’t really matter this quarter. In the mean time, go play the beer game before you finalize your operating plan.
It's all a crapshoot anyway isn't it? Al this forecasting and, like you said working, working with projections 9 months old. What's the point of all this if everyone knows it's for naught?
Damn I made some bad grammatical mistakes. Wish I could edit the comment, but alas, it will last for eternity on the interweb now.
wow, great post Brad. I forgot about the 'beer game'. You are absolutely right about creating the whipsaw effect strictly by making making future assumptions based on recent past performance indicators. But I think there is one difference here: I don't think companies know what the future holds at a macro level and how the economy generally is going to have negative unpredictable effects on their micro future. I think that macro uncertainty which is having a down-draft on everyone's Q1 expectations. I do agree that those that believe in their model should hold steady and have confidence.
Yeah – the macro-uncertainty is playing havoc with everyone’s 2009 planning, especially for Q1. Since it’s happening throughout the entire supply chain (ala the beer game) the uncertainty is getting amplified in odd and unpredictable ways. As a result, I’m encouraging all of the companies I’m involved in that are either profitable or generating meaningful revenue to get ready to do a regular (at least quarterly) rebudgeting exercise in 2009.
Hi Brad,
Just wondering if you are still planning to post an explanation of what you mean by ' give your sales people all the knives.' It's an interesting phrase and I'm not sure I'm parsing it correctly.
- Sean
Yup – it’s in the “edit cycle” right now (which means I’ve written it but now need to clean it up and post it.) Coming soon.