During the process of interaction with the various vendors competing for the business, the prospect will gain a better understanding of the competitive landscape, understand better what is on offer and refine their requirements based on what new functionality and services are available. They also become more realistic as to what they can achieve with the available solutions.
It is partly because of this learning process that the vendor creates the steps which the prospect will pass through. This limits the exposure of the vendor to withdrawals and rejections as well as ensuring the prospect becomes more committed to a solution.
Another reason for the staged approach from the vendor viewpoint is to manage sales resources. With a finite amount of resources in both sales and pre-sales capability, the vendor needs to allocate these to achieve the optimum outcome. They need to balance the requirement of progressing enough qualified leads to ensure sales targets while also devoting enough time to each stage to progress the best prospects. This is usually done by working with the sales people to ensure that they have adequate numbers of prospects at each stage in the process.
For example, the ideal scenario might be 100 sales leads to one prospect in final agreement approval. The initial 100 could be allocated across all stages to show what number of prospects should, ideally, be managed at each stage. Thus, if there are 100 new sales leads, there should be 40 at demonstration stage and 20 at RFP stage and so on. It is from this spread that the vendor can expect a steady stream of new sales. Any lumpiness in the process will result in lumpiness in the final sales figures.
Too many sales leads will result in a dry patch of sales while too many in final closing stages will result in a dearth of sales some months out due to the lack of progress at intermediate stages.
Each salesperson should be able to track every prospect in their pipeline and be able to state what has happened, what will happen next and when it will happen. They should be able to explain what they are doing to set up the next activity and how they are building support for the next step and steps beyond that.
Where a prospect has stalled, sales management should review with the salesperson various actions which they can take and other resources which might be used to move the prospect along. It is only by regular and systematic review that progress can be assured and poor performance identified.
Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.
