Category: Sales Efficiency

Every established sales leader should have a firm grasp of sales capacity planning. Once you’re confidently executing the Sales Foundations, it’s time to build your sales capacity plan.

What is Sales Capacity?

Sales Capacity is a way of measuring a sales team’s ability to deliver revenue targets based on expected sales productivity per head. However, life is never that simple, but you’ve got to start somewhere. So, let’s make some assumptions and start to build a Sales Capacity model.

Calculating Your Sales Capacity

Let’s use an example to illustrate the calculation:

Step 1: How many Sales Qualified Leads (SQLs) can your average sales person manage per month: Let’s assume it’s 10.

Step 2: What is the average conversion rate from SQL to win: Let’s assume a 30% win-rate.

Step 3: Now we can calculate the average number of won deals pm per sales person:

Average number of Opportunities pm x Average Conversion Ratio = Average number of Won Deals per Month

Step 4: What is the average deal value (ADV)? Let’s assume that the average won deal value is $50k. Have a look here for more on increasing the ADV.

Step 5: Multiply the $50k by the average number of won deals per month (3) to get the average revenue per month per sales person:

Average Deal Value x Average Won Deals per Month = Average Monthly Sales Capacity (in the example above, it’s $150,000 pm)

Step 5: Now work out how many sales people you need, on average, to hit your total sales target. Let’s assume your annual sales target is $10m. Therefore, the calculation is:

Total Annual Sales Target/(Average Monthly Sales Capacity per salesperson * 12) = Sales Capacity Requirement (in this example, it’s 5.5 sales people)

This is your starting point – now it gets more complicated! As with revenue forecasts, the capacity projection has a lot of variability associated with it and opportunities for increasing Sales Efficiency. For example:

• Average sales cycle length (closed-won and closed-lost)
• Seasonality
• Size of territory
• Customer segmentation
• Product/service range and Average Deal Value
• Salesperson experience
• Salesperson staff turnover rate
• Ability to consistently generate the required number of leads and hit the sales targets

Step 6: Now, start to add in the above variables to your sales capacity model and re-run the scenarios. You’ll likely end up needing at least 25% more sales capacity to hit the sales target, i.e. in our example, you’ll need 7 sales people not 5.5.

Note: You also need to look realistically at the lead-gen process; the above example requires 660 unique SQLs pa which is probably equivalent to >5,000 Marketing Qualified Leads (MQLs) pa!

How To Build A Sales Plan

Now you’ve got a Sales Capacity model, you need to build a Sales Plan. Here’s our step-by-step guide:

Do Your Homework

Gather as much information from past sales trends to try and predict the future. For example:

• Were sales healthy in the previous year? The last two years? Five years?
• How have your competitors performed?
• Have buying habits changed?
• What are your core segments?
• Who are your star performers and why?
• And …..

Having this core information and analysis will allow you to become familiar with trends within your business and your industry as a whole. Using this method enables you to build a strong foundation for a sales planning process.

Define Your Objectives

You cannot measure success without goals. Defining goals and objectives is one of the crucial first steps in the sales planning process. Establishing them early allows the team to have a firm understanding of the direction the business is heading in.

Be Clear About Success Metrics

If you can’t measure success, how will you know when you’ve achieved it? Performance indicators (KPIs) are vital when it comes to determining success. Traditionally, KPIs would include Closed Won Deals, Sales Velocity, gross profit margins, conversion rates and a whole raft of other sales metrics.

Forecast Your Sales

Now, take your Sales Capacity model, your assumptions and objectives and start forecasting. Include as many assumptions as you can think of (including skill and experience gaps) and use them as variables in the Sales Forecast model. Then, run different scenarios until you end up with a realistic, stretching, but achievable forecast.

Involving stakeholders once your sales planning process is coming to an end is essential, as it will allow all key areas of the business to be included. This inclusion will hopefully ensure that all stakeholders feel responsible for their part in the plan. The more engaged that different departments become, the better the outcome.

Create Engaging Initiatives

Now work with marketing to build campaigns (by month) that will generate leads in order to hit your targets. Measure what matters and build sales dashboards to keep on top of your lead and lag indicators of success.

Three Common Sales Capacity and Sales Planning Pitfalls And How To Avoid Them

1. Lack of Alignment With Business Strategy

There can be a slight disconnect between the sales plan and the long-term business strategy. Specifically, target geographic territories, customer segments, product/service line mix, pricing/margin strategy, etc. Resolve this by having a regular slot at the quarterly strategy sessions to present updates on sales plans. Additionally, regular 1:1 Exec meetings is a way of building alignment in between strategy sessions.

2. Under Estimating Attrition Rates

Being aware of previous years’ attrition rates and trying to plan for this in the current year is important when rolling out your plan. If you estimate that, based on last year, 10% of salespeople may leave this year and it’s actually 20%, it will hinder your chances of hitting financial targets. Monitor this closely so that the multi-month ripple effect can be avoided, or at least minimised.

3. Underestimated Ramp-Up Time

Just like attrition rates, sales capacity plans can underestimate the ramping-up process for new sales team members. When a new staff member is hired, they’ll need time to get to grips with how the business operates. This ramping-up process takes time and almost guarantees that a newly hired salesperson won’t be at full productivity for several months.

Summary

Sales capacity planning is a lot harder than it looks, but by making assumptions about factors that could become an issue, it becomes much easier to provide more accurate plans/forecasts. Use the principles above to establish your sales capacity plan and get in-front of the complexity that is natural in this type of iterative exercise.

Knowing how to improve your sales capability is a key element of establishing a successful career in sales. Learning and refining new or existing negotiation skills to improve your sales capability is one of the most productive things you can do to improve sales. Whether you’re new to the industry or have 20 years’ experience, it’s essential to build solid foundations in sales and negotiation skills.

This guide will provide you with 6 critical negotiation skills to improve your sales capability. Each one is tried and tested to help you harness your negotiation skills and ultimately increase your sales numbers.

What Is “Sales Capability”?

Let’s understand what we mean by sales capability first. 

“Sales Capability” is fundamentally about the following:

• Sales prospecting.
• Sales leadership and management, target setting and KPI-tracking.
• Sales CRM systems management.
• Intelligence gathering/research, listening skills and analysing customer problems.
• Creating value/ROI, solution building and overcoming resistance.
• Negotiating profitable commercial deals.
• Winning and growing business.

Being able to self-diagnose your strengths and weaknesses is a key part of being able to grow as a sales person.

What Is A Sales Capability Manager?

A Sales Capability Manager is essentially responsible for implementing strategic initiatives to help drive a salesforce forward. Having someone oversee the development of sales tools and techniques is a great way of driving long-term sales growth. Adopting this approach will provide salespeople with the support they need to succeed.

Why Are Negotiation Skills Important To Improving Sales Capability?

Closing a deal on the best commercial terms requires excellent negotiation skills. Having an effective, tried and tested set of negotiation skills, tools and checklists is crucial when it comes to improving a salesperson’s sales capability. These skills are one of the cornerstones of any improvement strategy.

It’s important to remain consistent in your approach to negotiation, regardless of whether a formal capability framework is in place. Allowing yourself to fall into haphazard, unstructured and an unprepared way of negotiating makes it impossible to improve your long term potential and success.

What Is A Sales Capability Framework?

A sales capability framework is a simple list of knowledge, skills and behaviours that impact a sale from start to finish. This list of “competencies” can be used to show a salesperson what’s expected from them and how to achieve it. Elements within this type of framework include:

• Collaboration – how well a salesperson works within their organization or externally to achieve a sale. Having a firm grasp of how a salesperson works alongside others is crucial when establishing what their capabilities are. The bigger the sale, the more complex the deal, the more that collaboration and communication is essential.
• Commercial Focus – a critical component of the framework is a salesperson’s ability to think commercially about the best way to negotiate the commercial terms of a deal. There are many different ways to build a commercial proposal which is about much more than just price.
• Communication – This lends itself to both customer-facing and non customer-facing elements of a sale. Great communication skills with customers will always help with closing a sale, while communicating effectively with a team will ensure things run smoothly. Focusing on improving communication from the very first point of contact with a customer can make all the difference.
• Customer Excellence – Aside from communication, this is one of the most important elements of strengthening your sales capability. Focusing on specific training to address any weaknesses in confidence when dealing with customers is key. Obtaining feedback from customers based on their experience is a great way of measuring where an individual or team can improve.
• Decision Making – Having a strong sense of self is a desirable asset for any salesperson. Knowing how to make firm decisions based on facts rather than emotions is how a lot of the best sales are closed. Decision making training and technique guidance are a great way of strengthening this skill.

Evaluating Your Sales Capability Framework

Once you have a sales capability framework in place, it’s essential to review it regularly. Whilst it’s not always a fun task to objectively review your own performance, it’s necessary in order to advance within a sales career.

Having a clear idea of the objectives and how to implement them on a daily or weekly basis is essential when evaluating a sales capability framework. It often falls to a Sales Manager to review and implement this type of strategy and provide support for salespeople. Some of the key things to bear in mind when evaluating your framework are:

• Is there just one element in the framework which negatively affects the others?
• Can these issues be resolved by further training or support?
• Are there any unavoidable external factors (e.g. economic uncertainty) which are having an impact?
• Are there any personal issues that the salesperson is facing, which could be impacting their capability?
• How do members of a sales team compare against each other? Could certain peoples’ strengths be used as a training method for others?

How Do You Develop Sales Capabilities?

Sales capabilities can be developed and strengthened through various training courses and by insights provided by enlisting a Sales Capability Manager. Adopting a more structured approach to assessing sales capabilities can be extremely successful when improving the skill set of a salesperson and/or team.

• Attend Sales Training – Extend your skill set by taking advice from trained professionals within your field.
• Roleplay – Acting out true to life situations in a safe environment can be a great tool when it comes to learning. Running through multiple scenarios and solutions will give a better insight into the challenges salespeople may face.
• Seek Out A Mentor – There’s often nothing more valuable than taking advice and pointers from professionals within your field. Enlisting a sales/negotiation mentor can have a significant impact on salesperson performance/success.
• Review Your Own Performance – It can be daunting to critique your own performance or sales calls, but it pays to be honest with ourself. Listening to recordings of both successful and unsuccessful sales calls are a great way of recognising how you’re performing and where to improve. 
• Listen To Feedback – It’s never a comfortable task to listen to feedback, especially if it’s negative. However, taking the time to review customer feedback will allow you to recognise areas of your sales capability which need improving.
• Switch Up Your Closing Techniques – Play around with how you try to close a sale. Different customers will react differently to your many techniques, so learning how to adapt and respond will allow you to develop.
• Enlist A Sales Capability Manager – Having someone else to report into, who has previous knowledge of sales techniques, can be very beneficial to a team of salespeople.

Six Critical Negotiation Skills that Will Improve Your Sales Capability

1. Be Prepared

Do your research in advance of any negotiation. Establish why the customer needs what you’re selling. If you’re solving a client’s problem with a compelling ROI, they’re more likely to negotiate a deal with you. What’s the time imperative; why do they have to solve this problem now? Do they have the budget required to buy your solution (based on the RoI)?

2. Build Trust

While nobody is saying that you need to become best friends with a client, you do need to build trust. As David Maister noted, trust relies on credibility, reliability, intimacy, and self-orientation. Trust isn’t built overnight, it can take months, and in some cases, years. When negotiating, mutual trust becomes an important factor in reaching agreement.

3. Be A Problem Analyser and Solver

According to Einstein he famously said “If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions”. So, once you’ve established the problems/pains that a client is facing, spend time really understanding the symptoms and root causes. Refer back to things that the client may have said when describing their current situation. Draw on your personal and industry knowledge. Then, spend time together building and negotiating the scope of possible solutions.

4. Don’t get Emotional

If you’re hot headed or often react based on emotion, it’s going to be a big problem. Negotiators are trained to emotionally-detach from a situation. Think about the PAC model when negotiating – adults talk about facts. Bring the discussion back to the rational if you sense it going off track.

5. Educate never Threaten

As William Ury said in Getting Past No, educate your counterparty, never threaten. If you sense resistance and people simply “digging in”, try and educate them about the impact of not moving forward. Go back to your objective-criteria for agreeing a deal. Re-frame problems and collaborate on creative solutions.

6. Turn Up Your Listening Skills

This type of skill is unbelievably helpful in every aspect of life, not just within a sales or negotiation environment. Taking the time to see your client as an investment rather than just a commission-earner is essential to improve your sales capability. Seeing the client in this way will ensure that you’ll take the time to really listen to their needs. Clients will be thankful that you’ve taken the time to listen to their problems/needs and want to work together to address them.

Start Improving Your Sales Capability

Taking the time to increase your sales capability will be of significant benefit to your company, your sales quota and your clients. It will provide you with a more prepared, confident and well thought through approach to negotiation. Take the time to strengthen and improve your sales capability and you’ll be surprised at how fruitful your efforts will be. We’ve seen that improving negotiation skills can increase revenue by up to 25% pa – with sales and negotiation training.

For more support in growing your negotiation skills, try sales-specific training or coaching sessions for you and/or your team.