By ERIC SCHMIDT

“Sales development is an organization that sits between the marketing and sales functions of a business and is in charge of the front-end of the sales cycle: identifying, connecting with, and qualifying leads. Simply put, this organization is tasked with setting up qualified meetings between a salesperson and a potential buyer with a high probability of purchasing a product.*”

*Wikipedia

Building a Sales Development Function:

One of the most impactful programs that we have experience with is the implementation of a solid Sales Development program. The need for a Sales Development program didn’t come from reading a book or an article or anything like that. It came from practical, real-world experience of trying to increase sales through a channel. You can read the whole journey of how we landed on the need for a Sales Development program by getting the e-book here. We had successfully increased the leads and opportunities that we handed to our distribution but weren’t seeing the relative increase in sales that one would expect. We believed we had a leaky funnel. It makes total sense too… when a lead or opportunity is handed over to distribution sales reps they are most likely to focus on those that are ‘Hot’ and expected to close soon. Leads that are not ‘Hot’ require a significant amount of touches, nurturing and developing to get them ready. Who is responsible for those touches? Is it your BD function or Sales function? In a long, complex sales cycle – there was definitely a gap. Justifying a new function can be a challenge and potentially a very costly endeavor, so we recommend putting together a pilot program.  The pilot program will accomplish several things, if done well. It provides a way to test your hypothesis in a quick, inexpensive way. You can gather true, validated learning from the results.  You will gain support and excitement if you are transparent with your hypothesis, results and commentary on what worked well and what didn’t. And most importantly, you will be able to take the results and roll them into the justification for the larger investment. Disclaimer:  You must have data! This really won’t work without the data.
Here is how we worked through the process of justifying the program: 

Step 1:

We started by showing the actual number of opportunities that had historically been generated:

Year 1
Year 2
Year 3
Year 4
Year 5
3,500
5,400
7,600
7,200
10,000 (Goal)
  • We were trying to add resources to the BD department as part of the investment and scaling of the Sales Development program.
  • There really isn’t much ambiguity around these numbers or uncertainty.  The goal is based on average productivity (historical data) so there really isn’t anything that could be disputed or argued here.

Step 2:

The next step was to break the opportunities down by source and look at close rates and average order size.

In the table below, all we are showing is the dollar potential based on the goals set above.  Again, we are not guaranteeing the dollar potential shown, but rather saying that if our historical data holds true (which is a pretty high likelihood) that you could expect the following return.  Now obviously there is the law of diminishing returns and we can’t keep adding BD resources and expecting to maintain the same the productivity, etc…We understand that and addressed that in the presentation – but it something you should be aware of.

These numbers would automatically serve as your goals and expectations for your business development function in the coming year.  You would break them down into monthly goals and KPIs and be measuring and ensuring you were on track.

Source & Timeframe
Close Rate (from Oppty to Win)
Conservative Avg. Order Size (70% of avg)
Potential Sales (based on goals above)
Dollar Potential
Calling
6%
$25,000
1,000 @ 6% = 60
$1,500,000
Construction Sources
5%
$30,000
3,300 @ 5% = 165
$4,950,000
Inbound Phone
16%
$35,000
1,350 @ 16% = 216
$7,560,000
Email
9%
$29,000
360 @ 9% = 32
$928,000
Website
10%
$22,000
3,150 @ 10% = 315
$6,930,000
TOTAL
$21,869,000
Also note, we did not include all sources in the tables just to make it simpler and keep some data confidential.

Step 3:

Next what we did was use the data from our pilot to show the impact of being able to increase the close rate by a few percentages.  We knew that even a small increase in close rate would yield a fairly large impact on the business overall. Our limited data from the pilot was showing that we could expect a roughly a 25% – 30% increase in close rate. For the purposes of the business case, here is what we did: Walking through the table from left to right – you have:
  • The source of the demand (i.e Web, Email, Calling, etc…) – capturing your sources is key in order to know where to invest more time and effort, where to tweak your practices, etc…
  • The close rate (from Opportunity to Win)  – how many of our total (by source) actual convert to a won sale.
  • We took the average order size by source – and we lowered the actual number to be more conservative.  It’s interesting to see the size differ by source.
  • Dollar potential is just straight math (Goals of Oppty – above * Close Rate * Avg Order Size)
  • Next we hypothesized that we could increase our close rate – the whole point of creating a Sales Dev function.  Our pilot told us we could expect to see between a 25% – 30% lift. So you can see that we added 2% to our existing close to get the new close rate.  In almost all instances it fell close to our pilot results.
  • Then we did the potential sales math again with our new close rate
Source & Timeframe
Close Rate (from Oppty to Win)
Conservative Avg. Order Size (70% of avg)
Potential Sales (based on goals above)
Dollar Potential
New Close Rate
SDR (Plus 2%)
Calling
6%
$25,000
1,000 @ 6% = 60
$1,500,000
8% (33% Inc)
$2,000,000
Construction Sources
5%
$30,000
3,300 @ 5% = 165
$4,950,000
7% (40% Inc)
$6,930,000
Inbound Phone
16%
$35,000
1,350 @ 16% = 216
$7,560,000
18% (12% Inc)
$8,505,000
Email
9%
$29,000
360 @ 9% = 32
$928,000
11% (22% Inc)
$1,148,400
Website
10%
$22,000
3,150 @ 10% = 315
$6,930,000
12% (20% Inc)
$8,316,000
TOTAL
$21,869,000
$26,899,400

We added one more column below, more as stretch goal to account for our continued learning and inevitable improvement over the course of the year.

Source & Timeframe
Close Rate (from Oppty to Win)
Conservative Avg. Order Size (70% of avg)
Dollar Potential
SDR (Plus 2%)
SDR (Plus 3%)
Calling
6%
$25,000
$1,500,000
$2,000,000
$2,250,000
Construction Sources
5%
$30,000
$4,950,000
$6,930,000
$7,920,000
Inbound Phone
16%
$35,000
$7,560,000
$8,505,000
$8,977,500
Email
9%
$29,000
$928,000
$1,148,400
$1,252,800
Website
10%
$22,000
$6,930,000
$8,316,000
$9,009,000
$21,869,000
$26,899,400
$29,409,300
As you can see we believe a Sales Development function can have a big impact on a business. – Especially in a business that is selling through distribution. In the case above, the business could expect to see between a 23% – 35% increase in sales by increasing business development and adding a Sales Development function.

How do you present the program to a distributor?

I am sure there are dozens of ways, but below you will find a presentation that helps bring context to the impact on a single distributor, along with helping to set expectations and goals.

Results

We were more than able to meet our business case with actual results.  We are happy to discuss the specifics of the program with you and get into all of the details of HOW to actually start up a program, the gotchas to be on the look-out for, etc.

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