For a change, this blog is probably targeted more at the CFO, Finance and/or Sales Ops than my typical musings. However, it is also applicable to sales since we are the ones positioning, negotiating and closing the deals – and I think this approach can help you do that much faster. I first wrote about this topic in a co-authored article with Frank Cespedes of the Harvard Business School. (If you missed it CLICK HERE.) As I stated then, while this type of approach has been applied on a deal by deal basis, I believed with thoughtful analysis, it could also be implemented for the overall business – and produce dramatic business results.
When discussing Business Strategy with executives, I find that even if they have a clear strategy, identified their ideal customer profile, and organized their go-to market strategy around these, the business results often are not meeting expectations. In virtually every case, these companies do not have a clear definition of a great deal – meaning the right business deals to support the strategy. This results in too many closed deals that are “unique” or downright ugly (especially with larger customers). And when you look closely at the elements of these deals they often run counter to the stated strategy of the business – and contribute to an unhealthy business today.
Therefore, I would submit the de facto business strategy of the company is the sum total of the actual deals that are being closed today. After all, they had to be approved by someone! Usually the more “unique” or ugly the deal, odds are it was closed in the late innings of a quarter and required higher approval levels. Often, they are justified to close a topline bookings gap. They get approved because it will be much later that the negative business impacts of these unhealthy deals are felt. What can be done to improve the consistency and quality of deals?
The Strategic Deal Profile – Advancing Our Business Strategy
The Strategic Deal Profile provides a pre-determined, well-defined “target” for the sales organization to aim for. It helps the sales organization to position the right deal structures early in the sales cycle and provides the flexibility to negotiate the deal within predetermined ranges. The result should be more consistent deals of much higher economic (and strategic) value to the organization that close faster without needing last minute intervention from numerous internal stakeholders.
This requires us to determine what the “right” deals look like before we start selling and promulgate this throughout the organization along with the strategy. If achieving the current Business Strategy is the end game, then the Strategic Deal Profile establishes how that strategy will be achieved on a deal by deal basis. Utilizing all appropriate internal stakeholders, we begin by predetermining items such as:
- What product / service mix is optimal?
- What new products or services are key to our future growth and direction of the business?
- What levels of discounting are acceptable based on volume, term, service attach, etc.?
- What products or services are particularly “sticky” and make for greater switching costs down the road?
- Should we include Customer Business Reviews and define the individuals we want to meet with to stay relevant to key decision makers?
- What contract T&Cs are critical to meeting the business and financial objectives and what leeway can we tolerate in each?
- What commercial terms for transaction items like lead times, minimum order quantities, payment terms, contract term, product returns, etc. are key to success?
As shown in the above figure, once we have established the key Negotiation Levers, we can then prioritize those levers because everything in a given deal is not usually equally critical to the Business Strategy or economic impact of the deal. Finally, acceptable ranges for each item can be established. Sometimes ranges are contingent on the status of other levers, which is to be expected. As mentioned before, the Strategic Deal Profile is then promulgated throughout the organization along with the other elements of the Business Strategy.
Empowering Sales – More Positive Business Impacts
It is key that sales be empowered to position, negotiate and close any deal as long as the results are within the “guardrails” of the acceptable ranges. Implemented in this fashion, the selling organization should see significant business impacts:
- Much more consistent deals with better economics and strategic value
- Reduction in the time and resources devoted to the internal negotiation (essentially done when developing the Strategic Deal Profile)
- Shorter sales cycles since sales reps are empowered to negotiate deals on the spot (reduced impromptu internal negotiations)
- Improved customer satisfaction as deals should have the critical products/services as well as support needed to produce customer success
The process of developing the Strategic Deal Profile, though straightforward, is not always easy as it involves many stakeholders in the organization. However, the effort is well worth it when you consider the number of “crisis internal negotiations” that will occur at the end of each quarter and the damage that unhealthy deals do to corporate strategy and overall health.