How Zendesk is Able to Forecast Revenue Within 1%
Author: collin stewart
There’s detail… and then there’s detail. We’re extremely lucky at The Predictable Revenue Podcast to talk with sales pros that have built inspiring processes that we – and hopefully our listeners – can use to help sharpen our own methods.
But this week we chatted with Jaimie Buss, VP of North American Sales at Zendesk, about how she builds her razor sharp revenue forecasts (routinely accurate within 1%), and all of our expectations of were blown out of the water. Buss is an absolute process powerhouse. Her use of in-depth stages throughout Zendesk’s sales funnel, as well as her adapted MEDDPICC qualification process, is a template we should all strive for.
And the results speak for themselves. “Before implementing our processes, the forecast was being missed by a large percentage, maybe 25%. But, you have to be within 5% – that’s industry standard. So most quarters, we have been within 1%. For two quarters, we were within 5%, that’s not too shabby on the whole,” says Buss, during our chat on The Predictable Revenue Podcast.
But, it really comes from the team. Hands off to my team, really. It comes from them knowing the process, knowing their deals, and driving these results.
Stages of the sales funnel
Of course, rock solid sales processes are rarely, if ever, rock solid from the start. And Zendesk was no exception to this rule. When Buss first started at the company she realized that her reps weren’t using a common language when discussing the stages in the sales funnel. For instance, Stage 2 in the sales funnel meant one thing to one rep, while Stage 3 meant something entirely different to another.
This gap needed to be fixed – Buss had to figure out a common language that the whole sales team could use for both sales process and qualification methodology. If she was going to build a precise forecasting method, everyone would have to be on the same page.
“So, when we had a forecast call and I asked about Stage 3, we all said the same thing. That allowed me to apply probabilities to sales stages and really asses my conversion rates from existing opportunities based on how far along they are in the funnel,” says Buss.
I feel so much more confident in our deals, and it gave more confidence to our reps too. The common language has allowed us to do that.
So…what is that common language?
It’s a sales funnel that centers around a fixed set of stages, each with a non-negotiable customer verifiable outcome (concrete proof from the customer that the deal can progress along the funnel).
Zendesk’s Sales Stages:
Stage 1: Qualification (part 1) – Buss omits this stage from her forecast. This is general prospecting work, where no meaningful connection with a prospect has yet been made.
Stage 1: Qualification (part 2) – When a sales rep finds a potential deal, it lands firmly in Stage 1. The customer’s verifiable outcome to pass this stage is the customer attends the initial meeting and they agree to proceed to a discovery call.
Stage 2: Discovery – This is the first stage that involves a closing rep. A general discovery discussion (are we a fit?) forms the basis of the call, with special attention paid to the stakeholders that attend. After each call, an email summary is sent, consisting of what the agreed upon next steps will be, and a summary of what the Zendesk reps have learnt thus far. Finally, the customer verifiable outcome is that the prospect attended the call, and has agreed to get the right people on the demo coming up.
Stage 3: Solution Review – This is a critical step. The solution review is when the Zendesk rep performs the demo, and gathers any of the technical requirements the prospect needs. That doesn’t necessarily mean it’s a technical win for Zendesk, but the rep, at least, understands all of the technical requirements involved in the deal. The customer verifiable outcome is that “doing nothing” is off the table (the customer has confirmed they will be moving forward with a software solution of some kind). The way Zendesk confirms this is by quantifying that doing nothing is more expensive than implementing a new tool.
Stage 4: Solution Validation – At this stage, Zendesk has confirmed they can meet the technical criteria, and they have gathered a full picture of the paper process involved in closing the deal. For instance, who needs to sign? Is there an order of operations that the signing process needs to follow? And, does the customer need to issue a PO? The customer verifiable outcome is that Zendesk understands everyone that needs to be involved the deal (the aforementioned paper process).
Stage 5: Verbal Contracting – This is, simply put, the contract negotiation phase. Typically, there is an agreement on price, but there may be concessions that need to be dealt with as well. The customer verifiable outcome is a signed service order, and a signed services agreement, if they’ve negotiated one. If there is a statement of work, then that needs to be signed as well.
Stage 6: Finance Review – Finance takes over at this point, and reviews everything to make sure there are no omissions. If something needs to be reworked, finance will send it back to sales at this point.
Stage 7: Finance Final Round – This stage isn’t done with sales at all; finance just checks all the boxes, ensuring the documentation is accurate.
MEDPICC Qualification (this applies to all deals over $12,000 Annual Recurring Revenue (ARR). Deals below this threshold aren’t subject to these constraints)
In case you thought those funnel stages weren’t quite thorough enough, Buss also uses an in-depth qualification method to score Zendesk’s opportunities and highlight the health of each pending deal.
“What you need on top of the sales process is a qualification methodology because qualification runs through all of this. The sales process is all about the customer verifiable outcome. They’ve told us we’ve won, or they’ve told us we won technically,” says Buss.
But, I am a process oriented individual. And in a high paced, transactional environment, I felt the team needed a way of scoring their opps to show how qualified they are. Opportunities aren’t all the same, of course.
MEDDPICC stages (shown here out of order, the order of the acronym isn’t important):
Metrics – this step is all about how Zendesk quantifies success for the customer. For example, what are the metrics their customers are gathering that they want to change? Is it response time? Or, is it resolution time, or customer satisfaction? These numbers form Zendesk’s ‘as is’ statement about the customer. Then, Zendesk asks what the customer wants those metrics to be. Those desired metrics are important – they become an anchor along the sales process. If possible, Zendesk will quantify what those desired metrics will mean to the prospect.
Identified Pain (this is a critical step) – this is very closely related to the metrics step. An easy way to quantify this is to highlight how many SLAs the prospect is missing on a monthly basis, and what the cost of missing them is. This is a critical piece of qualification – if Zendesk can highlight the cost of doing business ‘as is’ they have a better chance at winning the deal.
Zendesk reps also score this step in Salesforce – a score of 0 means they don’t know what the pain is. A score of 1 means the rep has uncovered the pain, but can’t yet quantify it. Finally, a score of 2 means the rep has identified the pain and quantified it so the customer agrees that ‘doing nothing’ is no longer an option.
Economic buyer (this is another critical step) – the economic buyer is the person that owns a budget and, if they choose, can move money around to make a purchase. For example, they can hold off hiring for the quarter, which frees up enough money for me to make a SaaS purchase.
Zendesk also scores this in Salesforce: a score of 0 means they don’t know the economic buyer. A score of 1 means they know who the economic buyer is, but doesn’t have a relationship with them. Finally, a score of 2 means they have built a relationship with the economic buyer.
Decision Criteria – this is all about the technical requirements needed to win the deal. Zendesk reps are required to know what they do well that the competition can’t do, as well as what the competition does well. And, of course, they also need to know where they overlap with the competition.
Zendesk scores this in Salesforce as such: a score of 0 means they don’t know their criteria. A score of 1 means they have mapped the technical requirements out, but haven’t met them all. A score of 2 means they have mapped out the requirements, and confirmed with the client that they can meet them all.
Decision Process – this step requires an understanding of all the stakeholders involved. For instance, there may be hidden business lines that could be involved or impacted by implementing their tool. Zendesk needs to know that.
Zendesk scores this in Salesforce as such: a score of 0 means they don’t yet know all of the stakeholders. A score of 1 means they understand the process, and who all the stakeholders are. Finally, a score of 2 means they know all of the criteria, and they’ve proven they can meet them.
Paper process – this step requires an understanding of all of the signed contracts needed to win the deal. For example, who are all the people needed to sign? And, what is the departmental sequence required for the contract signing?
Zendesk scores this in Salesforce as such: a score of 0 means the rep doesn’t know what needs to be signed (highly unlikely). A score of 1 means the rep knows everything that has to be signed. And, finally, a score of 2 means the rep knows everything that has to be signed, the order in which they need to be signed, and they can closely predict the closing date.
Champion (this is an important step) – Zendesk defines a champion as: someone who has power and influence, and something to gain from the deal. The champion may not be able to move money like an economic buyer, the champion is willing to get the deal in front of one and pitch it.
Zendesk scores this in Salesforce as such: a score of 0 means they don’t have a champion. A score of 1 means the rep believes they have a champion, but has not tested that person. Finally, a score of 2 means the rep has a champion, and has tested their willingness to get the deal in front of an economic buyer.
Competition – this is a great way to test the champion. For example, Zendesk reps will always try to get the champion to disclose who they are up against. Knowing who the competition is helps Zendesk set the focus of the conversation (remember, Zendesk reps know the strengths and weaknesses of their competition intimately).
Zendesk scores this in Salesforce as such: a score of 0 means they don’t know who the competition is. A score of 1 means the rep suspects who the competition is, based on inference. A score of 2 means the rep has been told who they are up against
Based on the scores attributed to each step, Salesforce will add the results up for Jaimie Buss, giving her a concrete look at the health of each opportunity.
What did we tell you? There’s detail…and then there’s detail.
Experience and a lot of testing have shown us that it is possible to create email templates that people actually resonate with.
You don’t have to figure it out alone, whether you’re starting off as a sales representative, looking to improve your game or providing your team with expert advice, we have your back!
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