Actions Sales Leaders Need to Take in a Recession
Author: collin stewart
There are a few key challenges that sales leaders face during a bad economy that they may not be thinking about already. The obvious roadblocks are prospects with tighter budgets and your own sales department facing budget restraints. But it’s the obstacles that aren’t so obvious, Steven Benson explains on a recent episode of the Predictable Revenue Podcast, that can be harder to overcome.
There are new challenges with your competitors. The adage “keep your friends close and your enemies closer” couldn’t be more prudent than at a time like this. A lot of your competitors are really hurting, and if they’re feeling desperate they may do desperate things like offer deep discounts, liquidate inventory, or give away free services in an attempt to undercut you and gain as much market share as possible.
There are new challenges with your customers and prospects. If they needed an excuse not to look at your product, they’ve been given an easy one. They’ll be resistant to meeting with you, resistant to spending money, and will be feeling new pressures from their senior leadership to keep it that way. Additionally, procurement departments will be more aggressive than ever. For people whose job it is to get discounts and better terms from you, a bad economy is the leverage they need to lower your margins and get their company a better price.
WHAT SALES LEADERS NEED TO DO
An economic crisis is one of the hardest times to be a sales leader. The whole company suddenly relies on the revenue your team produces not just to grow but to survive.
More than ever, Steven maintains, sales leaders need to confront reality and be-action oriented. That action plan can be broken down into 5 key areas:
- Communication & Transparency
- Changing messaging
- Adjusting KPIs
- Protecting compressing margins
- Coaching reps
Communication & Transparency
People’s imaginations can easily get the best of them. “Gossip of impending doom,” as Steven calls it, travels quickly and can lead to rash decisions and morale problems on your team. Consequently, it is more important than ever for sales leaders to communicate with their people in a transparent, realistic, and optimistic manner.
Your reps want security and safety. They are scared about the possibility of losing their jobs, and even more scared about the prospects of finding a new job in this market. Even if they feel their position in your company is secure, they are afraid that their commission checks will evaporate. This has a direct impact on their ability to make ends meet – salespeople aren’t paying their mortgages with their base salaries. So, be more responsive and supportive.
Be honest about the challenges facing the organization. Give your team a clear action plan to help them put their fears to rest and focus on selling. Let them know what that plan looks like in the immediate term, midterm, and long term, and what external factors can impact and change those plans.
Change Your Messaging
Buyers right now have fewer resources at their disposal and are being asked to do more. So change your messaging to reflect that. Change the focus from “we’ll help you do better” to “we’ll help you do more with less”. For example, before COVID Badger Maps said “we’ll help your field sales teams sell 20% more.”
Now they say “we’ll help you sell the same amount with 20% fewer reps.” This subtle shift in position has a huge impact on how it resonates with your prospects. Show them in a dollar amount how much more they can do with how much less (less money, less manpower, fewer resources).
Adjust Your KPIs
If it’s simply impossible for your team to close the same amount of deals in the current market, you’re going to have to revisit which KPIs you should focus on. This is all dependent on your company and industry, of course, but if you’re selling beer to bars, for instance, you can’t focus on how many kegs are being sold – and your reps aren’t going to be motivated if they can’t make any money.
In good times we manage by lagging KPIs (closed revenue) that are reflective of the effort of the past weeks, months, and even years. If we can’t close revenue, we need to shift to forward-looking KPIs that will result in closed revenue in the future. This could be top of funnel activity like prospecting and lead generation. It could be middle of the funnel activity like discovery calls and proposals created/sent. It could be bottom of the funnel activity like negotiation.
You could tack KPIs around discounts to try and protect your margins. At the end of the day, revenue is the most important KPI, but see if you can add some that will drive revenue in the future if they can’t generate revenue today.
Protect Your Margins
If it is still possible for your company to close deals, you’re probably experiencing difficulties in maintaining your profit margins. Prospects are negotiating harder and looking to cut costs wherever possible, and even a small discount for them can mean a big hit for you, revenue-wise. To mitigate this, you need to empower, enable, and encourage your reps to defend your margins.
Most sales reps in the software space are compensated on top-line revenue. In a lot of other industries where margins are tighter, reps are comped on profit instead. If your margins are tightening, as a sales leader, you can consider switching to this model. For example, if your profit margin is currently 30% and your rep is giving customers a 15% discount, you need 2 deals to generate the revenue of one undiscounted deal.
If the rep’s comp plan is aligned with revenue generated, they will only take a 15% hit on commission when they give the discount, but your company will take a 50% hit on profit. If the sales rep’s comp plan is aligned with profit, then they will take a 50% hit too and will be less likely to offer that discount. Don’t change your sales reps’ On Track Earnings or pay them less, but adjust comp plans to align with your business needs.
In some industries and cultures discounting is just the way things are done. But Steve suggests you price your product fairly, and rather than budging on price, negotiate on other areas of value creation your company can offer.
Coach Your Reps
This is an important time to level up your team’s skills. Steven recommends that you up the percentage of your time you spend coaching your reps to 50%. You can focus on pipeline building, pre-call strategy, post-call debriefs, ride along on their calls, and provide opportunity-specific coaching. Take a look at where your reps are having success, and empower those reps to share their strategies with the team so you can repeat and scale the behaviors that are working.
Perhaps the most important thing for everybody to revisit right now is negotiation. Refining your team’s negotiation skills will help them better defend your margins and demonstrate your value. Most software negotiations aren’t zero-sum negotiations – there is usually somewhere you can create more value for your customer by focusing on more than just the price.
These are wild times for sales leaders and sales reps alike. But the world keeps turning, we need to keep doing business, and sales leaders need a good strategy for how exactly to make that happen. Steven Benson’s advice is as follows:
- Focus on the long term
- Look for where you are still being successful and replicate those behaviors
- Rethink your ICP to who makes sense right now
- Update your messaging accordingly
- Help your team get through this
- Keep putting one foot in front of the other
George McGehrin’s recession-proof business model:
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