We’ve all heard the news - there’s a massive problem happening in sales - quota attainment has been in a steady decline for years.
When reps aren’t hitting quota, retention becomes an issue. If the company can’t make them successful - if reps can’t get commission cheques - then will they stay? Will we have another open headcount & territory to fill? In a time where the average tenure is just over two years, how can we get as much out of our sales reps in the time we have them contributing to our team?
These questions are keeping a lot of sales leaders up at night.
So as sales leaders, what do we do?
We throw spiffs. We do team outings. We celebrate wins. We buy a foosball table. We do our best to create a good culture and environment so reps will stick around. But is that the right approach?
Most of these are now expected, and are certainly not a competitive advantage. If you really want to get your reps to stay longer and maximize their contribution during that time, put down that ping pong paddle and rethink your focus.
What we can learn from SaaS Metrics
In SaaS financing, we use the bowtie funnel a lot to visualize the sales and customer process.
In the most simplistic of terms, the first part of the funnel is your Customer Acquisition Cost (CAC), going from awareness to purchase. The second part is the customer advocacy piece, going from implementation to expansion, which will drive lifetime value (LTV) of that customer to your company.
Metrics are derived from this bowtie funnel, and both venture capitalists and SaaS executives use these metrics as key indicators of the health of your business.
The more effective you can drive purchases (CAC) and the longer you can keep customers (LTV efficiency), the healthier you are as a SaaS company. And really any recurring revenue business model.
Let’s assume that you have a great product with the right positioning. And the customers you acquire are the right “fit.”
LTV starts with implementation & customer onboarding. You can have the best product and the greatest customer, but if they don’t implement properly from the start, and seeing fast time to value, then you have a high likelihood of losing that client at the renewal, reducing your LTV per customer. Customer churn is the poison for any SaaS business.
Driving the LTV of a Rep
Why don’t we apply the same concept to sales reps?
The first part is the hiring funnel, moving prospects from interview to hire. This is the “CAC” equivalent, or the cost & time it takes to find, recruit and hire a new rep. The second part is the development piece, once the hire is made, and moving reps from onboarding to promotions. This is the “LTV” component of the rep retention equation.
The problem is that many don’t look at retention as a flow. They look at it as “Here’s our onboarding. Here’s our training. Here’s your quota/territory”. Retention is hardly considered at this stage. Yet in SaaS, your team responsible for onboarding and implementation, has already got “renewal and LTV” top of mind.
If you want to have great retention, long term performance, and value from your reps, it actually starts with amazing onboarding.
Again, let’s assume you hired the right person. The key to driving LTV of that rep is the three stages - onboarding, on-going development, and retention (defined by culture and promotion paths). But if you haven’t nailed your onboarding, the risk of that rep attriting will go up immensely.
Designing Better Onboarding Programs
Great onboarding drives tremendous ROI and increases rep LTV:
- 69% of employees are more likely to stay 3 years at your organization when you provide a great onboarding experience.
- Employees ramp 34% faster when you extend your onboarding program longer.
- 77% of new hires who hit their first performance milestone had formal onboarding training.
So how do you create better sales onboarding?
- Start with the end in mind: Align your onboarding to quota attainment.
- Leading indicators: Map out milestones for your reps to hit, all the way up to quota attainment.
- Market Knowledge: Many companies start onboarding with sales process. I think that’s wrong. Have reps understand the company mission, vision, values, and the market you operate in.
- Customer Knowledge: It’s essential to have your reps understand who your customer is and why they bought. Have reps read case studies, watch customer videos and listen to a series of call recordings that led to that outcome - the discoveries, demos, executive alignment, negotiation, implementation. Rather than just shadowing a rep for a day or two, where the learning is heavily based on what meetings they may have, a better way to absorb knowledge is by listening to how an entire case study evolved.
- Product Knowledge: After the rep understands the customer, the challenges you solve, and the value you bring, add product into context. Which products or solutions help solve the challenges that customers are having, and specifically, how, what were the use cases?
- Sales Knowledge: Now you’re getting into the meat of the sales process. How do you identify leads and accounts? What’s the prospecting playbook? How do you conduct a good discovery? How do you conduct a demo? Space out the sales knowledge throughout the onboarding period (beyond the first two weeks). Do reps need to understand proposals, contracts, and negotiation tactics on their first week when they’re realistically not going to need it until a few months in?
- Practice: Add a lot of practice in your onboarding. I think reps should be on the phone within their first week. It will have them taking onboarding more seriously and that your bootcamp is not a 2 week party. Have them practice their elevator pitch, their attention grabbers and value statements. Have them practice mock discovery calls, whiteboarding sessions and demos. Have them go through a certification. The more they practice, the more comfortable they’ll get with delivering your message.
- Optimize: Continuously refine your onboarding process as cohorts go through it. Find ways to speed up your metrics. Is there a correlation between how early reps get on the phone and closing their first deal? Is there a correlation between time to certification and time to third deal? You really need to analyze these metrics and understand which exercises and activities during onboarding are driving key results.
It’s important to think of onboarding as having a significant impact on retention. Just like onboarding clients to your software/product, those critical first months might determine how long a rep will be productive for your company, ultimately driving LTV for you.
What are you doing today to increase rep LTV with kickass onboarding? Leave your thoughts in the comments below.