Enhance your sales opportunity pipeline for inventory

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[Music] [Applause] [Music] all right hi everyone I know I think we stand between you and the keynote so try to hang in there because this is a super exciting topic of forecasting which I know you're all really excited about so quick introduction my name is Jamie Baz VP of Sales of North America for Zendesk I've been there for is my fifth quarter so I started December 2 2016 so did Ron Cho Ron is our Director of Sales Operations she covers success marketing and of course sales as well for those of you that are not familiar with Zendesk just real quick we are a customer service platform customer service and support platform so probably most of this room knows what we do but I figured I'd start there so at least you know we're SAS we have about a hundred and nineteen thousand customers which produces its own set of challenges so we're gonna go through some of that today so that all right so what is the goal of forecasting right industry standard you want to hit within 5% of your commits Ron and I with the exception of one quarter have been within 1% only one exception we're gonna go through the reasons why we missed once actually we have a slide that shares with you some of the pitfalls we found and discovered in our process of forecasting here that hopefully you guys can can use and leverage as well so when how do you get within 5% what you need to know which which deals are gonna close right and how much those are obvious but the most specific thing that least I found when I came to Zendesk was when so I walked into this really nice pipeline of deals but then I listened in the forecast call and I dick there is no way this is a q4 deal like what is this doing in my q4 funnel right so we had to come up with a methodology of managing a couple ends of the business here that's the goal that we're trying to reach so when Ron and I got to Zendesk the first thing we realized is we were not in Kansas anymore and what do I mean by that how many people in this room when you go to forecasting you look at your funnel and you know on average how much you're gonna convert and you do some math and you figure out estimate okay well based on what I have I'm gonna convert 25% of that or something around there and and and and you can kind of get an estimate over your land right I mean everyone's done some form a funnel math before right well we had to do some funnel math but there was a whole long tail of math that I had no idea how to handle right we had online customers we had people that were touched by sales but then they would go and buy online I mean think about if you have a hundred and nineteen thousand customers you're adding a lot of people every every month and every day so we realized we're not in Kansas anymore we're gonna have to think of this in a new way we're gonna have to really think about our forecasting from two different perspectives so I'm gonna hand it off to Ron to walk through how we handled kind of that long tail aspect of the business just so you guys know to give you a frame of reference if you ever hear us talk about our velocity business because sometimes I slip up and I know I bring it up Ron might as well we're referring to the business under 100 employees and if we talk about territory or Enterprise for Zendesk we consider that over 100 employees just to keep it simple so the velocity component is to some extent the territory component you got to do a lot of math so I'm gonna hand that off to Ron because she's really been my partner in crime and figuring out how do I do this math component of the forecast you can use the mic it's a fail-safe thanks Jamie for that intro now you can hear me yes perfect I the mic is good so and yes we were definitely not in Kansas anymore over the years and us has grown into a highly complex very matrix business so we have one very different customer segments as Jamie sort of alluded to we have our SMB space or Enterprise space our strategic enterprise as well as our named account to segment on top of that we have you know very different sales territories as well as sales teams so as you can see here on this matrix we have in a mayor we have the east and the west teams as we scale we will probably grow into central south east south west etc and then on top of that Jamie else alluded to this we have the entire gamut of sales process and sales motions so on one side we have our long tail SMB space high velocity high frequency sales and then on the other extreme we have our true Enterprise sort of sales motions which as you can imagine you know you all work in sales and marketing and success they require very different sales motion sales processes as well as forecasting methodologies so in order to think about all of these different parts of our business you know you can you can obviously cut this in a lot of different ways to keep it simple Jamie and I think about it by deal band size so let me walk you through what that means so here on the bottom we have our SMB space so these are our self-service credit card swipe sometimes no sales assisted deals they're under ten thousand dollars in annual bookings or a CV at Zendesk they are you know under ten seat deals typically covered by your inside sales rep and because of what Jamie just mentioned with the high velocity high frequency you know there's no way we would be able to get our arms around every single deal here so this is where data information statistics come into play and this is where we need this sort of Qi cue which stands for quarter and quarter which is deals that are created and closed within the quarter this is where we need the Q and Q and trend math to help us with forecasting in this space on the other extreme we have our sort of fortune ten fortune 100 companies so think of this as you know that send us for instance we have 50,000 ACV deals all the way up through multi-million dollar contract value deals and these are the deals where you have your you know very senior very seasoned field sales reps walking the halls of the IBM's of the world of the Hewlett Packard's of the world and as you can imagine these are very complex very long deal cycles and because of that this requires a totally different type of methodology to forecast accurately so here we actually we it requires you to use a more formalized sales process and framework to be able to actually forecast and Jamie in the later part of the presentation we'll talk about Mednick which is one of the frameworks we use to forecast the enterprise space and then for a lot of you guys in the audience now you know most of your business is probably somewhere in between and not surprisingly we use a combination of both the pipe math and you know the quarter and quarter trending math in conjunction with the med pick and more formalized sales process to be able to pull everything together and be able to forecast accurately across your entire business so with that said let's dive into SMB forecasting as you can see there's a lot of things to consider on this slide you can very easily overwhelm yourself with data with information with different methodologies you can end up you know being paralyzed with analysis and just totally boiling the ocean and getting nowhere to be frank Jamie and I try to approach this in two main buckets I'm not gonna go through every single bullet point here I know you guys can all read but the two main buckets that we really look at our first and foremost up here on the left hand side the data and science behind forecasting especially for the SMB space where it's very high velocity it's this this piece is you know what you would typically think of as you know forecast math spreadsheets trending leading indicators just looking at the numbers and the math to really inform a number that makes sense for you the other bucket which is overlooked oftentimes and I would say maybe as important as the number and data is this whole bucket of you know external factors and qualitative things that happen within your company that will affect your sales especially in the SMB space where it is so high velocity and where these types of things you know product changes or marketing a/b tests will affect your sales given how high a velocity the deal cycle is and then very importantly also is just taking all these data points trying not to be you know inundated and drowning in the data how do you actually make sense of the data and how do you triangulate to get to a number that you at the end of the day I feel comfortable with and that's where triangulation comes into play so it send us for instance we have at any given point between four to five different forecasts going on just for Jamie's business so for instance my team and I we have our crazy spreadsheet math and you know it's probably indecipherable to most people Jamie and her leaders have their director and VP roll up math which is the little bit of a different take on how they get to a number finance typically runs their bookings forecast and then our data and analytics team has a more statistically driven approach to actually getting to the number we will land at at the end of the quarter and with all of those data points Jamie is then able to in conjunction with the external factors that we're showing here and her gut just being in customer conversations having conversations with her leadership team she unable to triangulate and understand and feel very comfortable with the range where she'll land and what her commit will be for the quarter and that's that's super important so that was probably TL DR and for those of you who don't know what TL DR means it stands for too long didn't read what what actually matters at the end of the day right and in my experience you know having supported sales teams at well-oiled machines like Salesforce as well as scrappy startups like slack it really boils down to these few drivers up here so on the data and science side you know trending super important especially for SMB especially for high velocity looking at day over day week over week month-over-month year-over-year depending on your deal cycle looking at percent mix so you know if your month 3 is higher than your month 1 usually if you're a typical SAS company if you see a hockey stick growth in q4 versus q1 all these things will help you inform where you land in any given quarter also very important is pacing and leading indicators again especially for the SMB space so as Jamie alluded to we were within 1% of our commits all of last year until q4 when you know everything was crazy in q4 as usual and we took our eye off the ball for a hot moment and we ended up missing our commit by almost 4% which again is within industry standard but did not hit our high standards for forecasting that Jamie and I have for ourselves and this all was due to the fact that we missed quite a bit in our SMB segment because you know we weren't looking at the MQL lead volume or pipe generation volume the other big bucket of things that you need is it off back on thank you all of the other internal changes within your company and I'll touch upon this in the next slide and then very importantly also business seasonality so this is something that's often overlooked as well and when I say seasonality I mean seasonality of your product as well as your customers industries so for instance we all probably know q1 will not be a great sales quarter for if you're selling to the federal government or if you're selling to the retail industry just due to the fiscal year end and you know the business seasonality of the retail space so a few more things when you're pulling everything together it's really important especially given how matrix and complex our business is it's really important to have a mutually exclusive and completely exhaustive framework when you pull everything together so for those of you X consultants in the room that stands for me C framework and it's really important to make sure you're not overlapping different parts of your business so that you're not double counting parts of your business and on the other side of the coin that you're not leaving parts of the business out of your final number when you call a number and then finally here you know always do try to keep the big picture in mind when you're calling up a number to your board or your CEO or your CX o execs at the end of the day just want to know what is your path to hit your number and what is your path to overachieve your number and also how comfortable are you with that path so what are your upsides and risks to hitting your commit and I think you know as long as you feel comfortable with that narrative and telling that story then you'll be in really good shape every week when you have to call a number alright and then before I hand off them the baton to Jamie we just wanted to share a few lessons learned and key mistakes to avoid especially when you're running SMB business and forecasting the SMB space so not surprisingly first and foremost you need to have a cohesive go to market strategy between sales product and marketing and everyone in this room probably understands that and it's much easier than that then done I totally understand one one quick way to sort of solve this kind of issue and to you know sort of close that feedback loop is ads on desk for instance this past year we've started a regular cadence of communicating when sales marketing or product makes a big change or initiative we want to make sure that all three legs of the stool are aligned and understand you know if there are going to be any downstream effects or dependencies on these things another another way to sort of help with this is rolling out pipeline review meetings so I've done this at Salesforce we we started this at Zen desk where you have marketing and sales meet every single week to again get aligned on changes either in the funnel or in the sales process and this is very very important especially in the SMB space next on this slide again not surprising but you definitely need to remember to hire enough butts in seats so that you can actually you know hit your number you need to have enough firepower and capacity and especially as you scale you're going to need to train that muscle memory of being out bounding and you know building a proactive sales team as well as continuing to support your reactive sales team and then finally I think Jamie and my favorite philosophy keep it simple stupid just you don't want to over complicate qualification right especially in the SMB space Bant is a tried-and-true method it's it works it might not work for the enterprise space Jamie will touch upon that but it works in the SMB space quite well and then from a scaling and operations perspective having more simple processes and operations will allow you and empower you to scale your business in a more efficient and effective way and then the last thing I do want to leave you with is since I am representing operations at this forum forecasting is a weekly affair and it takes a lot of time in mind share from each and every one of you and everyone on your team so I highly encourage you to take the time to really roll out a you know rigorous process and leverage all the tools and systems at your fingertips you know lean on your finance and operations business partners so that you can really take your time and focus it on what you do best which is marketing selling and closing deals and with that I will hand the baton off at Jamie she will be touching upon the more formalized sales process and med pick which will be more useful for forecasting the enterprise space thank you thanks Ron okay I have 12 minutes to talk about sales process and medics so let's see how I can get it I can get across without having to speed talk one of the things that I really realized that that I've done I think better at Zendesk and I have in Prior lives is when I look at sales process I kind of look at it from a different perspective than I used to right I used to look at it from my perspective what have I as the rep or what have my reps accomplished but it's done tasks I've really flipped that on how do I know I'm there because of actions the customer has taken so I'm gonna walk you through some examples here I'm not gonna spend a ton of time on it cuz I could spend an hour on this topic actually not gonna bore you though it's literally 11 minutes okay so qualify instead of saying the the meeting is qualified because my rep set met criteria I'm gonna say it's qualified because the customer agreed to a discovery call right that's why it's gonna be in stage one if it's in stage two then I know that the people attended the discovery call and that the key stakeholders attended right so when I'm going through my forecasts call for my reps if it's in stage three this one's super critical for me and the reason I really really care about stage three because do-nothing is not on the table right so if I look at it I know I probably don't have the technical win yet and I know that the customer can still do nothing I have a deal that's been sitting in my funnel that my boss keeps asking me about and so does my VP of Operations is in the audio that deal is still in stage three why because do-nothing is still on the table they can still renew the contract with their existing customer so once I have this laid out I can easily tell all right that's still a long shot for me so when Ron talks about pipe math if I have that 50k deal 50km RR in long shot then that's where I'm going to have it in the third month of the quarter because it's still haven't won technically and I still know that they can do nothing if I've confirmed technical selection but I still have to perhaps there might be maybe I have to work out the paper process because remember that the goal here is to nail the timing there's some enterprise customers which I know you've all worked with before that yeah they need to negotiate the MSA which can take forever so you need to figure out is the outside counsel is it inside counsel that makes a difference right do they have to cut a Pio and an Esso how many signatures are needed for both so I'm not gonna commit this thing until I understand all those things that's gonna happen so that's what's happening in stage four for us in Stage five I've got the economic buyer confirms the decision and alamin contracting so this is basically stage 5 is going to be a commit for me so if I have something in stage five five it's gonna be in VP commit I have the technical win I know I have the timeline I have the timeline to get it done and I have an accurate closed date so that's so for me Stage five my reps are very reluctant to put it in stage 5 but I will oftentimes cease date in stage 4 I'm like yeah shouldn't that be in stage 5 because you have all the other markers and it obviously closes opportunity booked so this has been extremely helpful for me as a VP looking through the deals cuz now that I've got the team trained on this I don't have to worry about my sales stages anymore when I first got to Zendesk I did not know what the sales stages meant it could have meant anything so who in this room used subscribes to medic okay there is a handful of so some of this is gonna be repeat for some of you for those of you that don't use it this is actually the first company that I fully have used met and I use med pick I do insert the PL walk you through then a second I have subscribed to this as a qualification methodology that I stripe across my sales process so sales process is piece number one piece number two is gonna be med med pick make sure that went to the next one okay so I'm gonna give you an example of a metric that one of my reps used on a deal that recently want us to deal a metric is a quantifiable reason why the customer is going to want to move forward with you so one of the examples this rep put together an awesome proposal very short but as part of it she included how much money it was costing them how much money the support agent costs then how much a ticket cost to resolve then compared that to how less expensive a text was to resolve than a phone call she then made a summary that showed if you do performance-based payment for your agents and you divert 10% of your calls to text you're gonna save $200,000 a year I was only gonna be $50,000 a year the customer brought that to their executive it was like this thing pays for itself right so that's what I mean when I talk about metrics I'm always asking the team quantify it for me what does that actually mean to the client in terms of a bottom line so economic buyer you know you guys are probably looking at that yeah I can have a buyer it's like who has the budget slight difference here that makes a very big difference I don't I care who has the budget but mostly I care who can move the budget let's say you're trying to sell to me right you're trying to sell to me there's some instances in which I have a budget that I can operate in and I can move money from one place to another so I know there's certain situations where I am the economic buyer there's other situations where I don't have the budget and I have to go to my boss I can be a champion in that instance I cannot be the economic buyer so this has really taught us to when I'm talking through deals with reps I'm asking two things do you know who the economic virus who can move the money and have you met with them if they don't know who it is that score is a zero on an economic buyer if they know who it is and hasn't met with them that's a score of one if they've met with them and have a relationship with that person it could actually pick them up and call them on the phone that's gonna be a two because the other piece that I do is these all have a score within Salesforce and my deals will show up as red yellow or green an economic buyer is one of the one of one of the very very key points here decision criteria this is kind of motherhood and apple pie right you got to understand how they're going to be making the decision and what are the technical requirements one of the things here that I really like if you guys haven't used them I call it a lockout document so does my prior boss who I know spoke here last year so maybe you've heard of that but a lockout document is a test plan that if a customer wants to a POC you provide them with a test plan that really highlights what you do well and if I know I'm competing against other competitors who won't be mentioned in this conversation if I know I'm competing against whoever I'm competing against I'm gonna specifically make sure that test plan lines it up so that my eyes shine and I know where they're not going to shine right so that's an important piece you can work with your solutions consulting or sales engineering group is do you guys have a lockout document for test plans I also need to know who all the key players are I sell to the LOB which is typically support it could be IT it could be HR I sell to the LLB but as you guys know as deals gets bigger IT is gonna be involved and it gets a lot more complex and and sometimes this rolls up to marketing and the CMO needs to sign off on it so this is you guys know this is this is not not rocket science everyone is aware of that I did include the paper process for medic a lot of times people just use medic with one C and no P I use the P because what we're finding is we have a lot of paperwork that needs to be done in our deals and a lot of times with the enterprise customers they need to sign an Esso but they also need to sign to Pio different people need to sign all that it takes a lot longer and I was miss forecasting the date of deals because the greps hadn't lined up all of the paperwork that had to be done so now I can ask and I know to keep things in best case I won't move them to commit until I know that paperwork can be done in time and I've gotten caught a few times with miss forecasting the commit date because of this still we all make mistakes um this one is really interesting so identified pain you can also think of this as as you got a pending event right in my pending event I kind of build in here but sometimes there is a pending event sometimes they did the building is burning down for the customer we have one customer that were in the process of closing right now I'm not gonna jinx myself but they're using email today to triage their support they are literally misplacing and not being able to track when their customers are reaching out to them they just got a huge round of funding they're doing phenomenally well but their customers are getting really upset and you know the number one thing with support is you lose your loyalty a lot easier than you can gain it when you're dealing with because people are already pissed you're calling if you're calling support it's not because you're happy right so these guys really need to get something up and running quickly I won the technical win and they have their own pending event because their house is burning down like they've got to get this fixed or they're gonna lose their customers in other cases they're on another platform and they can renew that other platform their building is not burning down they can revert and renew that other product right I've got a I have to create the pain of why were you considering looking to begin with and I need to take that knife and I need to twist it till they bleed and usually to do that you have to drill down to what is it costing you to stay on the current platform if I'm one of the other competitors that costs it takes five admins like well how much money other how much do you page those admins how much more you can have to pay them for another year let's really think about how much this is going to cost you if you decide to delay this project longer so identified pain has to come down to dollars it can't just be a simple pending event a lot of times people think they have champions but what they actually have are coaches right who's been stuck thinking before that they have a champion but really what they have is a coach it happens to all of us what a coach is someone who likes to give you information they can tell you who's who they can tell you how to get things done but what what do they not have they don't have power they don't have influence and they probably don't have something to gain right I'm looking for someone who if they deploy my product they're gonna they're they're gonna get a promotion they're gonna have something new on their resume that's gonna make them be better in their own career and I test their power that's a really important piece of this how do I test their power um oh here's a really good one the customer wants to negotiate on their paper who loves negotiating on the customer's paper no one because it's a nightmare right you want a manufacturing company to give you their SAS version of the contract puh-leeze right that's a night that's six months three to six months if I have a strong champion this is when I go to legal up to my own legal I see listen don't worry about it I got a champion I'm gonna take my champion I'm gonna have them go push on the legal in the company and tell them we'll walk you through we'll incorporate the things that you are critical to you but we're gonna have to use our paper do this deal we're gonna have to walk away if I have a real champion they'll go to legal and they'll sell that and then I know that they're gonna ask for unlimited unlimited liability and all those other things in term for convenience and all that other stuff the customers love to ask for but now I know I have a real champion and when they asked for things I can't do I can have my champion go sell internally for me and say listen dude we gotta get this deal done but I can't do X Y or Z I can do this but help me who do I need to sell to internally to get to get this done so having a real champion if I if I have a champion I know that I have a much much better chance of getting through that legal negotiation and then last but not least is obviously the competition I think some people only have one see I add the competition because I compete with a lot of vendors a lot of ends of the market I compete on the low end with a lot of startups I compete on the high end with the usual suspects so for me it's very important to know what the client is considering and then how I'm going to position myself because it's gonna go back to it's gonna go back to making the decision so I've got 20 seconds left I'm gonna leave you with the three things if you take anything away from that med pick there are three of them that matter the most I score these higher then I score any of the other ones yeah you got to know the other ones so I know I've got some reps in the audience you got a normal however there's three that will determine if you can win the deal one is economic buyer your access to them and your relationship with them because at the end of the day if they don't have the money this person can get you the money if they don't feel the pain urgently enough they will delay and do nothing because do nothing is always our biggest competition as salespeople always and last but not least I'm not going to get through that legal negotiation if I don't have a true champion so these three things alone I think have increased our forecast accuracy accuracy on the bigger deals significantly I can now look at my q2 funnel and know exactly where to put them in my forecast categories because I can walk with my team and ask them any of these questions I've now gone over by 40 seconds but I think I did pretty darn well considering how much I just packed into that so with that I'm gonna say thank you appreciate your time [Music]