“You can’t close what you don’t propose”
—a wise salesman
In the sales-led world, you can only close deals that you’ve proposed. Products like DocuSign and Adobe Document Cloud have made sending proposals and getting signed contracts easier than ever. They also allow you to track which deals are out for signature.
This seems 100% obvious, yet I don’t often hear sales leaders talk about tracking this metric. I use it religiously in conjunction with a concept I call yield. Simply put, yield is the dollar value of all your contracts that are currently out for signature.
If you haven’t sent a sales proposal, you can’t close it. And we all know that to have a signable deal means you’ve completed a whole bunch of other steps: demos, pricing discussions, value discussions, legal, procurement, and infosec. Surprisingly, most leaders I speak with don’t know the value of closable deals that are out on the street at any point in time.
Let me share how I use this metric in forecasting, and more importantly, its huge value at the end of quarter. Like other leaders, I tracked the obvious data points in my forecast process as an operator:
- Quota vs forecast. I want to know where we’re predicting we’ll land, vs. the actual budget.
- Closed to date. I want to see what the gap is between our forecast and quota.
- Pipeline stages. How many deals/dollar amounts are in commit? How much in the best-case stage? And how much in pipeline? From these data points I can get a sense of coverage by stage and sense how likely it is that we’ll close the gap.
- How many deals, translated into a dollar value, are quoted right NOW. I would track yield in my weekly forecast call to see how much potential value is out for signature.
Yield is particularly useful as you close months/quarters. At end of a period, I’d track this metric daily. Here’s an example to illustrate how it’s helpful: Let’s say you have four days left in the quarter, and you have a $1M forecast. You currently have $500K closed, so in the next four days, you need to close $500K to achieve your forecast. We know that to close $500K, you need to quote at least $500K. I’d track yield at the start and end of the day. If we started the day with $500K to go and only $100K in yield, then I’ll want to see this advance by day’s end. If we didn’t get more deals quoted out, it lets me take action. I can inspect on a deal-by-deal basis, work backwards and learn why more deals aren’t being quoted.
As sellers, we know that buyers need time once they receive the proposal to seek approvals, generate a purchase order, and run their buying process. As a sales leader, I can start assessing if my deals are truly going to happen at the wire. If our yield isn’t growing as we get closer to D-Day, it’s possible our forecast will slip.
My suggestion is to work with your revenue-operations team to add yield to your forecast sheet. Use your electronic-signature software to populate this column, or you can also do this in your CRM system. I’ll submit that if you’re not tracking yield today, what you see when you start doing so will surprise you. Learning how late your deals get quoted may also lead you to change your team’s behavior for the better.
Oh, by the way…the wise man quoted above is actually me 😊. I’m not sure how wise I am, but I am definitely a salesman and know one thing for certain—I can’t move a deal into the closed-won column until it’s been sent and executed.
The information contained herein is based solely on the opinions of Bill Binch and nothing should be construed as investment advice. This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity.
This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and is for educational purposes. The anecdotal examples throughout are intended for an audience of entrepreneurs in their attempt to build their businesses and not recommendations or endorsements of any particular business.