case study

Selling Strategically to Increase Sales & Margins

The BHAG approach to increasing sales by 50% through improved sales operations, management, and targeting.

~$ 0
Increase in Monthly Sales by fourth month
0 %
Improvement in Margins

Overview

*The name of the company has been keep a secret at their request*

Often, we encounter clients who continue to sell as they had when they first launched their companies. And while they continue to grow and increase sales, they leave money on the table because they have not examined their data and practices to see what they could do differently to improve sales.

In this case, the client sold a smart, well-organized lead generation tool aimed at the financial services industry. However, the sales team was selling individual licenses and heavily discounting prices to close deals. This gave the sales team the impression that they were hitting their quota and doing great.

Key Challenge:
No Specific Industry Target

The CEO, however, wasn’t sure they were making money and asked us to help analyze their sales. After asking some questions, examining their data, and building a financial model, it was clear that profit margins were around 18%, well below where they need to be for a SaaS company that sold mostly software.

There were several issues we felt needed to be addressed:

  • The average deal size was too low--partly because of the practice of selling individual licenses, and partly because even these were sold at a discount.
  • Their churn rate was also currently at about 8%, partly because it was easier to close monthly deals rather than quarterly or annual deals. This hurt sales and profitability.
  • The true average deal size was distorted because the company looked at the entire invoice which included third-party components necessary to sell its own software, but where it had little or no margin.
  • At the same time, the company paid commission on the whole invoice--even though nearly half of its invoice were items it resold--and as mentioned above, where it had practically no margin.
  • Licenses were sold monthly for the same price as annual licenses, providing no incentive for longer commitments.
  • The vast majority of the sales were to individual agents who required significant training and onboarding before they became loyal customers.
  • As a result of the last two issues, the company often lost customers before it had even recovered its selling and support costs.

The net result was moderate sales growth, but slow cash growth due to thin margins and high churn rates. The CEO knew the company was not doing as well as it looked on the surface.

What We Did

The CEO asked SOMAmetrics to provide a sales plan with sales projections on how to improve both their sales and profits. We developed a Big, Hairy, Audacious Goal (BHAG) of doubling their sales in three years.

With that target, we changed the sales strategy and plan around the following key rules:

  • No more single licenses. The minimum sales would be for a pack of three licenses.
  • Price discounts on only quarterly, or annual contracts–no more price discounts on monthly contracts.
  • Commissions will be paid only on sales of software the company makes. Sales reps would no longer get commission on sales of products purchased from partners.

These basic rules also changed how the reps sold their products—from a commodity approach of discounting heavily to close deals, to strategically selling game-changing value by demonstrating return on investment.

Lastly, we provided the sales team with SPIN Selling training which enabled them to sell strategically to maximize each selling opportunity by showing ROI and value to the prospect.

Results

Because of these changes we implemented, average new monthly sales increased from around $51,000 to around $81,000 by the fourth month of full implementation—a 59% increase in sales.

Just as importantly, the average profit margin (after cost of sales and support) jumped from around 18% to about 32%—a 78% improvement in margins.

~$
Increase in Monthly Sales by fourth month
%
Improvement in Margins

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