You’ve decided to offer annual subscriptions to your software solutions. Great! You’re on track to maximizing recurring revenue, not to mention increasing your liquidity multiplier if you’re planning for an IPO or acquisition.
But, of course, the next big question is, “Do you offer incented multi-year subscriptions?”
Possibly not for the rest of this year. You are already grieving over a large sum of deferred revenue that is going to disappear into retained earnings come January 1, 2018 (thank you ASC 606). Moreover, once 2018 hits, multi-year subscriptions won’t be fully ratable, so it’s probably best to only offer annuals, right?
Well, let’s first consider a few key factors:
If you were to offer multi-year subscriptions, how much would you need to incent your customers?
What is your expected annual subscription renewal rate?
How do you plan to compensate your sales team to keep your top performers?
What is the expected operational cost to obtain those renewals?
Your answers to these questions and associated analysis (as outlined below) should help you determine the profitability of offering multi-year subscriptions. (more…)
Pay as you go, utility, consumption, subscription, and the cloud have been the rage during the past several years. As a result, many vendors scrambled to adjust their offerings to meet the perceived needs.
The key drivers of this trend were:
1) OpEx budgets were plentiful in the good old days because most IT products were treated as capital assets. In some ways, operating budgets were easier to sell to than capital ones.
2) The perceived advantages of seemingly lower costs and not having to make a long-term commitment (true only if one compares a one- or two-year cost to owning an asset that can perform over a much longer period, and if there are no costs to switching platforms). Already, early adopters have come to realize that the yearly costs can stack up over time and can far exceed buying and owning your own licenses and IT assets.
3) Some customers have strategically chosen to divest themselves from owning and maintaining their own IT infrastructure. This last point can be a smart option for those customers for whom IT is not a differentiating core competency; however, this may not be the right solution for everyone. (more…)
Ipsa scientia potestas est. This phrase came from Sir Francis Bacon in Bacon’s Mediationes Sacrae in 1597. It means “Knowledge itself is power,” and it offers valuable guidance to technology sales professions.
For a B2B sales executive, these words especially apply to reviewing a prospect’s 10-K. In this short discussion, I will demystify the effort it takes to review and interpret a prospect’s financial statements and provide a short overview of the structure of an annual report and the 10-K.
Some say that solution selling is a dying concept or less relevant than it used to be. I think it is still an important part of the sales process, but its effectiveness relies on having a strong financial acumen and access to a robust financial solutions capability.
Over the years I have attended several annual IT sales kickoff events. I have also participated in hundreds of other sales events including QBR’s, sales training and education programs, and analyst events hosted by the likes of IDC, Gartner, and others. The concept of “solution selling” has seemed to survive the test of time.
It is almost always mentioned or referred to in one form or another. Whether it’s part of the keynote speech on the main stage or included in individual breakout sessions or part of the sales training curriculum. Apparently, solution selling continues to be a relevant part of most sales strategy discussions. (more…)
While sitting in traffic listening to sport updates, I was reminded of my busted NCAA bracket. For the last fifteen or so years, I’ve entered a bracket into my office March Madness pool. Relatively speaking, I’m a late arrival to the excitement of Big Dance. It wasn’t until after college when I was working in Los Angeles that a convincing officemate sat me down to walk me through the selection process (A xeroxed copy of the newspaper-published bracket) and promptly took my $10 entry fee.
My brackets have not improved much over the years. So why do I keep playing every year?
I’ve learned to enjoy the fast-paced nature of the game, the last minute heroics and the unforeseeable upsets.
March Madness is much like quarter-end at many companies: fast-paced, emotionally charged with equal parts excitement and anxiety and full of unexpected turns. I’ve learned that the teams that end up on top of March Madness have a lot in common with the sales reps I’ve known who have been the most successful.
Back in the … gulp … late 90s, many software vendors were slow to realize that customer finance (successfully used for providing leasing to grow and accelerate hardware sales) had any utility in their fast growing industry. For a short period of time, it wasn’t even clear that cost justification was required. And then the dotcom bubble burst. Suddenly financial sales execution mattered again—cost justification to help customers understand why they should buy and extended payment deal structures to make it easier to buy.
Fast forward to the present day and everything is feeling a bit cloudy. Offering subscriptions has become a popular bridge to establishing more consistent recurring revenue in the hopes of cranking up a company’s valuation multiplier. And now many software subscription vendors are questioning whether customer finance (successfully used for providing extended payments to grow and accelerate software sales) has any utility in their fast-growing industry.
Albert Einstein famously declared “Dancers are the athletes of God,” and rightfully so. A dancer, a ballet dancer in particular, must possess the strength, endurance, and stamina of a professional athlete all while maintaining the grace, artistry and control that is instrumental to success in the world of ballet. Ballet is not just tutus and pointe shoes–it is physically and mentally demanding. Ballet is no joke.
Many sales managers have a propensity to hire former athletes. However I’d be inclined to seek out a ballet dancer.
Presentation and Preparation
There are many parallels between ballet and top sales reps. Let’s start with an easy one. A strong dancer will convey a story holding command of the audience throughout the performance. A dancer will practice, practice, practice and then practice some more, perfecting each step. They don’t just get up on stage and “wing it.” They’re prepared. Dancers may need to improvise a sequence or two, but regardless when they step on stage, they have a plan and steps (literally) in place to execute. (more…)
I was listening to the news recently, and two political analysts were “unpacking” comments made by a political figure. I thought, when did “unpack” suddenly come to mean something other than taking things out of a suitcase? Turns out it’s good that I’m not an etymologist, because the answer is: more than 100 years ago. According to Merriam-Webster, one of the official definitions of “unpack” is: to analyze the nature of (something) by examining in detail.
I was reminded of this alternate definition in re-reading Denise Garcia’s great blog post on Sales to Service, when she suggests the importance of serving and understanding your customer.
In working closely with hundreds of successful sales professionals over the years, I’ve seen it proven that a clear understanding of what’s really important to you customer is critical to success on both sides of a vendor / customer relationship. This may be intuitive when it comes to the use and application of technology. In my experience, unpacking all of the information your customer provides (or alludes to) is just as important in making your solutions more consumable for the buyer. And making your products consumable for the buyer is essential in reaching your sales goals.
Customers expect a solution that not only quantifies the value of technology, but also integrates that value with the economics of the solution in a way that resonates with multiple stakeholders in their organization including business and financial buyers. Creatively structuring deals, overcoming customer objections, and reinforcing the comprehensive value of a solution is why many of our clients rely on our expertise to help them grow sales and perfect related execution. But what happens when a client is truly not interested in buying, no matter how compelling your solution may be? Is there a more efficient way to identify non-buying signals sooner so you can be more effective in sales?
Helping sales teams properly qualify their deals is a big part of TFP’s DNA and an important part of the sales cycle. As we enter 2017, I would like to take a moment to focus on deal qualification—in particular, how to maximize your time by embracing rejection and getting to “no” faster.
Selling technology to IT buyers is executed in one lexicon, one language. Selling to financial and business buyers (and influencers) requires sales teams to embrace a second language. In a recent conversation with the CFO of a high growth software company, he described one of the management team’s objectives as “reducing sales friction”, a good topic for discussion today.
First, a definition: “Reducing sales friction means reducing the cost for customers to purchase, adopt and use a service/product — reducing the cost of sales and marketing effort required get a customer and generate revenue. The less friction you have in your sales and delivery model, the easier it is to scale. The easier it is to scale the faster and more efficiently you can grow. The lowest friction sale can be a user clicking on a web page and the content owner getting paid for it. The highest friction sale is spending lots of money on marketing and trade shows and having a large, direct sales force of expensive reps pounding the pavement for months trying to close a large deal with an enterprise customer. Follow that with a three-month implementation process to get the customer happy.” Ed Sim’s BeyondVC
Success with financial and business decision makers demands an understanding of business, corporate and financial performance objectives. Sales must put technical solutions into terms that map to a customer’s business objectives. (more…)