When I sat down to write Part 12 of my blog series “Life at 1,000 Dials a Day,” I thought it was going to be easy: just do a little math that includes the price of sales labor — a dominant cost that is stubbornly ignored by both the sales tech industry and sales management alike — and we’re done.
I found myself trying to explain how much your CRM really costs. Now that the piece has been up on the ConnectAndSell website for a few days and has entertained a visitor or two on LinkedIn (and was apparently posted to Facebook — what’s with that?), it’s obvious I failed to get the point across.
Persistence being a virtue (that means I’m stubborn, but I still like myself), I’m going to try again, but from a different and more hopeful angle.
Yesterday I had the privilege of getting a private demo by Stephen Messer of Collective[i]’s Intelligence system. Stephen opened by pointing out, “CRM is just a database.” And as I watched what could pass for a series of miracles unfolding on my screen over the next 30 minutes, I kept coming back to that phrase.
Stephen’s point was that your CRM doesn’t “do” anything. Sales reps do all the “doing.” They put data in. They look it up when you need it. They can run reports and contemplate the names and numbers on them.
All of which costs bunches of time, especially given that sales reps are often not great data entry clerks, which makes them either slow or sloppy or both. The effect? Lots of money is wasted on the labor of feeding the CRM beast, and lots more money is lost in the opportunity-cost of turning an intended revenue generator into a data jockey.
HOW’S THAT CRYSTAL BALL WORKING FOR YOU?
We ask reps to do all this so we can forecast, using the mighty power of CRM. So maybe it’s worth the effort, cost, and hiring a person we can’t understand, who tells us what we’re allowed to see and do with our data (a CRM administrator, successfully injecting the conservatism, slow pace, and naysaying of an IT department into the very aorta of every company — Sales!).
In any case, surely the power to see the future of our business clearly and reliably is worth spending 20% or so of our sales cost and revenue-generating power, isn’t it? That’s pretty easy to calculate. If our forecasting were 100% accurate, and if, as a result, we closed 40% more revenue in the same time frame by making brilliant, proactive moves to optimize our investment in the best deals and quickly abandon the no-hopers, allowing maximum focus on the most likely opportunities, wouldn’t that be worth all the cost?
It turns out the answer is probably “No.” We’ve given up 20% of our revenue and added 10% to our overall costs (assuming our cost of sales is 50% of revenue) in hopes of getting 40% more revenue — speculatively. This “No” is even bigger if we correctly note that the 10% extra overall cost requires 15–20% more revenue to balance it out, unless our gross margin is 100%.
But we should at least check to see if forecasting has improved noticeably. The signal should be clear: cost of revenue should have been going down, down, down as CRM penetration went up, up, up. Sadly, the trend is the other way around: a couple percent increase from 49% to 51% over the past 10 years in the US.
Forecast accuracy itself is so dismal as to be hardly worth discussing — but let’s discuss it. Some say 42%, perhaps because 42 is the answer to the ultimate question of “life, the universe and everything,” according to Douglass Adams’ Hitchhiker’s Guide to the Galaxy, or perhaps because sales forecasting is such an advanced science that forecast accuracy can be measured with great precision. In any case, no one out there is claiming accuracy in excess of 50% — a coin flip.
So we can safely conclude that we are paying something — probably a lot — for nothing (unless we cherish less-than-50% forecast accuracy or never reducing our overall cost of sales as a percentage of revenue). No wonder Microsoft had the cash to buy LinkedIn, with so little meaningful competition, if you get my drift.
BUT WHAT IF…
What if there were a system that did the following?
1) Sucked the good stuff out of your CRM.
2) Cleaned up the data based on checking all the relevant data on the internet.
3) Got rid of your zombie opportunities.
4) And for the real opportunities, analyzed them for whether they are worth pursuing based on reliable information: how the same folks bought products like yours from other companies!
Here’s what such a system could do:
- Find companies that might need what you are selling.
- Tell you who at a target company buys what you sell.
- Tell you who else at that target will need to be involved in buying your offering, and what roles they might play.
- Tell you who else is needed to execute on buying your offering.
- Tell you how they solve the relevant problem today.
- Tell you when the target last bought a solution like yours.
- Tell you what alternatives they are considering.
- Tell you what your competitors are doing with the target.
- Tell you how they go about buying anything.
- Tell you when something important changes at the target — hirings, firings, new assignments, organizational changes, and big stuff like acquisitions.
- Tell you how long it really takes them to evaluate, decide, document the purchase, pay, and implement.
- Tell you the odds that the next step in the buying process will actually happen and therefore how much you should invest in pursuing this target rather than another one (including whether you should throw this one out in favor of finding a better one).
It would be like Waze, the traffic application that learns from what many drivers report about the road conditions where they are. Why rely on static maps and average road conditions when you could know, in real time, what’s really happening and, more importantly, whether you should stick to your current route or bail and take another road?
So now that I’ve seen such a system, I look forward to trying it out. Just cleaning up the horrible mess in our CRM would make it all worthwhile. To have a better-than-coin-flip view of what’s going to happen would be astonishing. I strongly suspect that we are getting away with “forecasting murder” just because we at ConnectAndSell generate more than an average number of opportunities by calling so darned many people.
But what if we all knew in advance which opportunities are the living truth and which are the future undead? That power, coupled with the power of Life at 1,000 Dials a Day, seems like a whole new thing, one that keeps the CRM safely in its proper role as a flexible database and lets us see the road ahead so we can drive our supercars as fast as we want on wide-open freeways.
I’ll let you know how it goes.