Remember back in high school, when you’d get a math test back and there would be a big red note imploring you to “show your work!”? It may have been frustrating at the time, but these teachers were on to something: The answer you ultimately arrive at is much less important than the process you used to get there.
This is as true in sales as it was in math class. Hitting or missing your number is a big deal, of course, but ultimately a single quarter’s result is far less important than your understanding of the bigger picture. Why did you miss your number? What are you doing to correct these issues? Do you know what you need to do to ensure that you hit your number next quarter?
All of this is to say that there’s only one thing worse than missing your number: Missing your number and not knowing why. All sales teams come up short every once in a while, but what separates the best from the rest is understanding what happened. Sales VPs who can explain to their CEOs exactly why they missed their number (and, critically, what they’re going to do to avoid a similar fate next quarter) are in an infinitely better position than those who can’t.
The best Sales VPs are always able to show their work.
If you missed your number last quarter (or just want to better understand how you ended up where you did), read on for the 5 questions you should ask.
Did I Have the Right Number of Open Opportunities?
Ultimately, the revenue your team brings in is most closely tied to the number of opportunities your reps have to work. If your pipeline is stagnant (or worse, shrinking), you shouldn’t be surprised to see a dip in won deals and, consequently, declining bookings numbers.
Look back at each of your closing reps’ open pipelines from the beginning of the quarter. Did they have enough in their pipeline (assuming they maintain their personal average win rate) to hit their quota? Or were they set up for failure from Day 1?
You should also go one step further and break down their pipelines by sales stage. If a rep starts the quarter with a full pipeline, but the vast majority of their opportunities were in an early stage, their missed quota should not have been a surprise. Each rep should have enough late-stage opportunities to hit their number.
Where Did I Lose Deals?
Of course, you can’t get a perfect prediction of your bookings total simply by looking at beginning-of-the-quarter pipeline analysis. It’s impossible to know with certainty which opportunities will turn into deals and which will drop out before they ever reach the finish line. So, if you want an accurate post-mortem of a missed number, you also need to pay close attention to where and why opportunities fell out of your sales funnel.
Did you lose more deals late in the sales process than you have historically? Did stage-by-stage conversions decline significantly compared to other quarters? Answering these questions can help you pinpoint the true source of the problem. Maybe it wasn’t thin or front-loaded pipelines after all, but a matter of late-stage sales execution.
Did My Average Deal Size Change?
Suppose your reps had full pipelines and they maintained their stage-by-stage conversion rates, but you still came up short. How could this have happened?
One possibility is that the deals your team closed this quarter were appreciably smaller than they have in the past. Declining deal size is a common culprit for a missed quarter. Look at last quarter’s deals, average them, and compare that number to your historical average deal size. If there’s a big disparity, you may have just discovered the cause of your missed number.
Did My Win Rate Change?
But it’s not always declining deal size that’s responsible missing your number. Sometimes the answer is even more obvious: If you’re not winning a high enough percentage of your opportunities, you’re unlikely to hit your number.
Analyze your team’s win rate and see how it compares to your average. Declining win rate is often a symptom of other problems ‒ poor qualification, not enough reps, increasing competition ‒ but it gives you a good sense about what part(s) of your sales process you need to improve to avoid a similar fate next quarter.
Did My Sales Cycle Lengthen?
There are situations where a missed quarter is not the result of dropping win rates, barren pipelines, or declining deal size, but instead the result of something much more insidious and harder to pinpoint. A ballooning sales cycle can just as easily torpedo a quarter, even if its causes are harder to identify.
Look at your sales cycle over time and see what trends you uncover. If the time it takes your reps to close a deal (either won or lost) is on the rise, it could signal that your reps are working the wrong opportunities, your sales process is becoming more complicated, or that you have a non-sales-related hiccup that is slowing opportunities down. Whatever the cause, it is important for you to identify the problem in order to make sure it doesn’t have the same effect next quarter.
Where do you go from here?
Once you’ve identified the factor(s) causing your missed number, it is time to find solutions to correct it before it haunts you again. Check out our post-mortem guide to help you learn from your past and make next quarter as successful as possible.