At some point, every company has to make a serious decision: is your sales team better off trying to win big deals or small deals?
Initially, it may seem like a no brainer – of course you want to earn more money! But before you start moving the sales team aggressively upmarket, you should step back and consider the costs and benefits of big deals vs. small deals.
Sometimes, more money just causes more problems. Your company’s Average Sales Price (ASP) could affect everything from your team’s overall win rate to the average sales cycle to the size of your rep’s workload. Make sure you carefully weigh the pros and cons of big deals vs. small deals before you alter your sales strategy.
Chasing Down Big Deals
The positive side of closing a huge deal is obvious: more money for your business.
Sales is all about the bottom line. By closing one really big deal, a sales rep on your team could easily hit quota for the entire month. Closing a huge deal could also be the difference between your team hitting the overall sales goal for the month, or completely missing it. As the sales leader, your #1 concern is about hitting that number, so targeting bigger deals seems like a no-brainer. After all, isn’t the entire point of sales to bring in more revenue?
As great as more money may sound, your sales reps have to earn every penny. There’s a huge cost involved in bringing in whale-sized deals. They often require more work, more time, more buy-in from invested parties, more configuration, more detailed proof-of-concept – more everything, in short.
In fact, the top quartile of deals by ACV have an almost 50% longer sales cycle than average, according to research by InsightSquared. Even worse, the biggest deals have a 20% lower win rate. If you’re relying on a few big deals to close before the end of the quarter, there’s a much greater chance that those deals will not come through. Bigger deals are more likely to push to next quarter or be lost entirely, which could be a disaster for your sales forecast. If your sales team relies too much on closing huge deals, you run the risk of missing your overall sales goals by a huge margin.
Sticking to Smaller Deals
Smaller deals are often more likely to close because prospects are investing less money in buying your product. More people are willing to take a chance and pay a small amount of money for a product, especially if it’s Software-as-a-Service. It’s easier for prospects to sign up for some inexpensive software, try it out, and then cancel later if they’re not completely satisfied.
At a lower price point, the prospects won’t be as worried about wasting valuable resources, and will be less intensive in the evaluation process during the sale. If your sales team decides to focus on closing smaller deals, they’ll be able to close faster, with less work, and with a higher win rate. This means your sales forecast overall will be more reliable, and at less risk of being destroyed by one lost deal.
Unfortunately, smaller deals also means less money for your sales team with each contract signed. Though smaller deals often take less time and effort to close, it doesn’t mean any less work for your team. In fact, smaller deals could mean more work for your entire team. Instead of focusing on just a few big deals with all of their might, reps have to split their attention between a much bigger sales pipeline. They have to work many more small opportunities to hit the same overall quota.
It’s up to you to decide whether the risk of big opportunities is worth the trade offs, or whether the work of chasing many more small deals is worth the paycheck. You have to evaluate the capabilities of your sales team and understand your true business needs. With the right analysis, you can really decide whether you prefer closing big deals or smaller deals.