Every organization’s sales cycle will be different to some degree. This is due to the nature of the products or services that are sold. For instance, the sales cycle for reselling components (which is typically a turn-around sale) is usually dramatically different then a server sale (which typically has a longer sales cycle).
It is crucial to understand how cash flow will work in your business and to be able adequately forecast the results. After learning the sales cycle, you should apply and customize it for your business.
The cycle is:
Phase 1: Prospecting
Phase 2: Proposing
Phase 3: Closing and execution
Phase 4: Maintenance
Phase 5: Lifecycle management
We will look at Phases 2 and 3 today. If you missed it, go back to phase 1.
Phase 2: Proposals
When you have earned enough trust to propose a solution to a potential client, you have moved to the next phase of the sales cycle. In this phase, the most important thing to remember is to make sure that you have the audience of a decision maker (who has the ability to sign off on your proposal) to move to the execution phase.
One of the biggest loopholes in which you may find yourself is a never-ending cycle of follow-ups with a non-decision maker or an influencer. An influencer can be your best advocate or your worst nightmare. This person will (to some degree) act as a gatekeeper between you and the decision maker until this person trusts you or is satisfied that your product can alleviate an obstacle for them. If it does not involve a solution that directly benefits or alleviates a problem, you will usually get nowhere. It is important to be honest, upfront and ask “Are you the person who has the final sign-off on this program; and if not, who might that person be?”
The cycle of proposal limbo creates a perfect opportunity to escalate this proposal at a later date. Another good way to create a sense of urgency and limit your exposure is to put an expiration date on the proposal itself. This will (at a minimum) limit your liability with price shifts, availability and ultimately gives them a timeline for action.
A good proposal has the following elements:
- Your company description: a brief description that shows the distinction between your organization and your competition. This description can also list many other services that you can provide to avoid being “corporate stereotyped” into one particular service or product.
- A situation analysis: a description of the situation, the problem and how your solution fixes that particular problem. This will bring any uninformed decision makers the information on why this proposal exists in the first place.
- Scope of work: the boundaries of a specific project. Defining exactly what you will provide and what services you will perform is the key to avoiding “scope creep”. This is the inevitable assumption that your organization was going to do more than originally specified. Having the customer accept and sign your proposal proves that they understand exactly what you will be performing for the costs projected.
- Out of scope: not within the boundaries of a defined project. Defining exactly what is out of scope will protect you from any gray areas in execution. This is a secondary layer of protection against scope creep.
- Assumptions and dependencies; states that in order for the work to take place at this price and in this timeline, “X” must be in order. This could be requiring that certain information must be made available to you, getting the support from the IT department on the client’s side, and / or certain equipment that must be in place and working at the time of your install. This is the final layer of your protection against scope creep.
- Timeline: Always forecast a timeline to let your client know when you intend on completing the project. Keep in consideration the timeline vs. the assumptions and dependencies; as well as the out of scope section. This gives you the ability to identify the reasons why timelines may not be met.
- Cost: In our opinion, it’s always best to specify the costs so that a detail-oriented decision maker can gather the facts he/she needs to accept and sign a proposal. This also specifies each of the elements that will take place and gives more insight into exactly what the client is accepting.
As far as contracts, prior agreements and work orders are concerned; we suggest you consult with your legal counsel to best protect yourself. Each business has a different model and it is not safe to assume that our methods will work for you. This is always a good time to seek professional legal advice.
Over time, many of these proposals will start to look similar. It’s smart to start creating work-specific templates. This will lower your costs invested by taking the time to write them and allows you a faster turnaround for quotes. Template proposals are excellent because they allow your people to spend less time writing proposals and more time selling.
Phase 3: Closing and Executing
A great feeling has come over you; you’ve just closed a deal and watched your new client sign his first contractual agreement with your organization.
So now what?
Control the execution phase by being proactive. Simply put, keep your deadlines and constantly update your client through either email or the use of a project management tool. You can find these online (some are even open-source and free but do require setup time). Make sure that you over-deliver and under-promise. If not handled correctly, this project could be the catalyst for more projects or the bitter end of a client relationship.
Avoid the following common mistakes:
Do not make excuses for falling short – if you miss the deadline within scope or you make a mistake, take full responsibility for the issue and let them know immediately how you intend to correct it. Sometimes showing a client that you have the ability to handle a problem will impress them more than anything else you can do. Do not take this lightly. Avoid under-delivering—If you misquoted (or did not troubleshoot the problem correctly) when you offered a proposal, you are in no position to negotiate with your first deal. It is often better to take this hit and correct the issue at your own expense.
During the maintenance period, you may have a bit more leeway when mistakes are made, but not during the initial deal. Do not assume that the customer is in the loop – Weeks go by and you realize that no one has made contact with the customer to keep them informed, even though you are on schedule and everything is fine. Now you have just received an email from the client asking, “What is the status of this?” A customer should never have to ask that question; all involved parties should know and be updated at all times. Assign someone to be responsible for keeping the customer updated.
If you do not assign someone, you may overlap your efforts and inadvertently annoy the customer with too many updates. Conversely, no one may update your customer at all.
Lay off the sales pitch for future opportunities. Unless it directly affects the project at hand or you have the full capability to manage multiple projects with the client, it is better to complete your first project before initiating other projects.
Be direct with your client about scope creep. Preemptively set the tone that you are performing contracted services. Do not set standards that scope creep is acceptable. This creates future problems when scope creep is assumed and you are performing profitable services at your own expense. It is in their best interest for you to remain stable and operational as a for-profit entity.
Executing the first project correctly shows your client that you have the capability to help them and the ability to cater to their needs. After the first project, your goal is to continue building a relationship with that client for future projects. A satisfied customer also becomes a good advocate for you in the future.