It’s the hard truth that most value-added resellers (VARs) and Solution Providers (SPs) fail to acknowledge and then ultimately take too long to address.
Once you commit to creating or growing a cloud services business, you’ve got to alter your sales model to ensure it maps to a recurring revenue based business model.
There are four major truths that need to be addressed. They will free you from the tyranny of missed expectations and low growth:
The Four Truths:
- A sales plan and selling structure created to drive transactional sales is rarely appropriate for driving month-over-month growth in a recurring revenue business.
- Successful sales professionals who are on-plan are not going to screw up their income stream and jeopardize their earning potential for the year.
- The skills and desire of the person selling cloud are fundamentally different from those of the person selling on premise projects and products.
- The same, old approach will not lead to the changes necessary to juice your business development and selling efforts in the cloud.
Acknowledging these truths should prompt actions designed to produce sustainable results. Your sales model and pay plan must change.
The Plan of Action:
- Looking at your sales team structure and make one fundamental decision. Do we use our current sales professionals to drive cloud or do we bring in new people to build the cloud business?
- Creating a sales plan that rewards productivity and results, but does not cause the organization to become a bank.
- Developing a demand generation capability that stresses inbound marketing capabilities and adds net-new customers in volume.
- Not disrupting your run-rate transactional business as you build-out your cloud services pipeline – you’ll need the gross profit and cash flow to fund your new business.
Again, it’s critical to acknowledge that your sales and business development model will not drive monthly recurring revenue if it was created to provide incentive to product and project-based deals. In addition, a transaction-based pay plan seldom meets the need when it comes to driving recurring revenue. What is the next step?
The High-Level Prescription:
- Don’t bother trying to teach an old dog new tricks. Get new dogs. Building a brand-new cloud sales team allows you to start with a clean slate. Find the people who desire to build-out a great monthly recurring revenue business, instead of trying to force Hunters who crave the big pay day and have no desire to build incremental revenue streams.
- Change your sales plan and ensure it aligns sales behavior with company goals for growing your cloud services business. Solid cloud service plans typically use between one and four measures, such as:
- Annual Recurring Revenue (ARR) or Annual Contract Value (ACV).
- Renewals (look at lowering churn).
- Total Contract Value (TCV).
- Net-new Revenue (monthly, quarterly, annually).
Many cloud services businesses value regular deal volume versus fewer, larger transactions at the end of each quarter. To achieve smoother bookings over time, put incentives in place to encourage even production, e.g.,
- Pay a quarterly bonus for meeting minimum volume, typically 15-20% of annual quota.
- The quarterly quota bonuses, if earned at 100% for the year, should represent 25-33% of the total variable incentive payout.
- If the quarterly minimum is not met, half of the quarterly quota bonus is forfeited, with the balance rolling.
- Create a demand generation framework that has a heavy inbound marketing focus, designed to create quality content that pulls people towards your organization and cloud solution-set. Align your published content with your prospects and customers' interests, with an eye on generating inbound traffic that you can then acquire, convert and close.
- Don’t confuse your current sales force and customer base, which will, in turn, stall deals and potentially pollute your pipeline.
By adhering to the first prescription and keeping your current sales team focused, you’ll significantly lower your risk. However, your client base will understand that you’re playing in the cloud marketplace, so you can grab any opportunities that might have otherwise slipped away forever.
In summary, it is imperative to change your sales and business development model when looking to build a solid recurring revenue-based cloud services business. Build out a new team with new capabilities. Create a sales plan that aligns sales with your cloud service business goals. Build serious inbound marketing capabilities. Finally, manage your current pipeline and continue to drive deals to closure, while grabbing any opportunities that might have otherwise moved from your funnel to someone else’s.