Increase Sales by Truncating Unproductive Conversations
To increase sales efficiency, one must ruthlessly truncate unproductive conversations with marginal opportunities as early in the sales cycle as possible.
If you haven't yet read the Founding Sales book by Peter Kazanjy, you should definitely check it out. Here is one of the more memorable quotes:
“The thing that is scarce in sales is time ... You should be ruthless with respect to truncating unproductive conversations with marginal opportunities, especially at the earliest stages, when the world is a greenfield of untouched accounts in front of you.”
In other words, it is a lot more efficient to filter out sales opportunities at the top of funnel. For the mathematically inclined, let me support this claim with a couple of formulas.
Consider a simple sales funnel with just two stages:
It has two conversion rates: \(R_{MQL \rightarrow SQL} \) and \(R_{SQL \rightarrow Deal} \). The overall win rate for the process can be calculated as the product of the two:
\[ R_{win} = R_{MQL \rightarrow SQL} \cdot R_{SQL \rightarrow Deal} \]
This win rate can be treated as the probability of finding a customer in the population of prospects. Let’s assume that this probability is fixed. In other words, we are not changing our product, replacing members of the sales team, improving our product narrative, or doing anything else that might affect it.
In this case, reducing \(R_{MQL \rightarrow SQL} \) by a factor of \(k\) must inevitably increase the conversion rate \(R_{SQL \rightarrow Deal} \) by the same factor \(k\), that is, we can still hit our revenue targets.
Let us now recall the AE-to-BDR ratio formula from our post on data-driven capacity planning:
\[ \dfrac{C_{AE}}{C_{BDR}} = \dfrac{\rho_{BDR} \cdot W_{SQL}}{\rho_{AE} \cdot W_{MQL}} \cdot R_{MQL \rightarrow SQL} \]
Clearly, by reducing the \(R_{MQL \rightarrow SQL} \) conversion rate, we are reducing the AE-to-BDR ratio. Since AEs are more expensive than BDRs, this leads to higher sales efficiency.
In conclusion, Peter Kazanjy is right. To increase sales efficiency, one must ruthlessly truncate marginal opportunities as early in the sales cycle as possible.
