Aaron Ross published his groundbreaking book, Predictable Revenue, in 2011. At the time, his theories about sales force productivity were revolutionary. While some enterprise technology business (like my ex-employer, Oracle) were already following his advice about specializing their sales teams, he gets much of the credit for creating the Sales Development Team (a team that is solely responsible for prospecting to new accounts to generate new leads for the main sales ‘closer’ team), popularizing the cold email (as an alternative to the cold call), and for inadvertently giving rise to the entire sales engagement software industry.
Which leads us to this article. I’ve spent the past few years dissecting Ross’s book, his sales philosophy, and helping a number of businesses stuck in the “Hot Coals” – sales are choppy for a few years and they just can’t seem to break through – to overhauling their sales process and systems. Along the way, I’ve found that while Predictable Revenue does offer business leaders a viable road-map for achieving sustained revenue growth, the book itself is disorganized and often strays far from the core theme.
This is my attempt to make sense of it all… to cut through the noise and tell you exactly what you need to know about generating predictable revenue and implementing Ross's system in your business. The article is part summary/part analysis/part implementation guide. I have tried to stay as true to the core concepts of the book as possible – updating them and adding my commentary only where absolutely necessary.
The Revenue Problem All B2B Companies Will Eventually Face
All companies will face a hot coals stage “B” sometime in their life when shifting from organic growth “A” (based on getting customers through the founders’ relationships and hustling or from organic internet marketing) to proactive growth “C” (based on investing in programs that generate predictable growth). Shifting from organic growth to proactive growth requires new habits, practices and systems, which can take months or years (and lots of delays and frustrations) to get through.
So, how do management teams get through the hot coals as quickly, easily and profitably as possible?
Mistake #1: Hire More Sales Reps & Work Them Harder
Many companies who want to grow fast by adding new customers tend to think that in order to double revenue growth, they need to either double the size of the sales team or make the existing sales team work twice as hard.
In reality, ‘lumping’ prospecting and selling into one job role causes a number of inefficiencies:
Lack of focus: Salespeople juggle too many responsibilities, reducing their ability to get things done.
Harder to develop talent: When you only have one or two sales roles, it’s more challenging to bring in raw talent and develop them because there’s no step-by-step career path, which is unfortunate because developing home-grown talent usually ends up being the best!
Unclear metrics: It’s harder to break out and keep track of key metrics if all functions are lumped into a single area. Different roles = easier to break out different steps in your process = better metrics.
Less visibility into problems: When things aren’t working, lumped responsibilities obscure what’s happening and make it more difficult to isolate and fix issues with accountable follow-through.
Mistake #2: Hire Experienced Sales Reps
Sales VPs assume that salespeople will find new business on their own from past Rolodexes or lots of cold calls, with minimum help or investment from the company. In reality, they won’t generate enough leads on their own because:
Experienced salespeople are terrible at prospecting.
Experienced salespeople hate to prospect.
Even if a salesperson does do some prospecting successfully, as soon as they generate some pipeline, they become too busy to prospect.
The idea that B2B salespeople can just ‘take their accounts with them’ represents a fundamentally flawed view of the way companies actually buy products or services.
Aaron Ross’s Solution: Build A Sales Prospecting Machine That Creates Predictable Revenue
In high-productivity sales organizations, the salespeople do not cause customer acquisition growth, they fulfill it. So, what you need to do when you run into the hot coals problem is to build a better system for predictably generating leads that the sales team can then fulfill.
This will come from creating and developing a highly specialized, outbound prospecting-focused Sales Development Team that will consistently generate new qualified sales opportunities for the quota-carrying salespeople. They’ll do this by adopting a system called “Cold Calling 2.0” (more on this in just a bit).
So how is this Sales Development Team different from the sales team you already have? Well, this team will be:
Specialized: This team has a single mission: to generate (but not by cold calling) new qualified sales opportunities from cold companies (ones at which we had no activity or interest) and pass these qualified opportunities to quota-carrying salespeople to close.
Outbound Prospecting-focused: This team should focus on creating demand at high-potential prospective accounts at which you don’t already have a relationship or current interest, or past account which have gone cold for at least six months. This team does not:
Qualify inbound leads
Handle sales order paperwork
Close small deals
Help-out marketing
Process-driven: Make your management practices, hiring, training and prospecting highly repeatable and consistent. No single person should ever be a bottleneck to the success of the team. Your sales results are only scalable to the extend the CEO and executives are designed out of the process…too many companies are dependent on the CEO or VP Sales for selling!
Predictable: After about 12 months of results and data, you should be able to predict the future results of new hires on this team. In Aaron’s case, he knew that if he hired someone costing $100,000 per year (including all overhead), they would generate as much as $3,000,000 per year in total contracts. He could also predict how long it would take for that person to ramp-up and become cash-flow positive to the company.
To recap – when revenue starts stagnating, many businesses will first look to hire more sales reps, work their existing reps harder, or higher more experienced sales reps. However, the companies that will be best-positioned to break through their revenue barrier, are those that recognize that the key to revenue growth is to increase the demand for their products – and the key to increasing demand is to build a specialized prospecting team that can predictably create new leads for the sales reps to close.
Now that we’ve planted the seed, let’s talk about how you can take your business from organic growth to proactive growth in 4 steps.
1. Specialize Your Four Core Sales Roles
Here are four basic sales functions. If you aren’t specializing your people into these kinds of roles, this is the very first place to begin! You MUST specialize your people to grow results.
1. Sales Development Reps (SDRs) prospect into cold or inactive companies who aren’t engaging with your already, to source new, incremental sales opportunities and pass them to quota-carrying salespeople. This is a team dedicated to proactive, outbound business development. Highly efficient Sales Development Reps do NOT close deals, but create and qualify new sales opportunities and then pass them to Account Executives to close.
One Sales Development Rep typically can support a maximum of 2-5 quota-carrying Account Executives (AE). If you sell very large deals, it’s possible to have even a 1-to-1 or 2-to-1 SDR to AE ratio and still be very profitable.
2. Market Response Reps (MRRs) qualify incoming leads that reach the company through the website or phone, and route qualified opportunities to the appropriate quota-carrying salesperson.
A rule of thumb is that for every 400 leads per month that require human attention, a company needs one Market Response Rep.
Note: The Sales Development and Market Response roles are very different – inbound (Market Response) reps receive leads to work to qualify, while outbound (Sales Development) reps initiate calls and emails – and it’s very challenging for a rep to switch between the two mindsets throughout the day. The Market Response Reps become experts at efficiently qualifying inbound and marketing-generated leads, and the Sales Development team only prospects for incremental business at accounts that need to be pursued, where there is no active or pre-existing interest.
Case Study: Salesforce.com changed from having separate Sales Development teams doing inbound and outbound roles, to having the same team mix both inbound and outbound responsibilities in 2004. Within a week, productivity dropped by 30% and it was clear after a few weeks that the drop (which was caused by mixing responsibilities) was not going to improve over time, so they quickly changed the structure back to separate teams and productivity rose back to the prior levels.
3. Account Executives (AEs) are quota-carrying reps who close deals. They can be either inside or out in the field.
Account Executive closers must continue to generate new business, but they shouldn’t spend their time making cold calls. Rather, they should focus on higher-potential sources of business: a small list of targeted accounts from which they can build relationships; a list of their current clients; a list of their own past dead opportunities.
4. Customer Success Managers/Account Managers (CSMs/AMs) are dedicated to making customers successful. They handle client deployment and success, ongoing client management and renewals.
When should you start specializing your sales roles?
The sooner the better. The second person you hire, after a salesperson who can close, should be a sales rep who is dedicated just to generating leads for your first closer.
Follow the 80/20 rule. When your reps, as a group are spending more than 20% of their time on a secondary function (ie a field salesperson is spending more than 20% of their time prospecting fro new client business as opposed to developing business from their current pipeline and customer base), break out that function into a new role.
An extra benefit of specializing your sales roles: a career path
Sales leaders should be thinking about how your can create a career path for people, to continually develop and grow them. By specializing your sales roles, each group can act as a feeder team for next. Here’s a very simple example:
In reality, your career ladder could include roles like interns, Sales Operations, Inside Sales, Field Sales, Customer Success, etc. However you design your own career ladder, you’ll want to try to move people up the ladder (or rotate them into another group) anywhere from 6-8 months in the early stages to 1-3 years in the later stages. The bottom line, according to Ross, is that the more kinds of different experiences your people are exposed to and develop an expertise in, the better equipped they are to become killer problem-solvers for customers! And that’s a great thing in ANY role in the company, customer-facing or not.
2. Understand The Cold Calling 2.0 (aka “Mass Emailing”) System
Gone are the days when we would just pick up the Yellow Pages and start dialing (Ross calls that Cold Calling 1.0). Instead, Ross recommends we start having our team execute Cold Calling 2.0. What’s that, you say? I’m so glad you asked…
Cold Calling 2.0 is a system for prospecting into cold accounts to generate new business without using any “cold calls” (calling someone who doesn’t know you and who isn’t expecting your call). Instead, he advocates a prospecting approach which favors sending mass emails to prospects in the effort to generate a “warm call” (a call with someone who is expecting your call). We’ll get into more detail on what exactly the system entails in the next section, but for now it’s important to note that Ross created Cold Calling 2.0 because he came to the realization that:
No one enjoys cold calling – neither the caller nor the person being called
Cold calling is inefficient – Finding the ‘right’ contact for your solution in any organization can take lots of time…much more time than it takes to actually have a conversation with them
It’s difficult to measure the ROI of cold calling - tracking classic cold calling metrics like dials or calls connected is much less useful than tracking metrics like qualified opportunities generated
Here are the key differences between Cold Calling 1.0 vs. Cold Calling 2.0:
Focus on results, not activities. Stop tracking metrics like dials per day, calls per day, or appointments set. Start tracking metrics like qualification calls per week and qualified opportunities per month.
Develop respected experts. If you treat the Sales Development role as a low-level job, you’ll get low-level results. Instead – treat the team as, and expect them to be, experts. Don’t skimp on training, equipping or developing them. Set high expectations of their skills development.
Qualify accounts and contacts before calling. Spend serious time identifying and clarifying your Ideal Customer Profile. Define what companies are the most similar to the top 5-10% of your customers (defined as the most likely to purchase for the most revenue) and develop focused target lists based on these tight criteria.
Research rather than sell. When reps do call into cold accounts, instead of making cold calls, make “research calls”. Rather than trying to get the decision-maker on the phone, a rep simply learns about the company and whether there is even a potential fit or not.
Send mobile-optimized emails. Nobody reads long emails. Send emails that are short and readable on a mobile phone.
Everything is a system. Cold Calling 2.0 also means you have processes and a system in place to generate new pipeline and leads predictably – that is, an organization knows how “x effort” will lead to “y results”. Go beyond basic Sales Force Automation. Continuously test out better and more powerful tools that can improve your team’s productivity.
3. Setup Your Sales Development Team & Get Them Started With Cold Calling 2.0
So now you know what Cold Calling 2.0’s all about, how it’s different from Cold Calling 1.0, and everything sounds pretty compelling so far. But before we get started talking about how you can implement Cold Calling 2.0 in your company, you need to setup your Sales Development Team. To help you get started, there are a few boxes you need to tick:
At least one person in your organization is 100% dedicated to prospecting. You can start with having someone part-time, but you will not get significant results unless someone is totally committed to it.
You have at least a CRM or a Sales Engagement software.
Your prospects use email.
You have a proven product or service that has generated revenue.
The “lifetime value of your customer” is more than $10,000. This process will work if your lifetime value is lower, but it becomes more challenging to make it profitable through hired salespeople
Once you allocate or hire the reps you need, let’s introduce them to Cold Calling 2.0 – the 5-step process that looks something like this…
Let’s go through each step in detail…
Step 1: Get Clear on your Ideal Customer Profile
Executed By: The Sales Development Team Manager
Most companies fall short from the start because they target the wrong prospects, at the wrong levels, going after too many kinds of companies, or not speaking in “their language”. The single most important thing you can do to make this program effective is to spend time getting clear on who your ideal customers are – both the kinds of accounts and the types of contacts in them. To identify your Ideal Customer Profile, start by looking at the diagram below and asking yourself that question…
Your next task will be to write down 3-5 criteria that best describe those ideal customers and then to list down any red flags or deal breakers that would warn you of a potential waste of time. Once you’re all finished, you might have a profile that says something like
“Our ideal customer is a VP Sales at a start-up with between 50-200 employees that is at least in their B-series funding round. They were promoted into their current management role from an individual contributor position within the past 2 years, and they don’t have any people management experience before that.”
Finally, you should make an effort to understand your ideal customers by asking them about their role. Doing so will help you develop a “theory of mind” that will allow you to have better conversations with other like-minded prospects. Asking these questions word-for-word may be too blunt, but here are some questions that you’d probably like to know the answers to:
What are the biggest challenges they face in their role?
What are their main frustrations with the __________ process/system they have in place?
What are their KPIs?
Step 2: Build Your List
Executed By: The Sales Development Team Manager or a trained Sales Development Rep
Building a database of your ideal customer profiles can be done by either building your own list in-house or buying one. By using LinkedIn and freelancers, building your own lists is a cost-effective and scalable way to go.
Building lists is a skill in itself that requires strong attention-to-detail, a good working knowledge of Excel/Sheets and the ability to work successfully with freelancers. It is best to delegate this responsibility to one person – either the team manager or an individual SDR – that can oversee all list building activities for the entire team.
Step 3: Run Outbound Email Campaigns
Executed By: The Sales Development Reps
Many companies are too dependent on cold calls. Phone skills are critical but are best used as a second step in prospecting. As we mentioned earlier, the idea is to begin with email and then use phone to follow up with people who respond.
Rather than sending hundreds of mass emails at a time in big bursts, the idea here is to send a regular, smaller number (50-100) of emails per SDR each day, a few days a week, as a rolling campaign. The main goal of this is to generate 5-10 new responses per day. Most Sales Development teams today use sales engagement software, software that is optimized for this type of outbound prospecting, to help manage their emails and responses.
When emailing prospects, Aaron Ross stresses that the goal of your email should be to generate internal referrals to the right people, who then expect your call. Sending these ‘short and sweet’ emails to high-level executives (in plain text) simply asking for a referral to the right person at the company for a first conversation about {what you do} generated a 9-12% response rate for Ross and his team, much higher than the 0-2% response rate typically generated by sending a more traditional cold email.
In Cold Calling 2.0, there is no cold calling. Instead of trying to get around gatekeepers, you can use emails to generate referrals to the right people who then expect your call.
**Author's Critique**
Today, there is a lot more sophistication in the way we engage prospects (instead of sending mass one-off emails, we now generally send email sequences that incorporate emails/calls/LinkedIn/etc.).
A major flaw in Aaron Ross’s argument is assuming that all response rates will be positive. While you may receive 8-12% response rates, it’s usually the case that half or more of the responses you get will be from prospects who decline your request or are uninterested.
This approach of emailing executives really doesn’t work if you’re prospecting into SMEs or smaller accounts and/or if your ICP is already very well-defined.
Step 4: Sell The Dream
Executed By: The Sales Development Reps
Once you’ve made contact with the right executives, Sales Development Reps should “Sell The Dream” by helping them paint a vision of what kinds of solutions will solve their problems. Then connect your solution to their key business issue(s) and their dream.
Sales Development Reps should not be treated as appointment-setting machines who setup all kinds of meetings to which prospects don’t show up. They should be enabled to create a vision with a prospect and start building trust, credibility and rapport from the first call.
Step 5: Pass The Baton
SDRs must focus on passing qualified leads to the AE. A qualified lead should address the following 6 questions:
Does the company fit our Ideal Customer Profile (minimum deal/user size, industry, etc.)?
Are we speaking with someone with influence or power?
Is there a clear Need?
Is there interest in a next step, usually in the form of a discovery call with an Account Executive?
Have we identified any fundamental “red flags” or deal-breakers?
Did the SDR clearly generate the lead (no poaching from “inbound” leads or other SDRs)?
If the answers to these questions are acceptable, the SDR should then transfer over the relationship to the quota-carrying Account Executive in a way that generates consistent and quality results. The process should be designed to allow SDRs to simply and clearly pass new leads to the AEs without dropping the baton! It might look something like this…
Once the SDR passes the lead over to the AE and they re-qualify the prospect (this is very important to ensure quality control!), then the SDR can be compensated. There are three ways an SDR can pass the lead:
Best: Hot-transfer the lead to the salesperson
Okay: Schedule a time on the calendars of your sales rep and the new lead for a discovery call.
Last option: Make an email introduction, cc’ing both the sales rep and the new lead, with each other’s contact information in the email.
At this time, the SDR should also log the email and create a Lead/Opportunity in their CRM. Only after the AE speak with and re-qualifies the lead should the SDR get credited. This is critical to quality control!
To keep your SDRs on track - have them print-out this funnel, add their KPIs, ask them to post it near their desk, and measure these activities on a weekly basis:
4. Use Technology To Standardize & Scale The System
Just as you use stages in your sales process to track the movement and progress of your sales pipeline, you need similar stages in your prospecting process that will, essentially, create an SDR assembly line by which you can manufacture new pipeline. This is an 8-stage system called “Account Status” or “Prospect Status” (depending on whether or not you typically can sell to more than 1 person in an account). This system is designed to be both separate and complementary to your existing sales stages because they precede the creation of a new sales opportunity. The stages are:
Bucket 1: Cold/Not Yet Started
This bucket consists of accounts that have not been contacted yet.
Bucket 2: Working/In Sequence
This bucket includes all the prospects that a rep is actively engaging and researching. They are not yet sure if the company is a good prospect yet, if there’s interest, or even who the right influencers are. The primary goal of a rep with a prospect in this bucket is to determine the “truth” of whether there can be an opportunity at this account in the next several weeks or months.
Bucket 3: ‘Nurture’ Active Opportunity
When a rep generates a new sales lead that has been accepted by the AE (we’ll call this an ‘opportunity’), the SDR can use this status to remove that prospect from the assembly line. This makes it easy for the Rep to check on the prospects and opportunities they’ve passed to their AEs to make sure no batons get dropped.
Bucket 4: ‘Nurture’ Check Back Quarterly
This bucket includes prospects who may have an opportunity in the future, but not yet.
Bucket 5: ‘Nurture’ Dead Opportunity
This bucket contains prospects with dead sales opportunities. These prospects are more likely to become customers in the future, so they have their own category.
Bucket 6: ‘Avoid’ Current Client
This bucket contains all current customers. In larger organizations, it becomes more and more complicated for SDRs to avoid contacting existing customers, so this bucket is designed to help with that.
Bucket 7: ‘Avoid’ Bad Fit / Bad Contact
This bucket contains prospects that don’t have a business fit (not the right ICP, not a significant potential deal size, competitors, partner businesses, etc.) for your solution or may not even be in the business themselves. Contacting these prospects will likely be a waste of time.
Bucket 8: ‘Avoid’ Duplicate
If you don’t want to just delete a duplicate from your list, you can add it to this list to make sure you avoid it in the future.
Bucket 9: No Response
This bucket contains prospects who received your communication but did not respond to it. In a few months’ time, you’ll want to reach out to these prospects again with new messaging.
A note about choosing the right technology:
At the time that Aaron Ross published Predictable Revenue, sales engagement software did not exist. Now, there is an entire sales engagement industry that provides this one software to help Sales Development Teams prospect with greater efficiency and more automation than ever before. How you implement these stages will depend heavily on whether or not you choose to purchase a Sales Engagement Software (which I strongly recommend but which can cost up to $150/rep/month) or if a low-cost CRM is the only tool at your disposal. Since we cannot possibly cover every CRM/Sales Engagement technology in this post, I recommend finding a good Vendor/System Integrator (or just reach out to me at stephen@sage.exchange) and discussing with them a) what kind of software options are available to you in your region and with your available budget, b) whether it makes more sense for you to implement these stages at the Account or the Prospect level, b) how you can implement these stages in your specific software, and c) if there is a dashboard where your reps and managers can view and drill into this data.
I wish you the best of luck as you cross the hot coals and start generating predictable revenue for your business. If you need help on the journey, you know how to find us!