When finance and sales work hand-in-hand
New and emerging Colorado companies are benefiting from arrangements where they can be co-located with shared access to resources and flexible space. These companies are expected to drive half of Denver’s workforce growth in the coming years.
What kind of job growth should we expect, and how can we sustain it? One answer lies in “creative discipline.”
Emerging companies are fueling growth in sales, marketing and development, followed by operations and finance. That means hiring business development and salespeople to gain sales traction.
An extremely important consideration is the creation of a “sales operations” team. Wikipedia defines sales operations as “a set of business activities and processes that help a sales organization run effectively, efficiently and in support of business strategies and objectives.”
Additionally, “The sales operations team members are often the liaisons for sales to other parts of the organization such as finance, marketing and IT.” Finance is a critical trusted advisor in sales operations. Finance isn’t, and shouldn’t be, the “business prevention department.” Rather, “creative discipline” can be a guiding principle to manage to desired financial outcomes. A strong partnership between sales and finance is a powerful and sustaining value creation activity.
Let’s use an example that can be applied in a real business environment. In this example, finance primarily assists in developing pricing strategies for sales of a company’s software product s and services.
These strategies include forecasting revenue, costs, headcount, margins, etc. One key to success is this pricing activity needs to be performed before the pricing is presented to a customer, and in collaboration with other functional departments.
The sales teams will know, in advance, the strategy and negotiation options, including how to answer questions like “at what price points can we meet the customer’s needs given their budget?” Or, “how can we bend and flex in other ways to meet the customer’s needs?” Customers will rarely accept list prices as final in the sales cycle. So how do you bend and flex to meet those needs?
Finance can help iterate the pricing strategy to clearly define expected financial results. The sales operations strategy will not only shape expected financial outcomes, but can serve as a basis for future resource/hiring decisions, facilitate communication or other key drivers. Your company will begin the journey to implementing a scientific process to forecast financial outcomes, instead of the dreaded “hope and pray” method.
Companies don’t need to write a lengthy policy manual. Rather, initially operate off an agreed upon process that evolves over time. There will be a healthy and natural conflict along the way. The relationship will be tested. Again, develop a simple agreed upon process to manage this, beforehand.
The important key point is finance should be engaged to help the company understand the economics of deals. If your sales strategy is to buy the business, then know that before you close the deal. If possible, perform this activity on a deal by deal basis. The key is to implement the concept, learn and then improve.
Now here is where most companies fall short: the feedback loop. By now, you have your sales operations set up, the team is engaged and the sales operations process is moving forward. Deals are getting done, sales commissions are getting paid, but how do you know your pricing strategy and sales operations process is working as intended? What’s the feedback loop and how do you improve?
One of the best ways is to compare your expected outcomes to your actual outcomes. This process takes time and patience, but is worth the effort. You learn so much more about key drivers of your business when you can measure them through facts and data. Finance can help the company understand the meaning behind the numbers. From there, look to standardize pricing, if possible, then manage the exceptions. Now you can begin to scale.
Managing a delicate balance between sales, technology and services can be complex, and finance can be highly effective at keeping them in balance, and function as a neutral third-party at times. The process is only as good as the information received, so finance must consistently be a proven trusted resource.
By now you are probably thinking “This is great, but I don’t have time for it.” I agree, you don’t “have” the time: You need to “make” the time. Your finance team is an invaluable resource to help business development and sales succeed.