Predictable Revenue by Aaron Ross: 5 Problems

Posted by Steve Richard on Tue, Jun 16, 2015

5 Problems with Predictable Revenue

 

Let me start by saying that I love Predictable Revenue author, Aaron Ross, as a human being and as a sales strategist. He has adopted a ton of kids and been the galvanizing force behind the Sales Development revolution that is helping so many companies grow faster than ever before. He’s just a good dude. That said his now famous book, Predictable Revenue, has several problems. In the book he outlines that cold calling is ineffective and should be replaced with a method whereby an SDR sends roughly 100 emails a week to CEOs or senior executives asking for a referral to the right person. Some percentage of these emails are responded to – maybe 7-20% – leaving the SDR a ‘warm’ referral from which to work. Sounds great, right? And Predictable Revenue does work for some companies; there are some killer documented case studies. But Predictable does not work for many other companies (some of whom have adopted the Funnel Clarity Persuasive Prospecting approach). Here’s why:

5 Problems with Predictable Revenue

Problem #1: Predictable Revenue is not built for companies that sell to larger enterprise accounts. Any sales strategy depends on three factors – what you sell, who you sell to, and your demand type. In the case of companies that sell an enterprise product or service to a small number of big companies, there are just too few accounts to target for Predictable Revenue to work. We have a client who sells a $250k ACV SaaS offering to big financial services firms, retailers, and travel/hospitality companies where Voice of the Customer is a big deal. Each quota carrying sales rep targets only 50 big potential accounts. They need their SDRs really digging into these accounts to figure out the business units, and correct decision makers within those units. There are up to 10 DMs for each opportunity and up to 20 opportunities per big account (think Bank of America with all their units and decentralized decision making). They were using Predictable Revenue and failing miserably. Why? There are only a limited number of these big companies. The sales team ended up wasting their time doing sales calls with mid-market companies who would never buy this enterprise solution. We got them back to prospecting blocking/tackling and using the phone as well as email. The result? The CMO called me to say we made her look like a hero to her Board.

 

Problem #2: Not enough accounts as you scale. So let’s pretend you are selling to the thousands of mid-market companies with over 1,000 employees. There are lots of these companies globally, so problem #1 doesn’t apply to you. Predictable Revenue is rolling along and working great. That is until your sales development team scales past a certain point. Now instead of sending email batches of 100 at a time to thousands of prospects, each SDR only has a list of 250 target accounts for the year. The equation is simple. More SDRs = fewer accounts per SDR. This results in a rather tough change that your sales team needs to make. Whereas the SDRs were living fat and happy off of their Predictable Revenue emails, now they are forced to go deep into the territory rather than skimming the cream off the top. But wait. They never had to pick up the phone to make an “Unexpected Sales Call” before. This leads to…

 

Problem #3: Over reliance on email = conversation atrophy. Because of Predictable Revenue the SDRs have been totally dependent on scheduling first meetings via email. And now too few prospects are replying to the SDRs’ Predictable Revenue emails for them to hit their numbers. The SDRs are only comfortable doing “Expected Sales Calls” that are scheduled where the prospect is ready to talk to them. The result? Conversation atrophy. Much like your muscles atrophy when you stop exercising, so too do conversation skills atrophy when you stop talking to people. And if you look at the history of CEOs who started their careers in sales, you notice that almost all of them cut their teeth by doing cold calling or canvassing for new business. There is no tougher skill to learn that serves you better in your career than the ability to strike up a conversation with someone who is not expecting to hear from you, and who doesn’t have context for the conversation, then walk away with a scheduled meeting. A client and I chatted about this yesterday. They have an SDR who hits their numbers purely over email. Great I said! Not so much. This SDR wants a promotion into client success, but she is not equipped with the conversation skills to do the job. In her 18 months as an SDR, this woman never learned how to talk to people. Yikes. It’s an unfortunate unintended consequence of Predictable Revenue. This leads to…

 

Problem #4: Lack of skill to do discovery call from recent college grads. In the book Aaron talks about how at Salesforce the SDRs would take the scheduled meetings from the email referrals and conduct those calls themselves to qualify as real opportunities vs. tire kickers. The concept of SDRs doing scheduled calls to qualify is totally sound. But unfortunately many companies are unable to execute this effectively. Why? Sales development teams tend to be recent college grads who are only able to have discovery and qualification calls with business leaders up to a certain point. It worked at Salesforce because the qualification was pretty straight forward. It was not working for the client mentioned in problem #1 because their sale requires significant subject matter expertise on various use cases, a deep understanding of the incumbent solutions, knowledge of the metrics that matter for different functional executives, etc. WAY too complex of a business conversation for a recent college grad to pull off. The AEs at this client desperately wanted to do their own scheduled “Expected Sales Calls” but were told no by the old leadership who drank too much of the Predictable Revenue Kool Aid. Once new sales leadership changed the SDRs back to pure appointment setters who gathered some info during “Unexpected Sales Calls & Emails,” the AEs were much happier (and their conversion rate of first appointment to opportunity skyrocketed). Which leads to…

 

Problem #5: Allen Nance’s concept of green field vs. brown field. Why was Predictable Revenue so wildly successful at Salesforce in the early 2000s as well as places like Acquia whereas it fails for other businesses who also sell to the SMB where there are enough accounts to make it work? The answer lies in the third leg of the sales strategy ‘it depends’ stool – the concept of demand type. This term is widely used by SiriusDecisions to bucket the demand that different products and services fulfill. There are four: same old, same old; better mouse trap; evangelical; and government regulation. Allen Nance, CEO of WhatCounts, describes this more simply as green field vs. brown field. For green field think SFDC in the early days – totally evangelical with a wide open untouched market for cloud CRM. For brown field think WhatCounts where they must systematically unseat incumbents like ExactTarget and convince clients it’s worth putting in place a better mouse trap. Allen got on stage at the Rainmaker sales development conference in Jan 2015 to say that he challenged Aaron Ross to produce one case study where Predictable Revenue worked in a brown field marketplace. Check out the video here. It was one of the biggest ‘tell it like it is’ moments on sales conference history. You rock Allen! In summary Predictable Revenue is one sales strategy that you should study up on and know how to execute. It works for some companies based on what you sell, who you sell to, and your demand type. But it is NOT a one size fits all, universal approach. Proceed with caution. What do you think? Have you deployed Predictable Revenue with great success? Great failure. Tell your story in the comments below.

Topics: Sales Process