Surprise! If the Sales team isn’t closing good deals, it’s your fault not theirs.
If you search for “close better deals” on Google, 99% of the content is about how to close more deals, bigger deals, faster deals. There’s little to no content about how to close “higher quality” customers—meaning customers who are more likely to renew.
It’s a shame; better deals will renew at a much higher rate, promote and refer your product to others, and grow more predictably over time. As companies grow, renewals begin to fuel the company even more than new customers and bookings. And focusing on renewals is especially important to focus on in times like these. At best, “bad deals” consume your CSM’s time and energy. At worst, they become detractors.
So, how do companies close “better” deals? And when a “bad” deal closes, who is at fault?
In this post, I’ll break down the behaviors and processes that can lead to closing a bad deal and then offer solutions for each problem. But first, we have to answer the following question:
What is a “bad” deal?
There’s a difference between a “misunderstanding during the Sales process” and a “bad deal”.
A misunderstanding is when the customer’s expectations don’t match what the customer actually received, but it’s easily rectified by the Success team.
A bad deal is one that the Success team knows will not renew without either a.) a massive amount of work from the Customer Success team, or b.) decreasing the price or adding services, which both ruin the margins. Here are some examples of bad deals:
- The Customer does not believe the product solves a severe problem
- The Customer does not expect to use the product more than a year
- The deal was sold to the wrong department or champion (i.e. they don’t have the functional skills to use the product)
- The customer doesn’t have the technology required to implement the product
- The customer needs help implementing the product, but not enough professional services were included
The behaviors that lead to bad deals
Most companies have robust funnels set up to capture leads at the top of the funnel, then nurturing those leads to talk with Sales, trial the product, and eventually close. Through that process, they identify and remove unqualified people.
For Marketing, those stages typically include:
Define ICP / Buyer Persona → Lead capture → Lead enrichment → Lead nurture → Lead score → MQL
For Sales development reps, those stages typically include:
Lead database → Cold outreach → Qualification call → AE gives demo
So all of the decisions about which leads are worth pursuing happen before the Salesperson is involved. Even with the incredible amount of qualification that many of us put into our lead generation process, we can hardly fault an account executive for closing the deal that was handed to them.
Here’s how to diagnose and fix some of the true causes of bad deals.
Problem 1: Lead quality
What it is: Marketing is sending low-quality leads to Sales.
- The Ideal Customer Profile (ICP) is not well defined. The Marketing team has not defined a buying persona that’s specific enough. For example, the buying persona might be “engineering leaders”, but the actual best buyer is a Director of Engineering at a software company with 100-500 employees that uses GitHub Cloud.
- Marketing campaigns don’t target the ICP. Even if Marketing has defined the ICP specifically, their campaigns target a broad audience and are capturing many people outside the target buying profile and there is insufficient lead enrichment data to determine how good the lead is.
- Lead nurturing journeys don’t filter out bad potential customers. This “cause” is different from the one preceding it because in this case, the campaigns may be targeting the ICP—but they don’t have enough qualification checks in the lead nurturing process to disqualify bad leads or companies.
- Customer discovery questions are incomplete. Once the Marketing team passes a lead to Sales, the SDR/BDR team doesn’t have sufficient lead qualification questions, or the answers to the questions are not stored in the database for future auditing.
Problem 2: Sales influence
What it is: Sales is over-extending to get deals across the line.
- The guidelines about what AEs can offer on order forms are unclear. During negotiations with Customers, AEs are often asked (or required) to make changes to standard order forms in order to close the deal. But it’s often unclear where the boundaries are, and who needs to approve each change.
- Spiffs or incentives to get deals closed are sacrificing quality for speed. When a company needs to push to hit their sales targets, they often provide end of month, quarter, or year spiffs to encourage the behavior they want. But most spiffs only target an outcome (close x type of deal) and fail to punish bad processes or behaviors to close that deal.
- AEs are below quota. Sometimes an AE is under massive pressure from their boss and CRO to hit their quarterly target. This can cause AEs to do things they wouldn’t normally do in order to keep their job or please their boss.
- And in extremely rare situations, the AE is a consistent liar that just sells what customers want to hear. This situation is the exception, not the norm.
Problem 3: Compliance
What it is: Compliance is sacrificing standards to get deals across the line.
- The deal desk doesn’t catch order form errors. At the end of month and quarter, all Sales support teams get stretched (solutions consulting, security, legal, and deal desk). As a result, fast-moving deal desk reps miss important changes to order forms or feel pressured to agree to new deal terms to support their partners in Sales.
- There are dependencies between features, pricing, and services that aren’t discovered early. The AE team often doesn’t know how offering a specific feature, service, or discount will affect the support and delivery of the product. If Sales isn’t appropriately trained on how the product works and how customers are managed, they won’t instinctively know how to sell the best deals.
From the list of “causes” above, we can see it’s generally not the sales team’s fault when a bad deal is closed. It’s up to the Success leader to challenge their peers in Marketing and Sales to find areas for improvement so that bad deals can be avoided. Some potential solutions to the problem include:
1. Marketing is accountable for generating better leads
Require the marketing team to do a few things:
- Provide a random sample of 25 MQLs each quarter that are inspected manually by the VP of Sales and VP of CS
- Define a minimum set of data (enrichment) before an MQL can be sent to sales
- Correlate lead score / MQL with close rate and renewal rate
2. CS gets to qualify inbound leads CSQL
Aaron Thompson proposed the idea of a Customer Success qualified lead—allow the CS team to specify criteria needed to close a deal. These criteria could be included in the initial qualification call, as well as in the deal desk process. In the most progressive version of this idea, Success would have a representative that participates in SDR qualification calls to ensure good opportunities are being passed off to account executives.
3. Have a tighter deal desk process for approving deals
Inevitably, the business will need to be flexible with deal terms sometimes to close important deals. But a strong deal desk process catches the changes, documents them, and makes them available for future analysis of the customer base and margin reviews. Ideally, someone outside of Sales (operations/finance) catches outliers and exceptions since their job isn’t directly tied to quota. Exceptions should be clearly documented in SalesForce at the opportunity level for easy future analysis.
4. Give CS a chance to “reject” a new deal
When the CS team does the first kickoff call, give the CS person a chance to reject a deal. In other words, their compensation will no longer include that customer’s performance. In order to have the deal officially rejected, the CSM must clearly show which qualification criteria were not met, and the VP of Success has to approve.
5. Make everyone’s salary based (in some way) on renewal rates
Since so many departments are responsible for the quality of the deals that are closed, make everyone’s compensation directly tied to renewal rates. This could be in the form of a quarterly or annual bonus, or aligned to your organization's current pay structure.
Doing it this way prevents Sales from feeling like they are being singled out, and gets everyone aligned around the KPI that matters most for SaaS companies.
It’s your responsibility as a leadership team (but especially as the VP of Success) to put the proper structure in place to enable the team to close the right deals.
Is your team handling "overselling" in a way that's not addressed in this post? Let me know.