Directing sales through sales linearity
What is Sales Linearity?
When transactions close in a regular pattern from week to week regularly throughout the quarter, it is referred to as Sales Linearity. Sales linearity is the technique of creating and nurturing opportunities in a balanced way to conclude business regularly throughout the quarter, as opposed to deals closing in mass at the end of the quarter with reps scrambling to meet their number.
Sales Linearity impacts all aspects of sales management and forecasting, not just early deal closure. Reps must correctly manage their pipeline to ensure opportunities are in the appropriate stage at the right time and that deals close uniformly throughout the quarter rather than by the last week or occasionally the last hour of the quarter.
Why is it important?
To increase sales predictability and provide businesses a stronger control over their financial health, a linear sales process is essential.
With a linear sales cycle, your business will have an edge in the following aspects:
Managing downside risk:
In subscription businesses where renewals and net new deals are all coming at the last month of the quarter, things start to pile up and that becomes a heavy burden for supporting cast members. This is called ‘downside risk’, which is effectively managed with a Linear Sales Process.
Building better cash flow:
Relieving strain from finance and operations to accomplish more with fewer resources otherwise, non-linearity puts a lot of pressure on the last quarter.
Reducing operational challenges:
It is so because if all the contracts are signed at the end of the quarter then all the deals are signed towards the end of the quarter, which is hence taken care of by linearity.
Companies that aren’t linear tend to miss their forecast. Linearity can be a sign that you are going to potentially miss your number.
How to improve B2B Sales Linearity?
1. Encourage 30 days quotas
Non-linearity shouldn't be a surprise if the sales organization uses quarterly quotes. Although switching to monthly quotas is a workable alternative, it does require more planning. This is due to the fact that it necessitates adjusting accelerators and incentives at a higher tempo and in the face of more pronounced seasonality. Some companies make the renewal team focus on getting deals done 30 days before the renewal and, in some cases even 12 months before renewal.
2. Install Pipeline discipline
Too many sales executives assume that they must become more active and/or exert greater pressure at the conclusion of the quarter. As a result, they become the main causes of non-linearity. Instead, sales leaders should conduct regular, weekly deal checks. Managers must monitor the status of deals. This includes the opportunity amount, the close date, and each and every MEDDICC element at all times. Representatives whose closing dates fall on the last day of the quarter or the first day of the next must be addressed by managers in a constructive manner.
3. Sales Incentives
Offer incentives for closing deals earlier in the quarter so that the last stage pipeline won’t continue to lag. Below are some best methods to incentivize your sales teams:
Salespeople are driven by both intrinsic as well as extrinsic factors. Giving out quarterly linearity prizes can have a significant influence, regardless of the financial rewards.
SPIFs Spend money on your linearity. For transactions that conclude in the first or second month of the quarter, think about providing either set cash sums or experiences (dinner for two, tickets to an event, etc.).
Settle Accounts with Reps accordingly
You can provide quota credit multipliers for additional commission on deals that close earlier in the quarter as an alternative to preset amounts. Due to the simplicity of administering set sums or gifts, this is graded significantly lower than SPIFs. This idea does have the advantage that it is simpler to increase the incentive month by month. A 1.5x multiplier or +3 percent commission, for instance, could be offered in the first month, followed by a 1.25x multiplier or +1.5 percent commission in the following month.
4. Integrate Marketing
Everyone on the revenue operations team, which consists of sales, marketing, customer success, and ops, will be able to see a deal's sales activity and contribute in their own unique ways to driving sales linearity. For instance, marketing can conduct targeted efforts to provide air coverage to re-engage the prospect and speed up the deal when they notice that an opportunity is stalled. After all, the adage that time kills all transactions is untrue.
Linearity is not a myth. It is a real number. You should in fact aim to close 20% by the end of 1st month, 50% by the end of month 2 and 100% by the end of the quarter. It would be fair to say that if you have a high run rate business in general then you’ll be more linear and should aspire for more linearity. While working for big deals though, its a given that those will come towards the end of the quarter.
Linearity is an indication that you may or may not hit your number. So when you’re calling your number at the end of 1st month or 2nd month, look at how linear you are. If you are not linear then there’s a good chance that you will miss on your numbers.
You can improve your sales linearity by applying the concepts discussed above into practice, depending on which one best fits your organization. However, Sales Representatives may become pushy, which may erode confidence and can derail negotiations if linearity incentives are too high.
To learn more about how to use your sales data to track pipeline performance and individual rep performance refer to our note here.