This week, the Bowery Capital team hosted Bill Siegel, CFO at SecurityScorecard, to discuss “Sales Pipeline Hygiene and Best Practices.” SecurityScorecard is a SaaS platform for cybersecurity ratings and continuous risk monitoring for vendor risk management. The company has raised over $60MM in venture capital, including its most recent round, a $27.5MM in Series C led by Nokia Growth Partners. With well over 100 employees, SecurityScorecard has been dramatically ramping its sales and other customer-facing teams. In this show, Bill walks us through his philosophy on the importance of sales pipeline hygiene, and why it’s potentially the most important step in building a predictable SaaS sales engine at the early stage. Today’s episode was recorded live at the 2017 Bowery Capital CFO Summit, where we had the pleasure of hosting Bill on a similarly themed panel: “Setting Actionable KPIs at Different Stages.”
Bill Siegel is the CFO of SecurityScorecard, a role he has held for just over a year. Prior to SecurityScorecard, Bill served as Head of Private Market at NASDAQ. He landed in that role following NASDAQ’s late-2015 acquisition of SecondMarket, where Bill had been CEO. He originally joined SecondMarket as VP of Operations in 2011, prior to which he was SVP & Head of Corporate Finance at The Receivables Exchange. As a financially minded executive who has served in both the CFO and CEO roles, Bill is a perfect guest to speak on today’s podcast topic.
Pipeline is one of the most frequently underrated measures of sales health in pre-Series A enterprise SaaS companies. While bookings targets dominate founder thinking off the bat, understanding sales success or failure when it happens is almost more important. For example, a team might hit numbers in its first few months of sales. Everyone is happy and no one questions it: customers want the product and our sales team is killing it. Then, two months of bookings misses. What happened? Because no framework for understanding the sales process was instituted, the founders and the board are in the dark. To avoid these situations, startups—especially in enterprise SaaS—must build a culture of meticulous pipeline tracking and data collection; sales pipeline hygiene, in other words.
A seed stage founder might protest: we’re only a few people and don’t have sales ops resources! We just started to build pipeline! Complex sales metrics are for post product-fit companies! These are easy assumptions to make but they are all misguided. The key to successful early-stage sales pipeline hygiene—and seed-stage sales ops in general—is to keep the funnel simple enough to measure thoroughly. Limit the number of steps in your funnel, make sure each is tied to a specific milestone in the sales process, and ensure your entire team is on the same page regarding these definitions. Bill outlines one way a founder might structure her early “simplified” sales funnel. I’ll walk through them briefly below, as well as the sales milestone tied to each.
Stage 1 — Lead: To move an account to this stage, something has happened warranting moving a prospect—which is no more than a name, company, email in your CRM—into something that salespeople can work on. This may be inbound (whitepaper read, form filled) or outbound (SDR touch). Once the account is here, it is “actionable” and there is a next step that your team will take to begin moving it further into the sales funnel.
Stage 2 — Qualified: To move an account to this stage, your team must first “qualify” it. There are many sales frameworks that determine which boxes must be checked for qualification. Bill and I use BANT as an example, which calls for sales reps to verify Budget, Authority, Need, and Timing. We’ve discussed this framework and many others in past podcasts. Qualification usually occurs through sales calls, but can also occur over email, or sometimes via other methods of data collection like forms, webinars, or live events.
Stage 3 — Demo: To move an account to this stage, there needs to be proof that the dialog has moved into “active” selling mode. In the example Bill gives, that proof comes in the form of a successful demo, or an agreement to see one. At this point, your account becomes an “opportunity,” and part of your formal pipeline, both company-wide and on an individual rep basis.
Stage 4 — Proof of Concept (POC): To move an account to this stage, stakeholders have agreed to use your product as a precursor to a full purchase and contract. We’ve discussed best practices in POCs (and related SLAs) in past podcasts. But the key to successful POCs is the mutual commitment of resources, dedication to a limited timeline, and good faith agreement that should you “hit your marks” to the company’s satisfaction, a proper contract will be presented and signed. Bill suggests that over the course of a good POC, pricing should be discussed so that by the end of the process, negotiations are more focused on breadth of usage than negotiations on ACV. To successfully move an account beyond this stage, it must be signed and fully Closed / Won.
With a simplified sales funnel like the above, your team can commit to thoroughly recording each of these steps in your CRM. This yields two critical tools: (1) an honest view of pipeline, and (2) a sense for conversion through the funnel, which helps one identify “leaks in the bucket” later on. In today’s episode, Bill also walks us through other keys to early sales pipeline hygiene. One, for example, is pipeline aging. Over time, a company will learn how long an account can stay in one stage before its age indicates that it’s no longer a valid opportunity. As reps are often incentivized to ensure their pipelines are full, it’s key for managers to keep an eye on aging to ensure deal freshness and mitigate “pipeline drift.” Later on, it’s possible to run more complex cohort analyses to get an understanding on aging’s affect on your sales process, but you can start simple: Bill suggests simply picking a date after which an opportunity must expire.
Armed with a proper measure of pipeline, you can use it as a leading indicator for bookings, our original goal. Pipeline coverage is the easiest way to think about this early on. As Bill points out, it is hard to know what the “proper” coverage level is until at least a year or so post-product-market fit, in large part because enterprise sales cycles are different for every product and there’s often a lot of variance early on. But, you can still get a sense for what’s healthy and what’s not based on your initial win rates. In general, it’s hard to make an argument that you’re in a strong position to hit next quarter’s bookings if your pipeline coverage is under 2x targets. It’s important to remember that none of these measures are going to be perfect leading indicators early on. But by committing to a consistent process and sticking with it, you begin to generate historical data. Only then can your accuracy and forecasting ability can begin to improve. This is why, as Bill explains, sales pipeline hygiene should be a priority from day one.
If you liked “Sales Pipeline Hygiene and Best Practices” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. If you haven’t already, subscribe to the podcast to get all our new content each week!
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