Sales Managers: Do You Understand Your Revenue Equation?

It's no secret that an organization has to enjoy alignment across all of its departments to really grow (or at least grow in a sustainable way). The problem is, it's common for departments, teams, sales managers, and even individual team members to be misaligned with one another.

In other words, they may have very different ideas about the value the company provides, the selling points that help to convert leads, and the typical journey that the ideal customer takes.

Misalignment can be a major problem for any business. Think about it: If one of your reps is selling based on price, and another one is selling based on customer experience, then where does that leave brand consistency? How can you focus on the prospects with the highest potential value if your reps aren't even sure who they are? 

The point is, sales management involves working out any misalignment issues within your organization as soon as possible. It may not lead to immediate, explosive growth. But it will stabilize your processes and revenue stream. That is the foundation you need for your company to really take off. This is where the revenue equation comes into the picture.

What is the Revenue Equation?

If we were to express the revenue equation as a mathematical formula, it would look like this:

Sales Foundations + Sales Design + Sales Infrastructure = Revenue Stabilization and Growth

​When those three key elements on the left side of the equation are completely aligned across the entire organization, the inevitable result is stabilization, and ultimately growth. The question for sales managers is: Do you understand the revenue equation for your company? And if you do, how about the rest of your team?

We've talked about these three elements in this recent blog post, but let's just remind ourselves what each component involves:

• Sales Foundations. These include the pain points that your company solves, your unique selling points, the experience you provide for your customers, etc.
• Sales Design. This is how you approach the sales process. Who is your target audience? What's important to them? Why would they buy from you?
• Sales Infrastructure. Your infrastructure is basically the framework that enables you to sell to your target audience (the technology and tools you use, the workflows your team follows, and the metrics you track for performance).

For sales managers, defining these three elements is the easy part. The trick is, making sure everyone on your sales team (and within your organization) is on the same page when it comes to these "pieces of the puzzle." If each sales rep has a different idea about what your company is all about, then many of them are selling for an imaginary company — the one that exists in their mind, not in reality.

Understanding the Revenue Equation is Vital to Sales Management

In practical terms, the main issue is how to get everyone on the same page. If you're the Change Agent, then you'll need to lay the groundwork for the Improvement Team to achieve that desired alignment. That means you'll have to dig in and ask some probing questions. Throughout this entire process, you'll also need to be guided by the three key qualities of the Change Agent:

Hold the Vision

Remember, the ultimate objective of your meetings with the Improvement Team is to work out any alignment issues. This is critical to stabilize and grow revenue. You can't forget that — and you can't let your team forget it, either.

Think of it like a family road trip. You need to figure out where you're going (not just the main destination, but any "sub-destinations" along the way). How will you get there? What's expected of each family member?

In the same way, with each meeting you need to be upfront and intentional about the main goal (your destination), as well as any "stepping-stone goals" along the way.  Of course, sales managers also need to be clear about how you're going to get there, and what's expected of each team member.

Consistently Cultivate Trust

Depending on the dynamics of your company, you may need to do some pre-work before your team members start opening up to you. Create opportunities for them to express their true thoughts and opinions. This may mean multiple introductory meetings at the start, several one-on-one sessions, and even meetings without the team's direct supervisor (just to give the participants some space, and with the supervisor's approval).

Here's another thing to keep in mind: Sometimes team members, in the middle of a meeting, will experience what we'll call a "tangential epiphany" — a really great insight that has nothing to do with the topic at hand. It's important to handle those occasions with care. You don't want to derail the meeting. But you also want to demonstrate your respect for the team member's contribution. 

The best way for sales managers to deal with that situation is to put the participant's idea "in the parking lot." Set aside time to loop back around to it at the end of the meeting. Alternatively, you could have a quick one-on-one with the team member afterwards to flesh out his or her idea. That's a great way to build trust, and gain more insight into your company's Revenue Equation at the same time. (In fact, sometimes those "tangential epiphanies" are the most valuable insights that come out of a meeting!)

Seek to Understand

Once sales managers have established a baseline level of trust, and everyone in the meeting knows why they're there, you can really dig into the details of your company's alignment issues. You can easily identify which areas need attention by simply having each participant rank, on a scale of 1 to 10, each of the following components is within your organization. The ranking should be done based on how well-defined each component is in the mind of each sales team member. 

1. Sales Foundations

• The problems your company solves
• The unique value it offers
• The key differentiators that separate you from the competition
• The specific offerings your company provides
• The experiences you want to create for your customers

2. Sales Design

• Your target audience (either individual consumers or organizations)
• Your target persona (what your "ideal customer" looks like)
• The customer's sales journey
• Your company's marketing strategies and tactics

3. Sales Infrastructure

• The role of each team/team member within the sales funnel
• The process of moving a prospect through the funnel
• The tech you use to enable sales
• The KPIs you use to evaluate team and individual performance
• The process you use to improve sales/marketing performance

After you get those preliminary scores, you can explore the discrepancies and areas of confusion you find on a deeper level.

Effort Pays Off

It takes some effort, and it definitely takes some commitment, to work through this process. But the light at the end of the tunnel is a deeper understanding of where misalignment exists, and the beginnings of a game plan to fix those issues. If you and your team really understand the organization's Revenue Equation, you'll be able to work together to refine it, stabilize it, and eventually use it to improve your sales performance.

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