Lenny's Podcast: Product | Career | Growth
01:07:39 · Lenny Rachitsky, Jen Abel
[01:07:39] S0: And yeah, the easier approach is just to stop responding and just hope that the salesperson understands very little, "Not excited." Oh, man. Okay. What are the benchmarks for how often do you get through each of these stages? You mentioned a few, just from demo to the stage. [01:07:57] S1: Usually once something is qualified, meaning you're speaking to the right person, they are excited by the alpha, they admit that there's change that needs to happen. Notice I didn't say problem, but change. People get so fixated on problems, which are important. They are important, but everyone speaks to the same problem and then it commoditizes you, which is why I don't like to overly emphasize it. The win rate for enterprise, a good healthy win rate is actually probably going to surprise you. It's not 50%. Meaning of all sales qualified leads or opportunities, a healthy win rate is usually around 30 to 35%. [01:08:38] S0: From qualified lead- [01:08:40] S1: Qualified- [01:08:40] S0: ... to signed contract. [01:08:41] S1: Meaning you speak to a hundred, you're closing anywhere between 30 to 35, maybe slightly less. Maybe 25 to 30. That seems high actually. Yeah, somewhere between 25 and 35%. Why? If your win rate is higher than that, your price is too low. There's a lot of part of the market that's just not an immaturity perspective to take you on and that's healthy. Those are all the chasms. [01:09:12] S0: And the implication here is it's better off keeping your price high than winning more often.
01:09:12 · Lenny Rachitsky, Jen Abel
[01:09:12] S0: And the implication here is it's better off keeping your price high than winning more often. [01:09:15] S1: Yes, because the market talks too. Well, the worst thing you can do is charge somebody's friend 50 and somebody else 500k. They talk. The market talks. You have to assume that. [01:09:29] S0: Yeah, I'm in a lot of WhatsApp groups with founders and they do exactly that. They're like, "What kind of deal do you get for this product?" [01:09:33] S1: Yeah, that's exactly right. So assume the market talks, especially at the corporate executive level. And someone might just not be ready yet and that's okay. The amount of deals that boomerang a year later of the ones that have lost, that's probably another 25%. So it is totally normal and natural for deals to not advance, right? But to a healthy win rate in the enterprise is typically, I would say between 25 and 35%. [01:10:05] S0: Okay, that is incredibly helpful to people, a, I know ... How about key stages along the way, just percentage drop off, up and- [01:10:14] S1: So it's usually from qualified lead to you're coming out of demo, it's probably you'd lose half. [01:10:28] S0: Out of demo? [01:10:28] S1: Out of demo. Yeah, and then- [01:10:29] S0: Post-demo, not first. [01:10:30] S1: Yeah, it'd get you to 30%. [01:10:32] S0: So from demo to, what was that step that you- [01:10:35] S1: From demo to ... The more you move down, the less those numbers, the less- [01:10:40] S0: I see.
01:10:40 · Lenny Rachitsky, Jen Abel
[01:10:40] S0: I see. [01:10:41] S1: ... wider those numbers. So let's say if you speak to ... And you're doing a really good job targeting the right people. Maybe 50% of those people move to a qualified lead or 50 to 75% move to qualify lead. Of that, then another half move to demo, and then from there, another quarter advance beyond that. Once you're in the bottom of funnel, you usually don't lose too much from there if you're doing good deal qualification. [01:11:13] S0: So say you're at the pilot stage, what percentage should you expect drop off? [01:11:13] S1: 80/20- [01:11:17] S0: 80% succeed post-pilot? [01:11:20] S1: Correct. Yeah. [01:11:20] S0: Okay. Amazing. [01:11:21] S1: I find that. Yeah. [01:11:23] S0: Okay. So if you're below that, something's wrong with your pilot. [01:11:25] S1: Yeah, or you're not qualifying clearly or- [01:11:27] S0: I see. You're almost doing too good a job convincing them this is the thing for them. [01:11:31] S1: Correct, and the product's not there. Correct. So yeah, that's where ... And again, smart buyers always want to do a pilot, so just have a part of your process. [01:11:40] S0: Okay. There's four more steps to go before you're done, before the money's wired. Okay, so step 11, papering prep, setting timeline for procurement.
01:11:40 · Lenny Rachitsky, Jen Abel
[01:11:40] S0: Okay. There's four more steps to go before you're done, before the money's wired. Okay, so step 11, papering prep, setting timeline for procurement. [01:11:50] S1: Yes. So you have now spoken pre-pilot about the timeline of which we're reverse engineering. Now you're going to document in an email, so that that champion that you're working with can forward that to procurement to say, "Hey, here's what we agreed to. Here's the pricing that's predicated on us getting this signed by this date." Give them something. "Here's the kicker they're going to give us if we get to this date." There's always got to be a reason to create urgency. And then what you want to do is say, "Here's our paper." Send a Word document. Do not send a PDF because they're going to always redline. Always. Send a Word document of your paper and ask the question, "Do you want to use our paper, here's a Word doc version, or do you want to lift from it? And do you want to use your paper?" It might be a lot faster to use their paper. That's why you give them the option. And that's why the timing is in there because they might say, "Well, in order for us to hit that time, we got to use our paper." [01:12:49] S0: And it's not Google Docs, it's Word doc like Microsoft Office. [01:12:52] S1: Microsoft Word, yeah. Most of these people can't access Google Docs, but yes. [01:12:56] S0: And so this says post-pilot, feels like it's gone well. You're saying the next step is, "Here's the contract," basically. Get that to procurement that early.
01:12:56 · Lenny Rachitsky, Jen Abel
[01:12:56] S0: And so this says post-pilot, feels like it's gone well. You're saying the next step is, "Here's the contract," basically. Get that to procurement that early. [01:13:07] S1: Again, your internal champion is you're working from N minus one from the executive sponsor or it's the executive sponsor themselves. You wouldn't have made it ... They're not going to put their team into a pilot if it doesn't have likes. [01:13:21] S0: And an implication here is procurement is a way that your deal might still die even if people internally love your product. [01:13:28] S1: Correct. If you get sent to ... So here's something interesting that a lot of people don't realize. People will use procurement as the excuse to not want to give you the bad feedback, "Oh, I got to go talk ... Oh, procurement. It's lost in procurement or blah, blah, blah, blah, blah." Very easy to blame procurement. Usually, procurement is a 30-day process, doing the back and forth on the legal, the papering. Procurement's job is not to kill the deal, it's just to make sure that it is aligned with how they need to buy. That's their job. Procurement is the only person that can get you paid. Do not start any work until you go through procurement. Business unit leaders can't just pay you. That needs to come from the finance team who pulls from the budget. So be very careful. Don't start any work until obviously the papers are signed. [01:14:26] S0: Start work meaning implementing, rolling out to- [01:14:26] S1: Right.
01:14:26 · Jen Abel, Lenny Rachitsky
[01:14:26] S1: Right. [01:14:28] S0: ... people, onboarding? Got it, got it, got it. Okay, amazing. Okay, so that's step 11, papering, prep, setting timeline for procurement, getting on board with, "What is it going to take to sign by this date? Here's a little gift you'll get if you do it by this date, free month or whatever." Okay. Step 12, papering review. [01:14:45] S1: Yes. The best thing you can do is they're going to send you back redlines. No question. If the redlines are extensive, go ahead and accept the things that are easy. If the redlines are extensive, see if you can get legal on a call live and just talk to them. That will accelerate your sales cycle. [01:15:06] S0: Versus a bunch of back-and-forth emails? [01:15:07] S1: Versus a bunch of back and forth. Get them on a call, be like, "Hey, we're 80% of the way there. I have a few questions based off of your redline. Can we jump on a live call and just go through them?" Focus on the things that are going to impact the business and push in on those. Let the other stuff go if it's not super important. Obviously, have a lawyer look at it from your side. You're dealing with a commercial legal team. Have a lawyer look at their redlines. [01:15:36] S0: I imagine most companies have legal counsel. [01:15:38] S1: Yes, I would hope. I would hope so. Yes. [01:15:41] S0: Okay, cool. So paper review, so that's reviewing basically. It's interesting to call the paper. Is there a more technical term for that like the- [01:15:49] S1: Contract. I say paper. [01:15:49] S0: Contract.