Deal debt is one of the most egregious management practices perpetrated on sales people today. Deal debt is the result of end of the quarter pressure sales leaders put on their sales team to pull deals into the current quarter that aren’t slated to close until the next quarter — all in order to make the number. Pulling future deals into the current quarter in order to make quota, is the same as borrowing money at exorbitant interest rates. It’s bad debt.
We’ve all been there.
It’s the final two or three weeks in the quarter. The outlook looks bleak and the number looks in peril. To avoid “perceived” diaster management starts asking if there are any deals the team can “pull in.” This simple request, backed by the best of intentions, triggers a nasty, and almost impossible to escape, cycle that dooms the sales team for quarters to come.
Here is the gig.
Once the team pulls deals forward a quarter, it’s like borrowing from the upcoming quarter and this is a problem — a big problem. Like any other debt, deal debt has to be repaid. And in sales, this means it has to be repaid the next quarter. When management asks the sales team to pull a deal forward, it leaves fewer deals in the pipeline for the upcoming quarter. This pipeline hole now has to be filled and unfortunately, most of the time the sales team is unable to generate enough new opportunities to pay the debt in the quarter. So, you guessed it, management asks to the team to pull deals in again. They go back to the well, borrowing from the new upcoming quarter to make the current quarters numbers, BECAUSE they couldn’t pay the deal debt they created the quarter before. It becomes a vicious cycle.
Deal debt is crippling! It’s a giant ponzi scheme, constantly shuffling deals around in order to avoid reality; the fact that there weren’t enough deals in the pipeline in the first place.
I’m amazed at how prevalent deal debt is. I see it at Fortune 500 companies and with small businesses. It kills sales organizations. Deal debt is worse than credit card debt. It hangs over sales organizations like heavy cloud that gets thicker and thicker as the end of the quarter approaches. It’s debilitating.
No Respect for the Customer
The other problem with deal debt is it strains the customer relationship. It puts the customer’s buying needs on the back burner and makes it about your quota needs. That’s bad business. I’ve sat in on more of these calls than I’d prefer. I’ve listened to reps ask their customers and prospects if they’d be willing to close the deal today rather than next mont as planned. They ask them if they’d be willing to shorten the demo or accelerate the delivery process or “accept” the order before it ships etc. Anything to get the deal in now. I’ve seen some of the most creative contortions in order to get the deal early and none of them put the customer’s needs first.
Price in the cross hairs
When sales teams go to the customer to bring in a deal, there is almost always a concession in order to make it worth while for the customer. This concession is predominately pricing or something related to pricing such as; additional features for the same price, extended terms, etc. All of which translate into less profitable sales.
When we go into deal debt, not only are we borrowing from the future to pay today’s quota bills, we’re paying a higher price for the deal. Just like real debt, there is a cost to debt and in sales it’s no different.
It’s a Leadership Problem
Listen carefully, deal debt is a sales leadership problem, period! Deal debt is the symptom of a poor culture and poor sales management. Deal debt happens when sales leadership;
- isn’t willing to take it’s lumps when they aren’t hitting their numbers. They’d rather borrow from the future to pay for poor sales performance today
- doesn’t do a good job managing the sales funnel earlier in the quarter and develop tactics or approaches when they recognize the quarter is short
- has a shitty sales team in place and aren’t doing anything about it
- doesn’t ensure there are solid deal strategies in place
- doesn’t have a “long” view of sales and the sales funnel
- doesn’t understand their closing ratio and lacks good forecasting skills
- has a shitty “NOW” culture!
- pays little attention to the customers needs and focuses on its own needs
Deal debt is a vicious cycle that infects far too many sales organizations. It destroys moral, affects profit, and undermines customer satisfaction and customer relationships. Deal debt is a cancer that plagues the health of the sales organizations. It prevents growth, creates unneccessary stress, creates an unrealistic view into the health of the company and limits transparency. It’s a mess.
Healthy sales organizations don’t “pull deals in.” They manage the sales cycle appropriately and build pipelines that allow quota to be met without borrowing. Deal debt is just like real debt, it’s expensive and can crush you. However, unlike real debt that can be leveraged to create financial gain, deal debt ONLY has a downside. There is no leverage in deal debt. It’s more akin to buying a car you can’t afford. The car is depreciating AND the weight of the payment is crushing you.
Stay out of deal debt! There is no upside!