Understanding Leverage

Leverage is an important concept in business, sales, and marketing. Unfortunately, we spend too little time understanding leverage and identifying leverage opportunities in coaching and developing our people.

Perhaps, our aversion to leverage is the negative connotations of the word. Too often, it’s construed as using some sort of manipulation or unfair/unethical tactics. This use of leverage is clearly wrong and seldom produces sustainable results.

In this discussion of leverage, I’d like to focus on “How do we identify and prioritize those things that have the greatest impact on our results or our abilities to achieve our goals?”

One of the challenges in identifying our leverage points is to pose the problem or challenge carefully and as broadly as possible.

For example, we can pose alternative solutions to achieving our business goals. One might be to find more opportunities–which would cause us to focus more on prospecting. An alternative might be to chase larger deals. A third might be to increase our win rate. Or we might focus on selling more to current customers, since it may be easier than acquiring a new customer. Or there may be other alternatives.

Any one of the 3 approaches should help us achieve our number or business goals, at least if we execute them well. But which is the better approach?

The answer to that question will vary depending on a variety of factors.

For example, in our company, we have very high win rates. So the challenge and return from changing win rates from 85% to 90% or more might be very difficult. It might be better to look at how we increase average deal size or reduce sales cycle.

For a sales person that has low win rates, say 20%, asking that sales person to do more prospecting, or chase more deals might be the wrong solution. It might dilute the time they are already spending on qualified deals or bring in just more deals that are squandered. In this case, the greatest leverage might be in focusing on their qualification and opportunity management.

Improving their win rates by 10%, means they have to chase far fewer deals to make their number, they can invest more time in executing winning strategies. It would also reduce the number of deals they have to prospect to achieve their goals. Stated differently, by focusing on doing less volume, but being more impactful, they actually achieve more.

Classically, the solution to anemic pipelines is to prospect more. But alternatives might be to increase the win rate or average deal size. By doing this, the pipeline dynamics change. Without doing more prospecting, we might achieve our goals through the win rates or deal size increases. We might actually do far more by first increasing win rates, then increasing deal size and keeping prospecting constant.

For example, one organization we are working with has done just this, they have increased win rates by 30-50% over current win rates and average deal size has doubled. So with the same prospecting effort, they are overachieving their numbers.

But this last example shows another impact of leverage. By improving the win rates and deal sizes first, the prospecting yields are also increasing with these sales people. This is because the sales people have become much more knowledgeable and can engage customers more effectively, consequently, converting more.

This second principle of leverage is perhaps the most powerful. It shows that by choosing the right leverage point, we can actually improve our performance in many areas, not just the area we have focused on. Stated differently, by choosing the right leverage point, we can have a huge multiplier effect. Doing this well, enables us to accelerate our improvement efforts.

Too often, we don’t seek to identify the leverage points and where we can get greatest impact. We opt for the easy or obvious solution. We blindly apply the same solution to each person, without assessing differences in their territories or their capabilities.

Astute managers and sales people are always looking for the leverage points and where they can have a multiplier effect.

Where are you gaining leverage?