Newsletter
News by SEs for SEs
May, 2008
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| Dear Pre-Sales Colleague:
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The average fully burdened SE salary and benefits is about $150,000 annually. Ever wonder what you get
back for that
investment? With a focused pre-sales
performance initiative, the answer may astonish
you.
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| What Is A Sales Engineer Worth? |
What is the
business impact of SEs? Let's look at an actual
case study.
A multi-billion
dollar hardware/software solutions company had a serious problem. So many pilots had been started, that the
sales team ran out of pilot equipment to loan.
Pilots were deployed based on the "use it and they will buy it" theory
of sales. Qualification of pilots was
inconsistent or even nonexistent. Measurement
of sales indicators was lacking across the organization. Business problems included:
• Sales
districts were being charged for millions of dollars of loaner equipment
• Much
of the existing pilot equipment would never generate the millions of dollars
of
revenue it was worth
• Because
sales were lagging, the corporation would not replenish the pilot pool
• Pilots
could not be provided to customers who would likely buy multi-million dollar
solutions - money was being left on the table
A pre-sales
performance initiative was begun to resolve these issues. Going against the corporate culture, one
pre-sales manager measured the results for his district of 6 SEs. At the start of the initiative, they had:
• 33
pilots, many of which were stalled
• The
average deal size was $40k
• The
technical win rate was 18%
• The
average time to the technical decision was 180 days.
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The Results and Analysis |
After 6
months:
• There
were 44 well qualified pilots -- A 33% improvement
• The
average deal size was $70k -- A 75% improvement
• The
technical win rate was 40% -- A 122% improvement
• The
average time to the technical decision was 120 days -- A 33% improvement
• In
6 months, annualized district revenue grew from $482,000 to $3,750,000
-- 678% growth
Let's
factor in a reasonable cost of pre-sales.
Say each deal requires 5 work-days of pre-sales effort, and an average
fully burdened SE costs $180,000 per year, or $500 per day. For every fifth deal, let's also factor in
one 2 day on-site visit including $1200 in T&E.
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cost of pre-sales for 33 deals in 180 days is $95,700, or
$191,400 annually. The cost for 44 deals in 120 days is $127,600, or $382,800 annually.
• In
6 months, annualized district profit grew from $290,600 to $3,367,200
-- 1059% growth
• The
annualized profit return on the program investment was 123-fold
• Each
SE would contribute $512,766 per year in profit. Conversely, had the organization done
nothing, this represents the annual lost opportunity cost per SE per year:
• For a team of 10 SEs, this represents $5,127,666
per year>
• For
50 SEs, this represents $25.6M per year
• For
500 SEs, this represents $256M per year
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| Your Mileage May Vary, But You Should Still Fasten Your Seatbelts
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Now we
would not ordinarily expect 1059% annual profit growth - but it did
happen. Conservatively, what if you
could improve each metric just 10% in one quarter? This really is not a difficult goal to manage
to. Your incremental revenue will grow
48% in one quarter.
Now improve each
metric another 10% for each of the next three consecutive quarters, and annual incremental
revenue grows a whopping 378%. In the case above, 10% quarterly improvements for one year results in each of
the 6 SEs contributing $303,800 per year in incremental revenue -- they would
pay for themselves twice over.
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| So What Is Your SE Worth?
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Consider
your business relative to the case above.
Approximately what is your average deal size? How many deals do you have per quarter? What is your technical win rate? What is your average time to a technical
decision? How much quarterly improvement
do you want? 5%? 10%?
20%? You can start to get an idea
of the relative value of one of your SEs.
If you
would like to contact us, we have a
financial model that we can plug your numbers into to give you a more accurate
view of the value of your SEs.
To
our colleagues - Feel free to forward this newsletter along to your CFO or
COOs. Perhaps it will challenge their
opinion of the value of pre-sales performance initiatives.
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Please feel free to email me your comments and stories at sedc_philjanus@salesengineering.com
Sincerely,
Philip Janus
Founder & CTO
salesengineering.com
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