This article originally appeared in Saastr on August 10th, 2017: View Here
Hypergrowth companies move fast by nature. If they didn’t they wouldn’t be category leaders and hard-charging up and comers. But at a certain point, usually between $10 million and $50 million in revenue, a wrinkle starts to appear in sales cycles. The high-velocity deals that used to be all hands on deck in the early days start to slip. Either they’re not closing or they’re getting pushed to the next month or quarter.
Even if close rates are still high this trend should be worrying for executives and sales teams. By $10 million in ARR, there’s a repeatable sales process and scaled team with A-players. By all means verify this, but more often the issue is elsewhere.
A quick check of late stage deal velocity may reveal the problem. The metric to focus on is time between contract proposal and signature. If this number is going up month-over-month you have a problem and if it’s static there’s an opportunity to unlock revenue.
In companies with an increasing time from proposal to signature, the issue isn’t that the sales team has forgotten how to close. It’s that the company hasn’t learned how to enable them at scale.
Why are things different now?
When a company is below $10 million in revenue, all decent-sized deals draw rapt attention from executives and legal. This pushes the contract negotiation and signature process rapidly along. Sales teams still have issues with long email chains, redlining, and version control when dealing with contracts, but with the whole company focused in they’re manageable. However, when a team of 10 sales reps becomes a team of 50 and global, legal can’t react quickly to every contract and executives have to work harder to gain visibility.
Consider that a team of 50 account executives may send three-five proposals a week and half of those likely move forward to negotiation. This means legal is dealing with 100 sets of redlines a week. This will markedly slow down sales cycles.
If a company has more reps or a higher volume, lower ACV product then assume this number is even higher. The solution isn’t solely to throw more headcount at legal, but instead to leverage systems thinking and technology to make the contracting process fast and scalable.
Enter contract management
The purpose of a contract management platform is to put all people, processes, and documents relating to the contracting process in one place. For sales, this means legal has preapproved templates to prevent any lag time between a verbal agreement and paper going out the door.
And when redlines come back, they’re done in platform and tracked, meaning legal can handle a higher number of contracts quickly and effectively. Then sales can simply share the approved redlines and request an e-signature. Note: It’s imperative to choose a contract management platform with an integration to your CRM so sales can work directly from there.
After the fact, all contracts are stored in one place and run through an analytics engine. This provides everything from insights on contracting cycles to reminders on renewals, making the platform as relevant for customer success and upsell opportunities as it is for new business.
This level of sales enablement has the added benefit of reducing compliance friction. No one appreciates a contract management platform more than legal.
Contract management isn’t just about a more efficient sales process. As a company scales, investment naturally trends towards sales, marketing, and product. Compliance and legal tend to be smaller teams relying on less automated processes. But what happens when commercial growth speeds up to a point where compliance isn’t guaranteed? Compliance friction ensues.
Then it’s either slow down to mitigate risk or continue on amid mounting compliance uncertainty. If an IPO, acquisition, or other regulatory event is in the future, neither of these are options. However, the same contract management platform that’s enabling your sales team to close deals faster also gives your legal team visibility, template management, approval workflows, and baked-in compliance.
Any organization experiencing a deal slowdown or compliance friction should address contract management. It can unlock growth and keep compliance flawless.