Published by
@ShahidNShah
@ShahidNShah
Guest Article: How to improve health IT products sales into physician practices and hospitals through better funnel management
_A frequent question I am asked by startups and their software focused leadership teams is, “how do we generate sales and what is the appropriate process to follow in creating our sales expectations.” My friend Steve Carbonara has been selling software to healthcare enterprises for years so I asked him to write a companion to his piece on selling to hospitals. Steve is currently the Chief Sales Officer at Cohealo, Inc., a VC backed healthcare services firm that optimizes purchasing and consumption of medical devices and equipment. After 8 years in corporate sales with Misys Healthcare and Allscripts, Steve has worked as a consultant with many start ups and medium sized businesses to optimize their sales processes. If you’re a tech-focused startup there’s a lot of help out there on the technical side but very little on the sales side so _I invited Steve to share his advice on how to sell health IT products, especially EHRs, into physician practices and hospitals. Here’s what Steve had to say on improving sales through better funnel management:
In my last article in this series we discussed how to sell Electronic Healthcare Record (EHR) software into the medical community and matching the selling process to the buying process. Today we’re going to focus on creating and managing that funnel of prospects; now that we’re matching up to the needs of our prospects, we’re going to be matching up to their time lines as well. As I have worked with solutions including EHR’s, Personal Health Records (PHR), Business Analytics, Clinical Analytics, Practice Management Solutions (PMS), and other health information technology; this article is transferable across the HIT landscape.
So what is funnel management and how do you maximize your return on investment from your funnel ? Basically, funnel management is learning how to manage your time and your expectations. If you want to have success in this industry of healthcare information technology (HIT) you have to know what it is going to take to make the monthly, quarterly and annual revenue that your firm needs to stay afloat, or to thrive. Some people think that if they sell product and their basic overhead is covered then they are successful, the problem with this assumption is that you have more than basic overhead. Have you thought of marketing costs, commissions for sales people, channel partners revenue needs, reinvestment into the products you sell, incremental revenue growth, market share and market position?
So, to begin good funnel management, you need to make sure you have a good pricing scheme. Pricing is the perceived value of your product as seen by customers based their needs. Did you perform market research to validate your pricing assumptions? Are you priced into the industry but not low enough to keep yourself from going out of business? Are you priced too high and thus above the perceived value of your product? Once you accomplish the goal of pricing yourself as a valuable product, not as a ‘bargain’ product, you will be able to sell within the needs of the industry and make money. This is important as I have seen many companies in this industry try to ‘buy’ their way into the market but it ended up with them being the ‘cheap’ solution, a title you don’t want to win, in any business.
How do you create a value proposition for your product once you define price? Through your market research you should speak with your target market, and learn from them. If you listen, you will understand that they tell you how to sell them, they tell you how to price your product, and they will tell you what was too much and what was cheap. If you listen then you will take their input and build your value propositions around their needs. If you have built your value propositions around your needs instead of market needs, you will not be able to match your sales cycle to the customers buying cycle. If you don’t even know what their needs are, take the time and make the investment, do your homework up front in market research and you will save money in the end.
Building Your Matrix to Success
So, pricing is in place, now we can build the matrix for success that will deliver us the revenue we need. As the CXO of your company you need to look at this from the point of view of your sales person. What does this person you hire need to do to meet your financial goals and earn the money that they need for their family? Once you understand this matrix you will understand how many sales people you will need to hire to meet all revenue goals. Let’s begin.
As the CEO you know your research informed you that your competitors have sales representatives closing an average of $500,000 a year in new business. You learned that they have a typical deal size of $20,000 and that they sell 100 units per deal at $200 per unit. Your basic sales plan lines up easy from here, each sales rep will have a quota of $300,000, you will look to average the same $20,000 per sale deal size with $200 per unit being the price of your widget. This means the sales rep will sell 15 deals this year to hit their number, or just over 1 deal per month.
Why did I go at $300,000 and not $500,000? Because you understood that your competition is a large national company that has been in business for 10 years with name brand recognition and you are new with less marketing spend and much less brand awareness. I would be honest with myself and with my new sales team, letting them know that my expectations are that we are going to work together to build this company and that means we will have to fight for every deal and that you know that each of them will lose more than they win this first year. You align yourself with your team, you build the trust and credibility that they need to have in you and in the end you set the appropriate expectations with yourself and your investors.
So, how many contacts do you need to make a week to begin building a funnel that will drive 15 new contracts and $500,000 in gross sales? I would say 400 new contacts. Why? Where to start:
- Because healthcare information technology as a market is saturated
- Because the big vendors, like Epic, Allscripts, Cerner and EClinicalWorks have an in with the hospitals and clinics that you can’t match
- Because competition will ‘buy’ a deal away from you
- Because you’re not obtuse enough to think you can close every deal you’re in.
I would go with the knowledge that the typical direct to consumer marketing effort relates to a close rate of 2-3%, but even if you give yourself credit for being better than that rate you still have to admit that your company may be small and not well known, and it doesn’t have a client base who can sell forward. With all this being said put that number in front of yourself and plan your attack.
Recap: 400 new contacts at 3% close rate provides 12 new clients this year and at $20,000 per deal you will generate $240,000 with your knowledge that you’re better than average and you will pick up the other 3 additional new clients getting you to the $300,000 per sales rep. quota.
What activities define your week if you’re trying to work within 400 active deals?
Well, this depends on your marketing budget, and you have that handy because you finished it while you were performing your market research. If you have an appropriate budget then here is an example:
|
Activity Type |
|
Cold calls |
|
Warm calls |
|
Discovery calls |
|
Demonstrations |
|
Follow up meetings |
|
Proposal presentations |
|
Pricing negotiations |
|
Reference calls and site visits |
|
Contract signing |
These activities are what each sales rep will do to achieve their goals and each activity builds upon the one prior to it, thus reflecting the sales cycle. Each widget needs to be sold a little differently, so these steps are easily changed to reflect the appropriate steps that your firm demands of your sales team.
The following activities are reflective of your company performing activities that help drive market and brand awareness to help your sales team reach their goals. These activities may be performed by the sales team, the senior leadership or a marketing team; but in the end, they are not part of the sales cycle, but are part of your overall marketing plan, helping sales generate qualified leads
| Activity Type |
| HIMSS conference |
| HFMA conference |
| MGMA conference |
| Regional conferences |
| Local conferences |
| Webcasts |
| Case study creation |
| Blogging |
| Speaking |
| Website optimization |
There’s a lot to do and being engaged in 400 active deals is not easy, time management is not a gift, it’s a talent that you have to develop and then manage. When working with my clients I have put together matrixes exhibiting exactly how much time a sales rep, and thus the company, should focus on each of these activities and what value should be derived from each. Defining how a sales rep should spend their 8 hours a day working for your firm can never go to far, as it sets expectations and defines success and failure so that no one is surprised at year’s end, with failure or with success. Go as far with this exercise as you want, the more detail documented and the more you can hold yourself accountable to your daily, weekly and monthly totals, the better off your firm and your sales representatives will be moving forward.
Join me for my next posting where we will dive deeper into managing the funnel that you just laid the groundwork to build.
Shahid N. Shah
Shahid Shah is an internationally recognized enterprise software guru that specializes in digital health with an emphasis on e-health, EHR/EMR, big data, iOT, data interoperability, med device connectivity, and bioinformatics.
