Selling to Employers: An Overview of Sales Velocity (Part 1)
Introducing a new HTN Series: Selling to Employers
This article is the first in a series of six articles that HTN’s Ryan Russell has put together based on his experience selling to employers. There is plenty of perspective out there about whether to sell to employers but we are presuming that you have already made the strategic decision to do so. These articles are intended for commercial leaders and sales teams in digital health startups. That said, there are a number of lessons learned that are more broadly applicable to employer sales outside of the health tech space.
The article leverages a useful sales metric, Sales Velocity, as a framework to help break apart the different strategies, tactics and considerations to think about when selling to employers. Each section dives into the different variables of the equation to discuss key components of the employer sales process.
Special thanks to Allison Whalen, Nathan George, Shilpa Guthikonda, and Tamra Lair for providing input and feedback on drafts of these articles.
Sales Velocity as the sales KPI to rule all KPIs
Selling to employers is hard and there are lots of metrics and jargon used to measure success - ARR, CLV/CAC, etc. But not many of them allow revenue/sales teams to isolate and assess the strategies and tactics used when selling to employers. Velocity does.
When I joined Bind (a health insurance startup) to sell to employers and commercialize new products, I had never heard of Velocity. Even in my management consulting days, where I spent the majority of my time in healthcare strategy with an abundance of sales strategy frameworks filled with buzzwords, it never came up. A Google search, of course, surfaces a number of articles on Velocity but geared towards traditional SaaS tech audiences. It doesn’t seem to be a widely spread concept throughout digital health sales to employers. Once I understood it, I tried to frame every selling strategy and activity around Velocity. I’m sharing this approach with you in the hopes that it helps both frame your thinking around employer sales and assess the effectiveness of your resulting sales strategies.
So, what is Velocity?
The output of this equation is essentially how much revenue you bring in per day.
Measuring velocity allows you to more discreetly assess what is working and what isn’t by taking a closer look at the activities within specific variables you are testing. The goal is then to have that number improve over time as you adjust your strategies, processes and activities.
Let’s take a look at the variables in the equation one by one:
(You want to increase the *combination* of these variables):
Number of Qualified Opportunities: The number of opportunities your sales team has had a legitimate shot at converting to a buyer over the period of time you are measuring. One of the most important things here is being consistent in defining and pulling this data. Take “qualified” for example: Marketing puts out a campaign, a benefits person clicks a link and submits an email address, indicating they would like more info. Boom, qualified lead, right? Maybe from a marketing perspective, but not from a sales perspective. When you have a marketing qualified lead (MQL), sales needs to requalify the lead (sales qualified lead or SQL). So, which do you want to measure MQL or SQL? My bias is SQL. But either way, the key here is to define the variable, then increase the number of leads and get really good at qualifying those into opportunities.
Average Deal Size: The average Price x Quantity of all your sold deals. For health care benefits sold to employers, this depends on how you structure your deals. The size of an individual deal could be the number of eligible employees you will be offered to (quantity) multiplied by the Per-Employee-Per-Month rate (price). It could also be a flat platform fee or a fully at risk model based on milestones that enrolled employees hit. This really depends on the deal structure you deploy - PEPM, PMPM, utilization based fees, etc. So, a bigger Average Deal Size is better, right? Well, sure, if you like (and are equipped to handle) super long sales cycles, tons of product customizations and stakeholder/change management paralysis. What is more important is optimizing your Average Deal Size for your organization, which means identifying/hypothesizing market segments that best align with your value prop at your current stage. There are a number of companies in this space that are winning by thoughtfully targeting smaller employers and deal sizes.
Win Rate: The number of sold employers divided by your qualified opportunities. This is the most straightforward variable in terms of measurement but clearly has the most impact on results. Truly understanding your buyer and making it easy to say yes are critical to driving this number up. The tricky part of win rate is that it is both an independent variable that you can work to drive up, but it is also a dependent variable on the other two components of the numerator (qualified opportunities and deal size).
(You want to shrink this variable)
Average Sales Cycle Length: The average time it takes to convert a qualified opportunity into a buyer (a sold deal) typically measured in days. Sales cycles in health benefits sales can range from 3 to 24 months depending on what type of product you are selling, what size of employer you are selling to, and whether you fall into benefits open enrollment timing or standard financial planning/budget cycles (non-enrollment dependent). The strategies and tactics used in the numerator variables also play a role in improving this, so keep that in mind while assessing strategies/tactics against results.
Improving the output
It is easy to look at an equation like this and say, “we can plug in our numbers and improve this”. But this is more than just the numbers. Each variable is driven by a set of skills honed over time that each require significant time, attention, and investment. Each of these articles would be approaching War and Peace in length if we dug into each variable to the extent it deserves. The articles are intended to dive into these enough to give you tools to ask the right questions needed to improve these skills and develop some ideas of things to test. So, for those of you who are still here, let’s dive in.
An Employer Benefits Primer + Deep Dive Into the Four Variables
Now that we’ve defined Velocity, let’s break it down. We’ll do so across the following five sections:
- Employer Benefits Market Primer
- Qualified Opportunities
- Average Deal Size
- Win Rate
- Sales Cycle Length
If you want to jump to specific articles in the series, you can do so here. Note that all articles aside from this overview are for HTN Community members only:
TL;DR: General Lessons Learned
For the folks who don’t want to read through all of the articles broken out into the Velocity framework, here are some of the main lessons learned from my employer sales experience:
- If you don’t have empathy, you will not succeed. Make sure you have it, or hire for it.
- Your product is not nearly as important, or cool, as you think...so do less talking about you and more listening to see if your product might solve a problem that is not “interesting” but rather important and urgent
- Stop pitching and start storytelling in a way that empathetically reaches your buyer(s) by making emotional connections that can easily be spread to additional stakeholders in their organization
- Everyone is selling a solution for high healthcare costs, because high costs are part of the status quo. Make sure your story addresses other needs and priorities that may be as, if not more, important.
- Understand the full cost benefit analysis your buyer is evaluating and make it easier to say yes by lowering barriers/costs like implementation effort, etc.
- Brokers/consultants are important to your buyers so treat them as real partners and incentivize the behavior you need from those groups
- The sales cycle is long and there are lots of stakeholders that need to buy-in so understand the purchase decision cycle and make it as easy as possible for your key buyer/contact to be an advocate and to sell to other stakeholders internally within that cycle
- It is very easy to become reactionary vs. proactive when it comes to revenue (fighting fires vs. thinking through how to avoid fires). This puts lots of strain on your entire organization so, be thoughtful about planning and use effective measurements that allow you to test and iterate on plans/strategies (e.g. Velocity)