Due Diligence Vigilance
Human nature suggests that we seek to find others, those who support our positions. While that may be an approach to make friends, it’s a dangerous trap during a sales cycle.
I have long advocated that in every enterprise software deal, the sales rep needs to have an executive sponsor (whose money is it?), a coach (our everyday advocate) and an IT enabler (IT will likely, ultimately, be involved, so support is needed there). Is this enough? The short answer is an emphatic NO, but it’s a good start.
If we have these three critical contacts in place, why do we need more validation that we’re on the right track with our deal? The fact of the matter is that people are often inaccurate, incomplete or just untruthful with data provided throughout our sales cycle. Sometimes our contacts simply don’t know the answers to our questions (e.g., why is driving the motivation behind the deal timing?). Sometimes, our contacts don’t trust us enough to tell us the complete truth about our deal — I call this the gap between the truth and the complete truth. Finally, sometimes our contacts are double agents and deliberately tell us untruths to help our competitor or to sabotage our deal. Not verifying data can result in a flawed pipeline, false confidence and a waste of company resources which could be put to better use.
So how much is this costing me? This chart shows the economic cost of not knowing the truth assuming you have four bag carriers each paid $160k base. 
In the mode where we collectively are hitting 76% of quota, this is an industry norm participation rate (i.e., bag carriers hitting quota) — note the economic consequence (per quarter) is $0 +/-. However, in the instance where the collective is hitting 41% of quota, the economic consequence is $224,000 per quarter. Translated: you are showing the prospective investor that you are burning $1 million of their money unproductively. This comes out of your hide when they value your company.
So how do we mitigate these types of data integrity issues? Simply put, we become skeptical of every detail told to us and work to validate or invalidate each one with at least two other people in the organization that could know the same detail. Only through this process, often called “triangulation”, can we be sure of what is true and reliable data.
Whether the data point comes from the CEO or an entry level person, every scintilla of data needs to be verified to ensure we fully understand this factoid and its significance to our deal. Most facts are easy to verify, but some facts are more nuanced and may require multiple layers of verification.
The moral of the story is that our detective work starts during our opening sales call and never ends. If we are vigilant about collecting and triangulating facts, our deals will be be more predictable and we can ensure that we are pursuing deals that have the greatest likelihood of closing.
If your SaaS company wants extra guidance conducting due diligence, please either ask Virtual Dave or email dave@moicpartners.com.
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