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Sales representatives may pursue deals of all sizes, including many small ones, because their companies cannot tell them what a "good deal" looks like. However, the true value usually lies in larger deals, given the time required to close any single deal and the cost to serve. When one IT services company analyzed its recent deals—not just at a gross margin level, but for their fully loaded marketing and sales costs—it realized that small deals were usually unprofitable, as shown in the chart. That led the company to reject any deal below a certain size threshold, helping focus valuable sales time and resulting in a quick improvement in sales productivity.
Matthew Crupi is a partner and Lucas Martin is a principal with Bain & Company. They are based in Dallas.