CPQ: the First Step in a Quote-to-Cash Process
For most startups, revenue growth is a hot button. I’ve noticed the term CPQ bandied about a lot lately. So it’s timely to talk about what it is, what it does (and doesn’t), as well as the ingredients for implementation success.
Let’s start with some basics like definitions and similar whatnot.
CPQ Fundamentals
Essentially CPQ refers to “Configure, Price & Quote” and it’s all about automating the process of creating a quote and transforming proposals into contracts. It’s the first step in a quote-to-cash roadmap.
So why all the fuss? Typically sales reps are busily creating and closing deals. That’s a good thing. Yet pricing may be all over the map with discounts that may make CFOs cringe coupled with contractual exceptions that give Customer Success sleepless nights.
Bring up the spotlight and cue the music... CPQ enters from stage left.
Once CPQ is implemented and fully adopted, it can work magic. It streamlines the quote creation process, enables a sales team to be more productive in getting quotes into the hands of customers quickly. As compensation is closely tied to closed deals, successful CPQ projects also boost morale as it eliminates pricing and contract errors, reduces the back-and-forth dance with prospects, and it gets to “yes” faster. CPQ also reduces internal headbutting as each back-office department gets what they need to shepherd a deal from contract signature to delivery to renewal.
Before we can gather ‘round the campfire, there are few things you need to know that a CPQ doesn’t do.
First, the CPQ automation doesn’t fix fundamental calculations in profitability. If the average deal is running in the red, getting more deals through faster doesn’t add up. Second, CPQ focuses solely on streamlining the quote-to-contract process. It can’t fix non-quote related processes. That’s a whole other kettle of fish that requires a different process and associated tools. Lastly, CPQ can’t fix legal issues with redlining. Once the legalities of your quote’s fine print and contractual agreements are solved, then you’re ready for CPQ.
9 Ingredients for Success
Given my experience with startups and CPQ projects, I’ve identified nine areas that can make such an endeavor productive (or not).
1 - Buy In Comes From the Top
When stakeholders are active champions, projects create and maintain momentum. Without it, alignment between teams is more problematic and simply makes the work unnecessarily harder. After all, putting in effective CPQ automation in place benefits the entire organization. Thinking in silos hinder progress.
2 - Messy But Worth It
Like most complex endeavors, it takes effort and coordination. When a CPQ implementation team acknowledges that the process ahead will mean identifying a higher ratio of “unknowns” than “knowns” than you originally anticipated or feel comfortable with. Don’t worry, that’s normal. You’ll learn a bunch, climb over those obstacles, and push through barriers.
3 - Everyone Is Involved
CPQ requires input from the back-office to customer-facing teams. End-to-end systems require end-to-end collaboration. Therefore input and buy-in is needed from all parts of the organization.
4 - A Commitment to Adoption & Intolerance for Workarounds
I know this sounds harsh. Yet it’s so necessary. There’s absolutely no point in going through the effort of mapping out and implementing CPQ to get to the point where the sales team won’t use it. If the company culture doesn’t support zero tolerance for workarounds -- sidestepping the carefully crafted quote-to-contract automation -- then your revenue growth bets are off the table.
5 - Don’t Try to Solve for Edge Cases
If a scenario happens 12% of the time, I suggest your answer is “I don’t care.” You want to solve for the majority rather than the “it might happen” or “it sometimes happens.” Solve those edge cases outside of your initial CPQ project.
6 - Be Willing to Say Buh-Bye to Legacy Systems
To be clear, I am saying you’re going to move off legacy system(s). The data in them though will be joining us on a new adventure. If you’re still looking at spreadsheets at the end of the CPQ project, something most likely has gone awry.
7 - Respect CPQ’s Core Competencies
CPQ is all about automating quotes into contracts. Don’t expect it to solve problems it’s not designed to. One of the most important skills needed during my CPQ projects is about communicating and managing expectations. A great project manager will explain where CPQ’s capability edges are. Heed their advice.
8 - The Customer is Your Why
At the end of the day, your startup's success depends on engaging prospects and guiding them into a signed contract (and renewals). It demonstrates your organization’s financial viability. Done right, CPQ leads to less friction during the negotiation process, improves customer satisfaction, and sets the stage for easier renewals. The side benefit of CPQ is alignment between teams, so you’re all supporting each other with the same business goals in mind.
9 - The Right CPQ Tool to Fit Your Tech Stack
There are literally hundreds of tech stack combinations. So your CPQ tool needs to play nicely with your other systems. That said, it’s okay that your processes and CPQ evolve with iterations after you launch. That said, iterations don’t belong in the development stage - otherwise, you’ll never launch. It’s not uncommon to get cold feet before once things get started and you’re face-to-face with the magnitude of the endeavor. Simply define your testing scenarios and test accordingly. If something comes up, that’s okay. You already defined the things that were important upfront. Trust yourself. Trust your CPQ project manager. Trust the development process. You got this.
Okay, now we can break out the marshmallows to roast over the campfire.
Proof CPQ Works
Now that you know what CPQ is and isn’t, and the nine ingredients for success, you may be asking… how do you pull it all together? Whelp, it requires a collaborative and inclusive approach to find the best solution with the greatest fit across all teams. Feel free to read about Hustle’s success story. Or, you can start a conversation with me.