A key document (and also step in the sales process) for B2B organizations is the Statement of Work or SOW. This is a document that specifically describes how the implementation will be handled including deliverables, roles and responsibilities, time frames, costs and payment terms.
So, why the SOW?
There are many reasons for (and uses for) the SOW. To begin with, many early stage companies are surprised when they find that their prospect/customer does not understand the implementation fees and pushes back on these fees. This stems from the prospect not fully understanding all of the work that the software company is going to do to make the implementation work for that customer.
A similar issue arises when new customers do not implement the product on time, or even, at all. This all leads to lost precious revenue (and cash) and lost precious references for the vendor, and also low customer satisfaction, and higher than anticipated attrition problems in subsequent years. There can be several reasons for this. Many times, the person responsible for the actual implementation of the solution was not the “champion” or the “decision maker”. This person can view the implementation as “additional work” or may even consider the product job-threatening. This is particularly true if there is more than one person required to make the implementation work. If this person becomes a stumbling block to success, a good SOW can help keep the new customer on schedule. It can prevent sabotage of the project.
Finally, the vendor is surprised when, at the end of the buying process, the prospect backs away from the sale. This is often due to perceived risk in the decision. The buyer is looking for confidence that the vendor will know how to service them after the sales is complete. This is particularly true when the vendor is an early stage vendor. The SOW shows competence and can help mitigate risk.
These are all issues that can be better managed with a proper SOW during the sales process. Here are some uses of the SOW.
Uses of the SOW
- Helps buyer understand the work that you are undertaking on the implementation
- Helps identify assets needed from them (data and other things)
- Helps set timeframe for implementation and live date
- Identifies roles and responsibilities of client
- Identifies key personnel required on client side
- Lays out training plan
- Qualifies the buyer on intention, funding, timeframe
- Clearly establishes the deliverables and price and what happens if things vary
- Increases your credibility and buyer confidence and reduces perceived risk
Sometimes, early stage companies do not take sufficient effort to fully explain all of this to a potential buyer. This can lead to disaster. An early stage company should have a software subscription or license agreement and a comprehensive services agreement. The SOW should be developed during the sales process and then be an amendment to the services agreement.
The SOW, when prepared as part of the sales process can also serve as a qualification document. If the buyer is not prepared to provide you with the information that you need to properly write out a statement of work, you have to question whether they are a serious buyer. Also, since the SOW contains a project plan, it helps flush out their true intentions on the buyer’s implementation time frame.
It should be noted that services are different than customization. Services are normally defined as configuration and should not include your product development or programming personnel.
Here are some things that should be covered in the SOW:
- Responsibilities of the vendor
- Responsibilities of the customer
- Assets required of customer for implementation (data, logos, rules…)
- Historical data sources and historical data to be loaded into the application (if required)
- Configuration (if required). Normally there are some rules or processes or procedures that need to apply to individual customers. For instance, in a general ledger implementation, each customer would have their own chart of accounts, organization structure, allocations etc.)
- Key contacts for the vendor and the customer
- Training plan for key users
- Timeline and project plan with dates for each key milestone or step
- Clear beginning date and ending date
- Total fees and how add-on or change request fees will be handled
This clarifies the roles, describes precisely what will, and therefore, what will not be done, helps the customer understand the level of work being done by you and provides a timeline of events. If things get off track, you can use the SOW to help corral the customer and determine how to get things back on track. Often, when the customer is not fully cooperating with the implementation plan, the vendor needs to circle back with the decision maker to help get the organization motivated to get back on track.
Developing a framework for a SOW for all customers and having the discipline to write one for each prospect and effectively utilize it in the sales and implementation process can have a huge impact on sales results, cash collections, customer expectation setting and customer satisfaction. In some cases, the SOW will flush unqualified deals out of the sales pipeline but these deals were not valid to begin with.
Samples of a SOW are available from Arbor Dakota.
For more information on how to improve your sales and implementation success rate with buyers, contact Arbor Dakota below. Arbor Dakota is committed to helping CEO’s grow their great ideas into great companies.