A Sales Pipeline is a valuable model used by sales managers, individual sales staff and the owners of small businesses to quantify the demand for their products and services. Regardless of what you’re selling, by effectively managing your sales pipeline, you can forecast customer demand and create a more stable sales cycle with reliable results.
The two primary sets of people responsible for creating the sales forecast are the sale reps and their mangers, and neither have stellar reputations for accuracy. So how can you put a formal selling process in place that improves forecasting accuracy and allows the senior leadership team to make company-wide decisions confidently?
It starts with having a defined sales opportunity stage methodology that has been agreed to by sales and the executive team. Sales reps must follow this methodology closely for it to be effective. When you define the activity that occurs in each stage, and not merely naming the stage as many company’s do, it allows for less ambiguity. Here is sample of an opportunity methodology that can be used.
** SOW: Statement of Work
Sales pipelines are only as accurate as the opportunity data entered into them. One common challenge is that sales people can become overly optimistic about the deals they are working. Since sales mangers can’t be with every rep to validate every opportunity, the overall pipeline data can lack consistency as you go from rep to rep and deal to deal.
Sales leaders can help pipeline accuracy by helping their teams focus on buyer behaviors and sales process actions, rather than the subjective ratings by the sales rep. In an example using the chart above, until the sales person has delivered a full solution to the prospect (including pricing and timelines) the opportunity cannot advance from stage 4 to stage 5.
Another process device that can greatly improve forecasting accuracy is CRM tools. By moving away from spreadsheet forecasts, which are clumsy and only as accurate as the last mass update, and integrating forecasting into your CRM tool it becomes very beneficial. Almost every CRM application out there has a forecasting package available and the reports it can produce are real time. If a rep makes a change to a close date or adjusts the value of the opportunity the system provides real time updates to the executive team.
These products also track the accuracy of the predicted event versus the actual event, which can reduce the forecast variance as you move forward.
Sales leadership today is about data management more than ever. The larger your sales team and bigger your quota the more important it is to drive continuous improvement in this process.
A sales pipeline works by placing cohorts of leads or prospects at the different stages of the sales process/sales cycle, and then measuring their progress through the pipeline, from unqualified lead to satisfied repeat customer.
At a gross level, sales pipeline management is nothing more than estimating incoming cash flow. Look at leads and prospects, make some estimates of the likelihood that they’ll eventually buy your products and services, and feed that information along with their expected spend into your projections to find out how much revenue you’re expecting to make.
The real power of sales pipeline management becomes clear when you establish proper metrics and put processes in place to respond to changes in those metrics.
By analysing the sales pipeline and the particular points within the sales process you are able to determine that for example, the biggest problem staff had was not in closing sales, but in opening a dialogue with customers. This enables management to run training courses and create training aids designed to assist staff in opening a sale and keeping a conversation going.
There are several benefits to managing your sales pipeline effectively:
By focusing on the entire pipeline instead of taking a short-term focus on closing sales, or getting a single high-value contract over the line, demand for your services will be smoother and your cash flow more reliable.
Making incremental improvements of as little as 1-2% in your conversion rates can increase your sales by much more
An in-depth analysis of when and why your leads and prospects leak from the pipeline will pinpoint specific areas for improvement and help you get far more value for your training Rands.
If you keep track of which prospects leak from your sales pipeline and which prospects don’t, you can construct a profile of prospects who are more likely to buy and prospects who are less likely to buy. This knowledge will help you to focus your marketing material and allow you to more accurately qualify your leads, leading to a more streamlined, more efficient and less costly sales process.
Once you have established an accurate sales pipeline, you can use it to plan for new product launches. If you were to plug all the information about your new product into an existing sales pipeline, you would quickly get a pretty good idea of how many leads you’re going to have to generate to reach your new product’s sales target. This will in turn assist you in deciding how to launch the product, and give you an idea of how much it’s going to cost. If you’re going to need 10 000 leads to reach your sales target, you’re probably going to have to look at a mass market advertising campaign.
A healthy pipeline
There are two commonly accepted measures for assessing the health of a company’s sales pipeline:
The number of opportunities in the pipeline. This is measured either by the total number of opportunities, or the number of opportunities at each stage, or both.
The Rand value of deals in the pipeline. Unfortunately, failure to effectively address the quality of opportunities in the pipeline is where it all frequently falls apart. Placing emphasis on the quantity of deals in the pipeline over the quality of those deals directly leads to all too familiar scenarios.
That is, opportunities that:
Have been forecast at a late stage that, upon further review, should realistically be forecast at an earlier stage.
Have significant revenue associated with them that, upon deeper scrutiny, should realistically be forecast for a much lesser amount.
Have been forecast to close at a certain date that, when examined through the lens of quality and not quantity, should be forecast to close at a later, more realistic date.
Have revenue that gets pushed back month after month.
Should never have been included in the pipeline in the first place.
First you need a consistent ‘flow’ of opportunities to work on to grow your sales. If there is a lag in the flow, there will be short falls relative to your sales success. Second, you need to establish an ideal customer profile to begin your pipeline.
Before placing a sales opportunity into the pipeline, you need to know exactly what a good to excellent customer looks like in terms of total sales, frequently of sales, average sales size, number of product lines covered, credit worthiness and other factors that are important with your best current customers.
Third, only sales opportunities that match your ideal customer profile such be placed in the sales pipeline. Any exceptions are just that – exceptions – and should be treated as such with good explanations relative to what purpose you are placing this account in the pipeline.
Fourth, each sales objective should be listed by itself to insure proper scheduling or forecasting of delivery dates. The key is to consider each sales objective, even if to the same company, to insure proper allocation of resources and most importantly to select the proper decision makers for each sales opportunity.
Finally you will need to assign deadlines for each sales objective. This allows you to see if you have a balanced pipeline relative to outcomes, results and forecasts. The more accurate you can make your deadlines, the more accurate will be your b2b sales forecasts. Accurate sales forecasts are important for you and more important to the sales management and the sales team’s credibility with senior management.
There are only three main sales strategies that all sales people, no matter what they sell, have to do. They need to find some customers, they need to manage those customers and then they need to close some business – that means… filling the pipeline, managing the pipeline and closing the pipeline. Ultimately, pipeline management is about managing your portfolio of opportunities to meet your target and then ensuring it is enacted within the team towards a common goal, that of targeted business sales.