As we’ve deployed the Dealmaker Sales Performance Automation software platform for our customers we noticed a few common challenges around the area of Pipeline Management. In the first instance, customers are often puzzled as to how to create the structure of the pipeline. Then they worry about how to keep the funnel full and whether to focus on pipeline volume or pipeline velocity. Finally we’ve been asked frequently to explain the ‘secret sauce’ that Dealmaker uses to identify pipeline risks or potential breakdown.
Here are four of the best practices lessons that our customers have learned by using Dealmaker.
1. Map the Pipeline Structure to a Sales Process
It is often difficult to decide how many stages you should have in your sales pipeline. We have seen different companies with their pipelines segmented into anything between three and 12 stages (we recommend no more than five or six) in the pipeline. Every week, or month, sales managers then ‘manage’ the sales force by working through each individual’s sales pipeline to determine how many opportunities are at each stage, and what probability to apply to each opportunity. More often than not, this is a fruitless exercise for two main reasons.
First, subjectivity plays a large part. In most cases, the interpretation of how to categorize the opportunity is left to the salesperson’s discretion. The buying cycle is often ignored, and there is usually little linkage between the key qualification questions used, and the stage of the process. One of the benefits of a standardized sales process is that everyone in the company involved in the sale adopts a common language. Clear deliverables are linked to each stage of the sale, and overall productivity increases.
Second, it is futile to determine the value of a pipeline by multiplying the value of each opportunity by the probability of it closing. There is no prize for second or third place in selling. You either win the deal or you lose. Having 10 opportunities at 10% probability mathematically may be the equivalent of one full opportunity – but it is not the same as having a signed contract. We are constantly amazed at how seasoned sales managers continue to value their pipelines in this manner. These percentage figures assume a ‘steady state’ economy, no variance in the competitive landscape, and a constant product scenario. Then the numbers often feed directly into company forecasts. Back to the fairy tale! Having a standardized sales process, and a fully-documented and formally-defined pipeline, with well-understood rules, results in everyone having the same, realistic view of the forecast.
You should design your sales process to incorporate stages in the pipeline that reflect the customer’s buying cycle. It seems more logical to us to link the selling cycle to the customer’s buying cycle, than to use other measures that sometimes seem arbitrary. If you take this approach, the selling actions that you have to plan become self-apparent. You understand the concerns of the buyer at each stage of the buying cycle, and, in effect, your pipeline management becomes a summary sales action plan. In addition, you can now link and layer the qualification process to the overall sales process, to help determine which qualification questions need to be answered, at each stage in the process.
2. Keep the Funnel Full
You mightn’t want to do it, but sometimes you’re going to have to generate your own leads. Getting appropriately-targeted customers into the top of your sales funnel is the source of your raw material. Without that raw material, you can’t build a pipeline. When there are gaps in your pipeline, pressure builds on the few opportunities you have. You’re tempted to try to progress a specific deal too aggressively. Your state of anxiety over this quarter’s revenue is heightened by the fact that you are looking into a void for next quarter. It may be the stated role of the marketing department to deliver qualified leads to the sales team, and you might be one of the fortunate few who is adequately served in this manner, but if you don’t recognize the need to look constantly for new opportunities yourself, you lose control over your destiny.
The likelihood of finding a good opportunity is dependent on the type of activity you undertake. If you’ve got your act together, you have a broad network of contacts who are potential customers. They respect you and the value you can bring to their business. Your existing customers can provide you with further business within their company, and referrals to their counterparts in similar companies. Strong relationships with industry consultants and analysts are a good source of recommendations for new business opportunities.
Your own market assessment and development activities will always provide the best quality of sales leads, but be sure that the folks in marketing aren’t working in a vacuum. Make sure they are in lock-step with your needs. Help them understand what’s exciting the customers. Together, you can craft effective seminar programs, social media campaigns, emarketing, or other campaigns for your territory. Marketing often bemoans the fact that they generate leads and the sales team ignores them. Get them on your side by telling them what you need, and then by showing them how you are responding to the good work that they do.
3. Rocks and Stones and Pebbles
If you want to fill a barrel with rocks and maximize the capacity of the barrel, you have to fill the gaps between the rocks with stones or pebbles. Have you ever been in the situation where you’re dependent on that one big deal? Our customers say that having Dealmaker highlight risks in the funnel mix – by identifying when there is an imbalance in deal sizes is one of the features that delivers most value to them.
Experienced sales professionals understand that relying on a small number of big deals is risky, and they will balance their opportunity portfolio with smaller deals in order to keep the numbers moving, in case the big rock falls off the cliff. It is one of the truisms of selling: big deals inevitably take longer to close than originally envisioned. Three months becomes six months – or a year. You need to be working on a mix of large deals and smaller opportunities. While waiting for the big deal, no one is making any money and desperation levels increase if there isn’t a backup plan. Your negotiation position weakens, and that major opportunity turns into a minor profit deal. Rocks and stones and pebbles make for a full barrel.
4. Know How Much you Need in the Funnel
There are four factors that Dealmaker uses to determine the health of a sales pipeline:
- Integrity of data
- Deal value
- Number of deals
- Balance across pipeline stages.
The information in the pipeline system must be pristine, continually updated to reflect progress, wins and losses. Everyone must understand the language being used and the salesperson (in particular) must constrain his normal unbridled optimism and not allow himself to overstate the potential value, or proximity to closure, of a deal. Every person entering, or interpreting, data must have a common understanding of the rules being applied to determine where an opportunity sits. Dealmaker automatically places the opportunities at the appropriate stage of the pipeline.
How long is your typical sales cycle? How much time passes during each phase of the buying cycle? As some customers are working through the Requirements phase of their cycle, you need to have others that you are guiding through the Evidence stage, and more with whom you are finalizing the issues that come up during Acquisition. To keep the pipeline balanced, and maintain a steady deal flow, you need to have an adequate number and value of opportunities at each stage in the pipeline. We use the Pipeline Value Factor, or PVF, to help gauge the value.
To achieve 100% of, say, a quarterly target, consistently over consecutive quarters, PVF is the measure of what multiple of that target number you would need to have in each stage of the pipeline, at any point in time. While PVF doesn’t take into consideration the mix of large and small deals, and it is a blunt tool, it is a useful early warning system. If you don’t have enough value in your pipeline, then whether it is made up of large or small deals isn’t the big problem. The problem is that you don’t have enough in your pipeline.