If you’re interested in knowing how to determine the actual value of your sales pipeline, this might be worth a read.
In a previous post I set out what I consider to be the important elements of a sales pipeline management system. That’s all about knowing how much you need to have in your pipeline to achieve your revenue target. Clearly, if you don’t have enough opportunities in the sales pipeline, you won’t make your revenue target. Using a measure we call the Pipeline Value Factor, you can calculate the value, number and spread of deals that you need – but that’s still not enough. The health of your sales pipeline is a function of the momentum, age, activity and velocity of opportunities.
Most pipeline reports measure only the pipeline value or volume, by adding up the value of each opportunity in each stage, and coming up with a total pipeline value. However, unless those deals are being actively worked, it’s likely that the pipeline report is giving you an inaccurate, or at least incomplete, view.
When we’re measuring the true worth of a pipeline we consider the status of each deal, at each stage in the funnel. We classify each deal as Active, Stalled, or Inactive. Depending on the sales-cycle and the overall cadence of the business, the status is determined by when the deal was last worked. If, for example, your sales-cycle is 90 days, it would be reasonable to assume that a deal that has not been worked for more than 60 days is Inactive. If the sales person has placed that deal at one of the later stages in the pipeline, then there clearly is a misrepresentation of the value of that stage in the funnel. As we all know, opportunities never stand still; either they move forward towards closure, or they regress towards ‘no decision’ or loss.
So, how do we do this? In our case, as you might expect, we use one of the pipeline analytics reports in the Performance Coach module of Dealmaker – our Sales Performance Automation platform.
In the graphic below, you can see that this sales person, Lynne Clooney, has a total pipeline value of $11,499,800 – the number represented in the bottom right corner. When you look more closely you also see that only $5,980,000 is Active, $3,670,000 is Stalled, and $1,849,800 is Inactive. In this report Stalled deals are those that have not been worked in more than 30 days, and Inactive deals have not been worked for more that 60 days.
On the face of it Lynne’s pipeline isn’t bad. We know that she has a quota of $2.5m, and with nearly 5 times that in the funnel, you could be forgiven for thinking that she’s in good shape. However, the sales cycle at Lynne’s company is 90 days, and we can tell from this report that there is nearly $5m in her pipeline that she has not worked on in the last 30 days. Should I be concerned about that?
More critically, we can see that of the $1.8m that’s recorded at Inactive, there are deals worth $320k in Verbal Order, and $240k in Acquisition. With these being the two last stages of funnel, we might be expecting them to close soon – but that’s surely not going to happen if they’re not being worked. Time to review the plan, or determine if in fact we’ve lost the deals, and they should be removed from the funnel.
Getting this kind of insight provides considerable actionable data to help the sales person. Frequently, if deals are Inactive, it points to a lack of urgency on behalf of the customer, or an inability on behalf of the sales person to identify or create a compelling event, where she can demonstrate to the customer the value of making a decision now. In either case, it should point to an opportunity for Lynne’s sales manager, or marketing department, to create an initiative or program to help move the deals. In other cases, it just highlights that the sales person has not recorded as sales as lost or disqualified – but then everyone is working on an assumption that she has enough in her pipeline – and that not good for anyone.
Where deals are Stalled, our experience would indicate that there is some obstacle that is causing difficulty for the sales person. This is where the sales managers should prove their worth. It’s time to coach or brainstorm to figure out how to apply the resources of the organization to help the sales person.