Which is better – a sales pipeline that has $30m in opportunities, or one that has $50m in opportunities?
Without knowing more about the quality of the deals in the pipeline and the velocity with which they are moving, it is impossible to answer the question.
It may be that the deals in the $30m pipeline are well qualified, moving quickly through the funnel, and well distributed through the different pipeline stages.
Conversely, the opportunities that comprise the $50m number might be stalled, languishing in unqualified territory, but not disqualified because of the need to maintain an enlarged pipeline number.
I recently received a call from one of our customers looking for some assistance with this problem. The customer – call her Karen – is a keen sales methodology user, and Karen’s team has seen a significant growth in Sales Velocity since her company deployed Altify’s Opportunity Manager about 18 months ago.
It seems the problem is that, through the use of the methodology, Karen’s team has adopted a far more rigorous approach to opportunity qualification, and because the Altify platform identifies inactive deals, and measures things like pipeline velocity, she has a much greater understanding of what should or should not remain in the funnel.
So, where’s the problem?
Well, because of her disciplined procedures, and her team’s diligent application of the methodology, she has cleared out all of the unqualified deals from her pipeline.
In fact, her pipeline has shrunk by over 30%, and I can only imagine the pressure from management and the conversations in the QBR.
That’s why she called looking for my advice.
To put this in context, and to be fair to her manager, she is getting credit for the 37% increase in revenue she has achieved. It is acknowledged that when her team requests internal resources to support a deal, the deal is qualified and is a good use of the company’s resources.
Everyone loves the fact that her sales forecast is more accurate than any other division in the company. But because her pipeline per head has reduced, she is subjected to a monthly grilling by her boss, and she is looking for help on how to educate her boss on the difference between pipeline ‘volume’ and ‘pipeline value’.
I remember a saying that I learned early in my business career. It referred to the relative value of revenue and profit.
Revenue is vanity. Profit is sanity.
In the context of a sales pipeline, I think we could borrow that phrase and say:
Pipeline Volume is vanity. Pipeline Velocity is sanity.
I’ve given Karen my input as to how to communicate the value of pipeline velocity to her boss, but I’d love your opinion.
What advice would you give?