Every sales professional knows the importance of keeping a full pipeline. If they don’t, their managers remind them of it every pipeline review. But if we are keeping full pipelines, why do only 53% of sales people make their quotas? Something’s wrong.
I get to see the pipelines of dozens of organizations and hundreds of sales people every year. After only about 15 minutes of review, too often what I see is a pipe dream, not a pipeline. The signs are easy:
Deals that have been in the pipeline too long. You’ve seen them, your average sales cycle is 90 days, count the number of deals that are in the pipeline longer than 180 days—-most of these are pure wishful thinking!
Deals where there has been no movement or activity for 30 days. If they are in the pipeline, we need to be working them. As I drill down into the opportunity reports, when I see no activity on the part of the sales person or customer, the question arises, “What’s happening?” Why aren’t we, or the customer, paying attention to this? Why aren’t we moving the deal forward? Do we know what to do next? Does the customer know what to do–are we providing leadership? The longer there is no activity, the less real the deal is.
Then there are “real deals,” with unrealistic expectations on the part of the sales person. The easiest way to see this is lack of alignment in the Stage and Projected Close date. If you have a 90 day sales cycle, and you have an opportunity that has just been qualified, the likelihood the deal will be closed in the next week is very low! These may be real deals, but very unrealistic projections of close dates. Consequently, it causes one to think? Do we really understand the deal, do we have the right strategy to win?
Deals outside our “sweet spot.” This is what happens to a lot of sales people when their pipelines are thin. When sales people don’t have enough in the pipeline, the sales people have the tendency to “cast a wider net.” They chase everything that looks remotely like a deal–a prospect fogs a mirror—it’s a qualified deal. This is, perhaps the most dangerous fix to a weak pipeline. The further outside our sweet spot, the lower the quality of the opportunity. It may be a real opportunity, but our ability to win it is probably very low. These low quality deals divert our focus and resources away from the good deals, they cause win rates to plummet (which means we need even more deals to have a healthy funnel), sales cycles to lengthen, and overall performance is much worse. While it may seem counter intuitive, rather than loosening our qualification criteria, we have to do exactly the opposite and toughen our qualification criteria.
The pipeline coverage fallacy. This is a blind spot with managers. They tend to look at pipeline coverage, typically saying “a healthy pipeline needs to have 3-4 times the number of deals required to make quota (this assumes win rates of 33-25%). ” They hammer sales people for the coverage, without looking at the quality of deals that make of the pipeline. Bad deals, low priority deals, unrealistic thinking prevails–we have the “right” coverage, but the deal quality is low–and the “death spiral” continues.
Deal quality counts! High quality, high integrity pipelines are critical! Good or bad, we want a high quality pipeline. Without this, it’s impossible to diagnose and fix issues that impact our business performance and quota attainment. Several years ago, I sat down with the executive team of a mid sized company. They had several years of missing quota, the current year looked bad. They contacted me, saying “We think our problem is………” They were looking at the pipeline, and diagnosed certain sales skills problems. In our first meeting we sat down, looked at a pipeline that had about 3.5 times coverage. When we cleaned the pipeline, removing all bad deals, correcting deals that had been misplaced, we had a pipeline that had a little more than 0.2 times coverage. As dismal as that seemed, the problem was crystal clear, the actions needed to fix the pipeline and business volumes jumped out at us. While we had a difficult path, we had an accurate view of the issues and a strategy in place to fix the issues.
Pipelines need to reflect what is–not what we wish it to be. Without integrity to our pipelines, it is impossible to understand what performance issues might exist and what we need to do to address these problems.
Do you have a pipeline or a pipe dream?
Dave,
I’m glad you are addressing this elephant in the room in your blog. Most sales organizations I’ve seen all struggle with pipelines that are a very poor indicator of their true forecast. This can have serious ramifications not just for managers and sellers but also ordering, production, shipping, etc.
One of the biggest issues I’ve seen that worsens this issue has little to do with automation or policy: It’s called “the fear factor.” Sales gets berated for having too few deals in the funnel, so they fill the funnel any way they can to relieve the pressure and keep functioning, leaving the real problems that are causing the lack of real prospects alive and well, robbing them not only of a cure, but of the time they could be using to discover the cure.
This is not just on sales people, some managers have created and/or allowed a culture where sales people feel they can’t discuss the real issues, they are only allowed to spread sunshine and joy (good numbers.) As long as sales people feel insecure about sharing real numbers, managers will get false indicators regardless of what systems or policies are in place.
Don F Perkins
http://mindmulch.net
Thanks for the great comment Don. We (sales people and managers alike) do nothing by artificially inflating our pipeline numbers. They hide the real problems and issues we face and divert us from meaningful solutions. Thanks for the reminder. Regards, Dave
David,
Unfortunately the Sales Pipe Dream Syndrome is alive and well. I wish every sales pipeline review could have an independent third party resource with no direct stake in the outcome there to watch for these and other red flags.
One other prevelant thing that I see contributing to many sales pipe dreams is the ‘one and done’ factor- deals where we’ve really only gotten cozy with one influential decision maker and never really expanded our sphere of influence or done our due diligence to determine who else is going to be involved in influencing the deal.
Thanks for your continued service to the sales community.
Robert
Great comment Robert! It’s not only a pipeline problem, but it’s a deal strategy problem. I’m amazed at the number of sales people (and managers) that really don’t know how decisions will be made. They rely on one person (usually their buddies) and don’t actively expand relationships, dealing with everyone involved in the decicionmaking process.
As always, great insghts! Regards, Dave