The second half of the year has just begun. Recently, I’ve been getting some panicky calls, “Our pipeline is a disaster! We need to find and close more deals!” What’s shocking to me is the level of “surprise,” being expressed by these very sophisticated business people. I have to admit, it’s a little difficult for me to understand the “surprise.” I wonder, “Why does this seem to be a surprise, do people have the right measurement systems in place?'”
The pipeline is the single most powerful tool for individuals and managers, alike, to give insight into whether you are on target to making the numbers. At any point in time, you can look at:
- Are we pursuing a sufficient number of opportunities to achieve our numbers?
- Are we pursuing high quality opportunities?
- Is there good flow or velocity through the pipeline, or are things slowing down?
- Are we maintaining or improving our win rate?
- Are we maintaining or increasing our average transaction value?
- Do we have a sufficient number of new opportunities being qualified and coming into the pipeline?
If we are keeping the pipeline updated, we have the most powerful “early warning system” available to us. We have great insight about problems that are impacting us now, as well as problems that may impact us in the future.
The primary reason I’m getting these panic calls is that people are not leveraging the pipeline well. 85% of the time, when I look at an individual’s or organization’s funnel, I immediately see problems with the quality of their funnels—-opportunities that have been in the pipeline for months, sometimes years with no activity. Opportunities that show projected close dates in the past. Opportunities high in the funnel, forecast to close in the next four weeks (on an 18 month sales cycle). The list can go on.
None of this should be a surprise, if people are maintaining their funnel—keeping it current, understanding the metrics that come out of the pipeline, paying attention to the early warning signs.
As sales people or organizations we need to answer these fundamental questions to be leveraging the funnel as an effective control or early warning system?
- Do we know the ideal number of opportunities required in each stage of our pipeline to make our number? Do we have at least that number of deals at any point in time in the pipeline.
- Do we have the right quality of opportunities in the funnel? It’s actually easy to have the right volume of opportunities—we can stuff the pipeline with garbage or low quality deals. When we are opportunity starved, the greatest “urge” sales people face is to stuff the pipeline with junk. We then waste time on bad quality deals, reducing our win rates, reducing our average transaction size, changing the whole dynamic of our pipeline–requiring us to have much greater volume. The single most important thing is to focus on high quality opportunities.
- Do we know the velocity or flow required to make our number? Having the right number of deals in the funnel is meaningless, if they aren’t moving.
- Do we know our win rate, are we maintaining or improving it? Flow is meaningless if we are losing too much. If we improve our win rates–by pursuing higher quality deals in our sweet spot, the number of deals we have to chase goes down. If we improve our win rate, by increasing our effectiveness in each deal, the same thing happens.
- Do we know our average transaction value, are we focusing on deals that fit that, or are we in desperation chasing lower quality deals. Recently, I met a sales team that was panicked in chasing business. Over the course of several months, the average value of the deals they chased was reduced by 75%. They were winning deals, but at a lower value. They didn’t realize that by chasing the lower value deals, they now needed to find and close about 4 times the number of deals they had to in the past. They hadn’t adjusted their other pipeline numbers to reflect this new reality and were confused about why they weren’t making their numbers.
- Do you know how many newly qualified deals you need to be feeding into the funnel? We spend all our time focusing on what’s in the funnel, at some point it empties out, unless we devote time to prospecting and identifying new deals. We have to make sure we have a good flow of qualified deals coming into the funnel. If marketing isn’t supplying enough qualified leads, we can’t wait for them, we have to find them ourselves, we have to prospect.
Doing these makes the funnel a powerful early warning system, telling us whether we are on track or not. These measures give us powerful diagnostics to help us identify what may be going wrong, giving us clues to what we need to do to fix things.
Make sure you are leveraging your pipeline as an effective territory or organizational management tool. Without it, you are just guessing, you have no idea whether things are working or not, or what to do if they aren’t. This is the fundamental underlying reason for those “panic” calls.