As a brief recap from the first part of this series, you have now 1) established qualified opportunity criteria, 2) begun coaching opportunities in early stages of development and 3) practiced skill conversations with members of your team. With that foundation in place, you’re ready to start analyzing individual and team pipelines.
Just as a doctor establishes a few baseline measurements before a more intense examination (e.g. height, weight, blood pressure and pulse), we will look at three “macro” components of a well-balanced, healthy pipeline.
- Size of Opportunities: Is there a reasonable mix of small, medium and large opportunities in your pipeline? The most dangerous pipelines are the ones filled with unqualified opportunities. Almost as bad are pipelines with just a few large opportunities that create a “make or break” scenario. If you land the few “big ones”, you hit your plan. But, if you don’t and only get one out of the three, then the quarter or even the year is shot. We only recommend this “elephant hunting” style when you supplement your big ones with smaller, more easily attainable business in order to mitigate any risk.
- Opportunity Velocity: How long does it take for a medium or large size opportunity to go from lead to close? It’s important for management to establish reasonable baselines for how long an opportunity should reside in each stage of the sales process and monitor this movement. Often opportunities will slow down or stop, and if they do, it’s a perfect time to implement the proactive coaching regiment we suggested in the first part of this series. Another way to keep things fresh is to age opportunities against a reasonable benchmark. This helps to remove stalled or dead business before it drags into Q4 with no chance of closing.
- Volume: How many overall dollars (or euros, yuan, pounds, etc.) should be in your pipeline at any given time? The best way to solve this calculation is to gather historical data that tells management:
- Average sales cycle, or average time from lead to close. Let’s say this is 6 months.
- Weighted probability at each stage. At the halfway point, what we call the evaluation stage, we can assume there is a 50% probability to close.
- Any surplus or deficit in the salesperson’s performance to date. For this example, there is none.
- The sales rep’s annual or monthly revenue plan. We’ll use $2MM per year, or $165,000 per month.
Here is the calculation: Monthly Revenue Plan ($165,000) x Average Sales Cycle (6 months) = $ 990,000.00 At the Evaluation stage, only 50% of opportunities are likely to close, so reps need double that amount, or fill their pipelines with $1,980,000 of business, in order to ensure they will hit target. You can apply the same type of calculation to all stages in your pipeline to build a more accurate picture of revenue health.
We’ve run this calculation for many of our customers and would be more than happy to share examples with you. If you’re interested, just contact me at john@drive-revenue.com. Don’t wait to start examining your pipeline and looking for the three components we discussed – opportunity size, velocity and volume. Do it now while there’s still time to course correct (if needed) and have a successful, profitable 2016.
(Part 2 of 2)
