By Bob Apollo, MD at Inflexion
Most sales people, and most sales managers, have been conditioned to believe that bigger pipelines are better, but there are many reasons - and much evidence - to show that reducing the value of your pipeline could actually enable you to sell more. Here's why...
At any time, most pipelines contain opportunities that are destined never to close. Some of these prospects will inevitably end up deciding to do nothing. Others will end up in the hands of competitors. Another group turn out to be far less advanced in their buying decision process than the salesperson believes.
All the while, these poorly qualified or over-optimistically rated opportunities are consuming resource, creating a false sense of security, and slowing the progress of other more attractive prospects.
I’d like to suggest a handful of simple steps that when first implemented are likely to reduce the “headline value” of your pipeline - often dramatically. But the remaining opportunities will be much more real, and far more likely to turn into revenue - and you’ll be able to free up valuable resource to pursue more of the right sort of prospects.
1: Base your pipeline stages on buying behaviour, not sales activity
Most sales pipeline stages are defined by the actions the sales person claims to have undertaken. Progress is measured by what stage the sales process has reached. Yet often this bears no relationship to the stage the prospect has actually reached in their buying decision process, and as a result, most deals are far less advanced (and far further away from a conclusion) than the typically optimistic sales person believes.
There’s a simple remedy: base your pipeline stages around observable evidence of the prospect’s buying behaviour. Insist that sales people only promote deals to the next stage on the basis of observable, measurable milestones that reflect actions or commitments on the part of the prospect. The transition will probably seem painful. Many deals will end up in a far less advanced stage in the cycle. But your pipeline, and your forecast, will be a much better reflection of reality.
2: Get Smart About the Percentages!
Most CRM (Customer relationship management) systems come out of the box with percentages assigned to each stage in the process. In high-value, complex sales environments, they are almost always precisely wrong. Firstly - particularly in the early stages - they wildly over-estimate the true likelihood of the opportunity closing. Second, these percentages are almost never adjusted to reflect the reality of actual conversion performance in the vendor’s particular environment.
It’s worth the time and effort to calculate percentages that more accurately reflect the actual percentage close rates in your particular business environment. In fact, using increasingly available sales analytics tools, it’s possible to come up with percentages that reflect each sales person’s historic close rates.
3: Bring Out Your Dead!
Empirical evidence has demonstrated that, on average, it takes 50% longer to lose a deal than it does to win one. Or to put it another way, it takes 50% longer to recognise that the failed deal has already been lost - or is n
ever going to be won. All other things being equal, the velocity with which deals are moving from stage to stage in the process is a critical indicator of the likelihood of a successful closure.
This is why sales velocity is such a critical measure in pipeline management. It’s essential that your CRM system is set up to timestamp the progress of every opportunity between every stage in the pipeline - and that management have clear visibility of where opportunities have slowed or are stuck. Early attention can often get opportunities back on track - or force the recognition that the deal is unlikely ever to close. Either way, an understanding of sales velocity helps to focus attention and resources where they can have the greatest impact on revenue.
Three Simple Steps: Why Less Can Be More
Adopting these ideas can result in something of a short-term shock to the system. But your pipeline will be immediately leaner and fitter as a result - and you can apply some of your newly released resources to finding and winning more of the right sort of prospects.
A Focus on Quality Pays Off
Clients who have chosen to focus first on pipeline quality, and then on quantity, rather than the other way around, have reported significant improvements in shortening sales cycles, increasing win rates, and improving sales forecast accuracy. These principles could help you achieve the same.
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