In a recent webcast, Sirius Decisions shared some preliminary results from their 2010 Sales Pipeline and Forecast Survey - a study conducted jointly with Cloud9 Analytics. As ever, their research makes for fascinating and thought-provoking reading.
Perhaps the most interesting conclusion was that bigger pipelines aren’t always better - and offered empirical evidence to back up their findings. According to the study, firms with less than 3 times cover in their pipelines were significantly more likely to have the majority of their sales people at or above quota than firms with an average cover of 4 times or more.
The firms with high (>4x) pipeline coverage also reported significant sales forecasting challenges - they were more than twice as likely to report problems with sales forecast accuracy and revenue predictability than their peers.
Less is More
So - there seem to be circumstances when having excessive levels of pipeline coverage is a bad thing. When you dig further into the situation, it becomes clear that the fundamental problem is one of quality, not quantity - and of having the capacity to do justice to well-qualified opportunities.
When organisations are insufficiently selective, resources end up getting spread more thinly, poorly-qualified opportunities draw resources away from better-qualified ones, and sales people and sales managers find it hard to determine where all the deals really are in their decision-making process.
Focus on Quality
The answer lies in a focus on quality. First, establish the common characteristics (SiriusDecisions refer to this as the success profile or “DNA”) of winnable deals. Start by focusing your marketing efforts on organisations that reflect your ideal prospect profile.
As the prospect evolves into a potential opportunity, pay close attention to deal qualification. Apply clearly-defined tests to ensure that the opportunity is real, that you are in a position to compete, that you have potential to win, and that the effort will be worthwhile. Don’t leave it to the sales person to make these judgements - ensure that the same criteria are rigorously and consistently applied across the entire pipeline.
Insist on Evidence of Progress
Even when a deal is well-qualified, look for evidence of progress in the prospects’ buying decision process. Insist on tangible evidence of buying activity before allowing the sales person to advance the deal to the next stage in your CRM system. Pay particular attention to opportunities that seem to have stalled. Prune any dead wood ruthlessly.
Monitoring the number and value of deals by stage isn’t enough to determine the true state of your pipeline. You’ll want to monitor conversation rates by stage and the time taken for opportunities to move from stage to stage in the pipeline - sales velocity has been proven to be a vital indicator of the health of both your overall pipeline and of individual opportunities.
You’ll soon be able to identify patterns of success. Focus your attention on the opportunities that qualify. Compare performance across sales people, product and campaigns. Identify and replicate winning habits. Adapt and evolve your standards and metrics in the light of experience.
If you focus on pipeline quality, the conclusions are clear. Revenue success will follow.