Sales organizations must keep a vigilant eye on both immediate forecast targets and longer-term pipeline development. But it’s easy for the former to overshadow the latter, which is unhealthy for both. I find it crucial to actively keep my organization focused equally on inputs and outputs – short-term goals and long-term sustainability.
We begin our pipeline meetings by looking at how the four-month weighted cycle breaks down by close month and sales stage. This provides a sense of whether we have enough (and the right kind) of sales pipeline to cover target goals and current consumption. This is indeed a structured and formal process with close attention to distribution across the various sales stages – but without it we’d be lost.
If your organization is just guessing at the coverage you need, you’re putting profitability at risk. Here are some steps for getting started on a process that will pay off in more consistent sales performance.
5 Steps To Develop Your Sales Pipeline The Right Way
1. Model For Quality, Not Just Quantity
Here is a simple example of how you might model quality throughout your sales pipeline. Quality is based on 1) the time it takes from any stage in the cycle until the deal is closed and 2) the chances that a deal in any stage will eventually be closed.
This model is based on the following assumptions:
- Sales wins 22% of Stage 1 dollars in an average of 110 days
- Sales wins 45% of Stage 2 deals in an 80 days on average
What’s most useful in this model is the expected time remaining in any successful cycle.
2. Calculate Your Weighting
Now you can estimate the weighted value of any individual’s pipeline. The weight is calculated as:
1. Total deal value in each stage X win rate for that stage
2. Use the Days to Win number for each stage to spread the weight over time.
3. Measure The Gap
Finally, we contrast each individual’s weighted pipeline to goals over select data ranges. This comparison is the key to determining if your sales pipeline is adequate.
In this gap chart, anything above zero is good, while below zero is bad. This chart indicates problems coming in about month three or four.
4. Watch For Trends
We can see some issues in a few months, but how do we know what’s causing the problem and if the issue is getting better or worse?
A Weighted Sales Pipeline Development chart shows a monthly progression for the total value of any team member’s 120-day weighted pipeline. In this case, the trend is not good.
5. The Why
To determine a cause for this sales person’s problematic trend, we must start with lead generation. Has anything changed in the market or within the marketing organization that would inhibit lead production?
We might at this point look at what happens just before a lead enters the pipeline at the stage of Sales Ready Lead (SRL), including those sourced by Sales and Marketing.
6. The Fix
In this instance, clearly marketing is not at fault. This individual’s contribution to SRL production has plummeted. They must do more to develop their territory.
As a manager, working with this sales person to resolve the problem would require looking at all the steps in the above analysis and then discovering what has changed to take away their attention form pipeline development.
The model we’ve followed here is essentially a matter of maintaining a balance between building and winning deals. My own organization has become much wiser about investing for the future because we take the time to care for the pipeline – not just today’s pressing deals.