How much business will you do in the next quarter? How much business can you do next year based on the current pipeline? Are there prospects in your pipeline that shouldn’t be there? In which part of your sales process do sales become in danger? What is the close rate for each stage of the sales process? And do you even have a sales process that you could measure?
If you cannot answer these questions, how can you possibly make decisions in your business? How do you know when to hire? How do you know when to invest? Despite not knowing all of the answers above, businesses typically do not spend any time managing the sales pipeline. When they do, they feel like it is magic.
A staged sales pipeline should be in alignment with your sales process. Basically take your sales process (if you have one that’s consistent) and group parts of it based on where prospects are in the process. If a prospect becomes qualified by your marketing, you might identify that first stage as “marketing qualified.” If the next step in the process is to further qualify that lead as a prospect by the sales team, once that is complete you might call that stage “sales qualified,” and so on.
Once the staging is complete, the magic show begins. Here is what you should be able to learn from a well-managed pipeline:
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Close rate per stage. In other words, how many prospects that enter the pipeline make it to become a customer AND which stage best identifies whether or not a customer will make it to the end? Let’s say that you are disqualifying 90% of the marketing leads and you know that number. Are the marketing leads bad, or are the salespeople just poor qualifiers?
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Reasons for wins and losses. When you force your salespeople to identify why they are not closing business, you can figure out where trends exist. If Joe Salesperson always makes the excuse that “they thought our price was too high,” you can figure out if he is weak at creating value or if you really need to look at your pricing. Knowing why you win sales is just as important. If there is a key tactic that is working nearly all of the time, you can make sure that all of your salespeople are following that tactic to maximize their own results.
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Having confidence in the weighted pipeline. The weighted pipeline is the percentage chance amount that you will close based on where prospects are in the stages. If you have $1M in the pipeline, but your weighted pipeline shows that 30% of those opportunities will close based on history, then you can have confidence in the pipeline. Many companies rely on their salespeople to decide how likely a prospect will close. This only leads to a lack of confidence in the pipeline because salespeople will always be more optimistic than reality.
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Other magic. If you are using a pipeline you can also learn things like:
- Average deal size
- Where prospects are likely to stall
- What steps in the process are skipped and is that the cause for success or failure
- Average days to close by salesperson
- Average days in each stage by each salesperson
The decision that you have to make is whether or not knowing how much business will close is important to you. Go ahead and pretend that it isn’t just so you can feel better. Then just build the infrastructure to do that. If that doesn’t seem simple, then you had better ask an expert to help you.
