This sponsored post is produced in association with The TAS Group.
Every sales manager relies on a pipeline of some sort to track opportunities, manage their team, and forecast revenues.
[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":1844559,"post_type":"sponsored","post_chan":"sponsored","tags":null,"ai":false,"category":"none","all_categories":"business,enterprise,entrepreneur,marketing,","session":"C"}']Unfortunately, not all sales managers have the tools or expertise to ask questions of their pipeline data that will derive the information they need to increase win rates, boost average deal size, and reduce sales cycles.
And that inability to gain prescriptive value from pipeline data can mean very bad things when it comes to projecting performance and meeting quotas. A big part of the problem is over-reliance on some very dated approaches as to how pipelines are valued and managed.
Danger: Using quota multiples and weighted opportunities
The traditional view of pipelines, which focuses on putting opportunities in the top of the funnel, is pretty simplistic. If the quota you’re working towards is $1 million, then you need to have perhaps 3x to 5x that amount in your pipeline, depending on how aggressive your sales and marketing is. That’s good rudimentary math but start asking some tougher questions and things fall apart in a hurry.
For example, using the same $1 million quota, if your sales cycle is one month and your average deal size is $10,000, then you would need to maintain a constant 500 deals in the pipeline to reach that 5x figure and meet sales quota, which isn’t very likely. So, very important early-on is to get away from this basic 5x metric, which really only deals with one element of the Sales Velocity Equation — and start looking much deeper into your pipeline for meaningful insights.
Perhaps even more dangerous and less reliable than the multiple-of-quota method is the weighted approach to pipeline value. In this scenario the technique is to assign a relative value of ‘percentage closed’ to each deal, and use that to factor the resulting revenue projection. Deals that are further along tend to get organically get more sales attention. But again, the logic behind the weighted approach is somewhat flawed.
[aditude-amp id="medium1" targeting='{"env":"staging","page_type":"article","post_id":1844559,"post_type":"sponsored","post_chan":"sponsored","tags":null,"ai":false,"category":"none","all_categories":"business,enterprise,entrepreneur,marketing,","session":"C"}']
Let’s say you have 100 deals in your pipeline that you assess in terms of five different stages. Stage A means 10 percent closed, Stage B means 25 percent closed, etc. To get your pipeline value, you’d simply apply the relevant stage percentage of each opportunity against its perceived deal value (e.g. 10% x $10,000 = $1,000), and add up total for all opportunities. The difficulty with this is that one deal at 90 percent is not worth the same as nine deals at 10 percent, because you don’t win 90 percent, or 10 percent of a deal — you either win the deal, or you don’t. Savvy?
Sales Velocity Equation + Context = Insight
To move past these flawed methods of assessing pipeline value and managing for optimal performance, sales managers need to look at their pipeline heuristically, not just mathematically.
This means figuring out what part of a deal you are actually likely to win based on the individual opportunity profile and placing your focus on those deals that have a higher likelihood of closing. Simply put, more total opportunities can be a good thing, but better quality opportunities is always a great thing.
Here’s how it’s explained by Donal Daly, CEO of the TAS Group, which provides a Smart Sales Transformation platform that’s native on Salesforce:
[aditude-amp id="medium2" targeting='{"env":"staging","page_type":"article","post_id":1844559,"post_type":"sponsored","post_chan":"sponsored","tags":null,"ai":false,"category":"none","all_categories":"business,enterprise,entrepreneur,marketing,","session":"C"}']
“When we do a pipeline review for a client, the value of the pipeline typically drops a lot, in some cases by up to 50 percent, because many of the opportunities are not real, and this can cause some initial unease,” he says. “But when we explain that if 50 percent of your pipeline is empty calories, and you’re spending time working those deals, you’ll likely end up going to marketing saying ‘Help me,’ and wasting more money, or you won’t pay enough attention to the other 50 percent of deals that really matter, and they’ll wither away on the vine.”
So, focusing on the wrong deals not only drives up overall cost of acquisition, but there’s a pretty good chance you’ll also end up sacrificing win rate percentage and revenue, as well. The key to effective pipeline management, then, is to spend more time working on fewer deals that are more likely to close.
Less is more
Ultimately, it’s better to win 4 deals out of 7, than 3 deals out of 10 (use this calculator to punch in your own numbers and see for yourself). That being the case, Job #1 for every sales manager should be to cut ‘empty calorie’ opportunities out of their pipeline, and spend more time working on what’s left.
Determining what the important data signals are among each opportunity is important in deciding how to whittle things down. For example, let’s say your sales performance data shows that talking to prospects who have an approved budget is the most important element in getting them to ‘Yes’ and monetizing the deal. If that’s the case, then the opportunities that you focus on most should all meet this criteria — because everything else is extemporaneous to performance by comparison.
[aditude-amp id="medium3" targeting='{"env":"staging","page_type":"article","post_id":1844559,"post_type":"sponsored","post_chan":"sponsored","tags":null,"ai":false,"category":"none","all_categories":"business,enterprise,entrepreneur,marketing,","session":"C"}']
While the less is more approach may seem counter-intuitive, Daly is emphatic. “When you focus on understanding the context of fewer of the right kind of opportunities and dedicate more resources to working each solely on its own merits, good, measurable things happen,” he says. “Win rate goes up, deal size goes up, and the sales cycle comes down.”
Traditional pipeline methods are easy to understand and simple to factor but ultimately don’t provide much reliable insight as to the true value of your opportunities.
Focus your sales team on working fewer leads and use only the most relevant data points of each opportunity to provide greater individual context and improve sales metrics across the board.
Sponsored posts are content that has been produced by a company that is either paying for the post or has a business relationship with VentureBeat, and they’re always clearly marked. The content of news stories produced by our editorial team is never influenced by advertisers or sponsors in any way. For more information, contact sales@venturebeat.com.