After a prospect has converted into a lead and been qualified by marketing and sales, respectively, they become an opportunity and enter the sales pipeline. Once you have a realistic expectation of how much revenue could result from a deal, you can start predicting your pipeline and forecast your team’s performance.
A sales pipeline is the total amount of revenue and the total number of accounts that could be closed-won in a given time period. While the amount of revenue in your pipeline is the most important thing in relation to goal attainment, the number of opportunities that revenue is divided between factors into your pipeline’s stability.
If your goal for the month is $200,000 and you have $800,000 in your pipeline, that’s good from the revenue perspective. However, if that $800,000 is only three accounts, that’s really volatile. It’s more stable to have $800,000 divided amongst eight accounts.
Why is It Important to Manage a Sales Pipeline?
Knowing how much your sales team regularly closes can inform your hiring decisions and company trajectory, since you'll have an educated estimate of your generated revenue on a periodic basis. Sales forecasting helps establish what is realistically going to close in a given time period, which helps businesses understand how they’re bringing in revenue over time.
Since your pipeline consists of all potential revenue your team could bring in, you don’t want to present that raw data to your higher-ups. Realistically, you’re not going to close 100% of the deals in your pipeline. With pipeline management and sales forecasting, you can gain a more accurate understanding of what your team could close, enabling you to present a weighted pipeline forecast instead of your total pipeline.
Your weighted pipeline forecast accounts for historical data like push rate, average sales cycle length and win rate, all of which can help you identify your reps’ strengths and weaknesses.
Average sales cycle and win rate help you understand the likeliness of goal attainment on a monthly and quarterly basis. Push rate is a clear indicator of how accurate sales reps are at forecasting. The lower push rate your reps have, the better they are at forecasting realistically when their deals will close, thus making them more reliable. That allows you to trust your reps to forecast accurately so you may present more realistic projections to your executives.
Pipeline management and sales forecasting is a chicken and the egg situation though. You can’t get data on your sales cycle, win rate and push rate unless you have strong pipeline visibility and management. At the same time, sales forecasting is an integral part of pipeline management.
How to Manage Your Sales Pipeline
When you’re starting out, it’s super important to have clear definitions and clear processes for what opportunity stages look like and when people move from one stage to the next. Without that, you won’t have reliable data points.
For example, if there’s no definition for when your reps should open an opportunity, then you won’t be able to calculate the average length of your sales cycle because each opportunity could be opened and closed at a different point in the sale. On top of that, if you have a complex sales cycle with multiple opportunity stages, then explicit definitions for when each stage begins and ends are essential for you to be able to improve your sales process at a granular level.
Establishing the stages, definitions and processes is the first step to improving your pipeline management, and then you need to wait until enough time has passed that patterns can be observed.
For instance, to understand win-rate you’ll need a couple months of data and a few deals to close before you can pull historical insight. I typically wait until six months after a new sales rep ramps up before I start drawing conclusions from their performance metrics.
When a rep is new, whether to the organization, the industry or sales as a whole, they have “happy ears.” Their optimism and excitement can interfere with their ability to accurately predict how a sale will go.
New reps tend to think they can outperform the team averages every sale, but data is data and team averages are averages for a reason. so they end up with higher push rates.. However, over time those push rates go down as they learn to better understand their own data and use what they learn to forecast more accurately.
While they’re still optimistic and inconsistent, you can use your team averages as benchmarks until their performance stabilizes enough that you can start to compare them to their own historical data.
Using Pipeline Management to Improve Your Team Management
Forecasting makes sales more predictable.
In addition to helping you determine the overall win-rate of your team, you can also use sales forecasting to understand how individual reps are performing and how you can help them meet their goals.
If your pipeline is properly managed in regards to operations, you’ll have historical data on all your reps and know their individual win rates and average sales cycles. This historical data can be used in conjunction with the current pipeline forecast to give reps transparency into how likely they are to meet their goals. Having that visibility motivates your reps and provides direction for the actions needed to meet their goals.
For example, because pipeline encompasses a specific window of time, the length of your reps’ sales cycle needs to be taken into account when measuring their performance during that time.
If their sales cycle is longer than a month, than your reps’ performance could be all over the place from month-to-month. However they could be consistently beating their goal each quarter. Knowing that, you can focus your strategy meetings on how they can surpass their goal for the quarter instead of stressing over how they might not meet it for the month.
At New Breed, we keep a sales scorecard tracking performance metrics for each rep and for the team. Every six months, we re-analyze those metrics so we can see trends in how they’re performing on push rate, win rate and other key areas. We then compare individual performances to the overall average in order to identify outliers and learn what’s working well and what’s not.
People definitely change, and that’s why it’s important to re-review those metrics regularly and coach your reps on any changes that have occurred.
In order to benefit from pipeline management, your team needs to be consistent in how they’re following your company’s process and protocol. The operational aspect of pipeline management should be table stakes.
You shouldn’t have to spend pipeline meetings discussing whether or not opportunities are labeled correctly or forecasted close dates are realistic. Give your reps the visibility and capability to forecast their own pipeline and then hold them accountable for maintaining it. Then you can spend your pipeline meetings with them discussing strategy and coaching them on how to close the opportunities in their pipeline.
Your pipeline meeting conversations should be focused around how to win what’s reliably and realistically forecasted for the month.
For sales, style is important for outreach. However, there need to be guardrails in order to get good data. If one person goes rogue, we won’t be able to get good data about their performance or gain insight into why things aren’t working.
It’s common for sales reps to not prioritize updating their pipeline, so it’s up to managers to hold them accountable for doing so. If someone isn’t following the process, they’re only hurting themselves and creating unreliable historical data.
Process is more than just defining opportunity stages and establishing when to move from one to the next. It also includes criteria on when reps should and close an opportunity.
The Takeaway
It’s easy to feel like sales is uncontrollable, and sure — luck can factor in from time to time. But, the more you can measure, the more predictable insight you can provide to everyone involved.
Change is inevitable, but it’s always smarter to make predictions based on past data instead of assumptions of what could change. Focus on the known over the unknown.
Pipeline management allows sales leaders to ground their strategy in the aspects of sales that they can control. Instead of wasting calories trying to accommodate for random things that might happen, you should focus on your team’s historical performance and how you can use that data to help them meet — and exceed — their goals.
Tag(s):
Sales
