VIDE Freeman Consultant Corporation: Sales Pipeline Management

Sales Pipeline Management Part 1 - Introduction

Not atypically, if you take a look at a seller’s - and consequently an organization’s - revenue over the course of a year you will see peaks at the end of each quarter with a substantial peak at the end of the 4th quarter. This is commonly referred to as a roller coaster ride - which is very much in line with stress levels in the sales operation.

This is, of course, due to the fact that sellers are trying to do everything they can to achieve quarterly and annual quota objectives, including unnatural acts to close business prematurely.

And, unfortunately, at the start of each new quarter, and especially the new year, pipelines are barren and people are therefore doomed to repeat this pattern.

Sales pipeline management will resolve these and other related issues. The purpose of this post is to define what we mean by Sales Pipeline Management, provide the framework for an effective sales pipeline and illustrate its setup, and demonstrate pipeline management by using a Pipeline Balance Algorithm.

Definitions

The Sales Pipeline summarizes by stage all qualified opportunities that are actively being pursued. It is usually depicted as a funnel. Qualified opportunities include those from the earliest stage of qualification (“Candidates”, where a seller has conducted a partial sales call and where the buyer has, at minimum, admitted a Critical Business Issue, with a 10% probability of closure) to opportunities that are imminent (“Near Wins with a 90% probability of closure) and recent “Wins”.

The forecast, as opposed to the Sales Pipeline, focuses on near to mid term revenue projections. It includes opportunities that have anticipated close dates that will occur in the near term (next 90 days) to mid and potentially long term (beyond three months).

As opposed to the forecast, the Sales Pipeline looks at the broader opportunity set and includes opportunities that are nascent and too early to forecast. It is normally independent of opportunity close dates and instead focuses on opportunities by stage. As such, for individual sales people, their managers, and executives it gives a picture of anticipated overall future business. And, when matched against sales pipeline goals:

· Provides an important view of both the health of the pipeline and the health of the business,

· Identifies where gaps exist, and

· Gives management the ability to take corrective actions early.

Sales Pipeline Management is the process of:

· Establishing pipeline balance expectations/requirements,

· Monitoring and assessing pipelines against those expectations for both quantity and quality,

· Identifying gaps, and

· Putting in place highly specific plans to rapidly achieve balance where gaps exist.

In Part 2 of Sales Pipeline Management we will provide the framework for an effective sales pipeline and demonstrate pipeline management through use of a Pipeline Balance Algorithm. Stay tuned!

Sales Pipeline Management Part 2 - The Framework

Lets look at the framework behind Sales Pipeline Management. Provided in the following table are the Adventace “no wiggle room” Opportunity Stages along with their definitions. Well-defined surgical Opportunity Stages are the critical foundation to accurate identification of the status of opportunities, Sales Pipeline Management, and forecasting. They must reflect key events successfully completed between the seller and the buyer organization (such as access to power, identification of a Critical Business Issue and a solution, and the sequence of events leading to a buy decision). For a detailed review of the stages please refer to our video at http://www.youtube.com/user/AdventaceGlobal.

The flow through the stages is shown in the following diagram. The T stage involves planning for prospecting, while the S stage reflects the identification of near-term prospects the seller will call. But opportunities at the C stage represent QUALIFIED OPPORTUNITIES that represent the first stage to be included in the Sales Pipeline. It is qualified due to the fact that the seller has been able to get the buyer to admit a Critical Business Issue. Note that a C opportunity ultimately leads to an A opportunity. The A opportunity is very important because the seller now has a Power Promoter who has agreed to an Action Plan. A opportunities and, in summary, the A pipeline, are an excellent predictor of win probability (at least 50%) and are thus key in terms of predicting revenue goals and quota achievement. As we will demonstrate, the value of the A pipeline provides a key metric for assessing pipeline health. It is also a key to accurate forecasting.

But note that there are two paths a seller can take to reach the A stage. We can go directly from C to A, or take the path C to B to A. Very importantly, we DO NOT want to take the latter, through the B prospect, because this is where sellers get stuck “below the power line”. And, as we previously explained, this is why many sellers, and ultimately sales operations, fail to achieve their overall goals. Thus, the B Stage should be minimized. So it is important for executives and managers to make sure that organizationally they are following the correct processes and metrics to take that direct route. For a deeper look at this please take a look at our video on performance metrics.

In Part 3 we will demonstrate how to do Sales Pipeline Management through use of a Pipeline Balance Algorithm. Stay tuned!

Sales Pipeline Management Part 3 - Pipeline Balance Algorithm

Sales Pipeline Setup

Recall that the Sales Pipeline tracks all qualified opportunities, i.e., those that are actively being pursued and where the seller has been able to achieve at least the first level of qualification, a Candidate, because the seller made enough progress with the prospect to get the prospect to admit their Critical Business Issue.

Shown to the left are the key Adventace opportunity stages for qualified opportunities mapped to a representative Sales Pipeline.

We believe and teach management that:

· Each Pipeline Stage provides the total number of active qualified opportunities in that stage.

· The C and the B Stages do not provide a dollar or other currency value because they cannot be determined with a sufficient degree of accuracy. At the C stage, the initial sales call has not even been completed. At the B stage, the seller has not yet gained access to the Power Promoter, nor is there yet an action plan and, therefore, the value here also cannot be determined with a sufficient degree of accuracy.

· The A Stage is a total of the A and A+ stages. We differentiate between the A and A+ stages only for forecasting purposes, not pipeline balance, because the A+ stage is simply a set of A prospects with a higher qualification level because the seller has successfully completed certain key steps in an Action Plan.

· Opportunities in the NL (Near Loss) stage should be minimized. NL’s represent a failure to properly and early on in a sell cycle to disqualify an opportunity. They typically occur when various disqualifiers are ignored by the seller, but also a failure on the part of management to exercise “tough love” and remove the “opportunity” from the pipeline. They also occur when sellers respond to RFP’s they have no business responding to. This also represents a failure on the part of management to again exercise tough love.

· We combine the NW and W because NW is a stage that many opportunities skip (because they go directly to W) or if an opportunity does go to the NW stage, it is normally a short-term interim stage on its way to a W. Thus, it is not possible or relevant to determine a NW pipeline goal.

The Pipeline Balance Algorithm (PBA)

The purpose of the PBA is twofold:

1. It helps sellers maintain a continuously balanced pipeline, “24 x 7 x 365” days a year. It is designed to ensure continuous pipeline balance. In so doing, when a month, quarter, or year ends, and irrespective of whether or not the seller “made their numbers” for that period, it ensures that the seller enters each period with a fully loaded pipeline.

2. The point above ensures that quotas are being met.

Here’s how the PBA works. Looking at our Sales Pipeline, the concept is that coming out of the bottom of the funnel we want a consistent number of wins with sufficient value to achieve quota (as represented by $Win).

The PBA works to ensure this via its two key components. The first component is the value (in dollars or other currency) of the A pipeline. Why the A pipeline? If you think about how we clearly defined an A prospect with a 50% probability of becoming a win, the A Pipeline becomes an excellent predictor of $Win. Therefore, managers calculate the financial value of each of their seller’s A pipeline.

The second component is the number of New Opportunities to Create (NOC) each month to achieve and maintain the $A pipeline. A NOC is achieved each time an opportunity progresses from a S to either a C (by far the most common), B, or A opportunity each month.

Then, consequently, if there is a gap in the $A pipeline managers are shown how many additional NOCs are needed for the upcoming month to alleviate the $A gap as quickly as possible. If managed closely, most can in fact be eliminated in one or potentially two months.

Note, as shown below, that this entire process (determination of the PBA, gap identification, and NOC’s to eliminate the gap) is completely automated in our Adventace SMS application.