Sales Pipeline Management A Detailed Guide To Grow Your Revenue
As per a recent report by Harvard Business Review, companies with structured sales pipeline management process reported 28% higher revenue growth.
WHAT IS SALES PIPELINE MANAGEMENT?
Pipeline management in sales is a scientific way to capture, measure and analyze your sales opportunities and their corresponding sales stages. It allows you to make data-driven decisions rather than just intuition and gut. It is also commonly referred to as Funnel Management in sales. It is an integral part of any sales management process.
WHY IS SALES PIPELINE MANAGEMENT IMPERATIVE FOR STRATEGIC DECISIONS?
For your business to thrive, you will need to make many strategic decisions on a daily basis.
Decision making in sales is most effective when you have answers to questions like –
How to accurately predict and forecast your business?
What customer segments and industries offer the most opportunities for your offerings?
Which territories or regions have the highest potential?
How many opportunity conversions are required for you to meet your business goals?
How many leads are getting converted into deal closures – also referred to as conversion-rate or win-rate?
What is the average deal size and sales cycles you are witnessing across segments and territories?
How many sales activities are required to close a deal?
Are you observing any specific customer-buying trends or patterns?
How do you measure aspects like market coverage and penetration?
Which sales channel is most effective for specific offerings and segments?
What resources and training needs are required for your team?
Efficient pipeline management will allow you to answer these difficult questions and make those critical decisions strategic to your business performance to stay ahead of your competition.
TOP 8 METRICS THAT YOU SHOULD MEASURE IN SALES PIPELINE
Sales Pipeline management should be effectively used to track and measure data points across following aspects of your business –
Number of opportunities pursued by your sales teams
As in any funnel, your inflow of opportunities at the top of the funnel has a direct bearing on the outflow. This inflow at top of the funnel is also referred to as Leads.
Every organization should have a strategy and process to maximize Leads through a lead generation or demand generation process.
One of the most fundamental metrics you need to measure is the number of opportunities that your team is pursuing.
Once a lead is captured in your system, it is the responsibility of your sales team to qualify, mature and convert the opportunity into closure. This is referred to as the conversion rate or win-rate. A higher conversion rate implies more opportunity getting closed by your team.
This metric also gives you a good idea on the quality of leads that are assigned to your sales team.
Deal value of your opportunities
While your sales reps are pursuing many opportunities, it is a good idea to keep a watch on the average deal value across different customer types, segments, period and geographies.
Measuring this would help you identify specific trends to take appropriate decisions on prioritization. You will also be in a better position to replicate what is working and avoid what is not working for your teams.
Deal movement across pipeline stages
This is possibly the most critical aspect of pipeline management. This defines your team’s ability to progress the deals through the funnel towards closure.
To measure this effectively, you must define the different stages of the pipeline and communicate the same with your teams. I am covering below this topic in detail to arrive at the right pipeline stages for your organization.
Sales cycles or closure timelines
Sales cycle is the number of days it takes your team to convert (or win) a sales opportunity. It is also referred to as deal efficiency as shorter sales cycles mean better results in a shorter time.
Sales cycle could vary depending on your sales reps, solution, customer segment, deal value, customer relationship etc. Measuring this metric across these parameters can provide you valuable insights about your business.
There are many ways to achieve shorter sales cycles. These include better deal qualification, deeper client engagement, crafting compelling value propositions, providing incentives to customers for faster closure, etc
Sales velocity is the most powerful metric that business leaders should track to accurately measure business traction. It is numerically calculated based on following four variables or business levers:
Length of sales cycle in days (L).
You should measure this metric consistently every quarter. That will help you objectively analyze all the business levers to consistently improve sales velocity. It will also provide insights for you to stay ahead of your competition.
Rolling Four-Quarters Pipeline
Historical data about your deal size, conversion-rate, sales cycles etc. will give you an insight into the ideal pipeline that you should strive for. This is often referred to as a 3X or 4X pipeline depending on your industry or past trends. For e.g., your probability of achieving a target of 100 is very high only when you have a minimum pipeline of 300 (3X).
This measurement is effective only when you measure it quarter-on-quarter, ideally for consecutive four quarters including your current quarter (CQ). This is what is referred to as the “Rolling four-quarters pipeline” – CQ, CQ+1, CQ+2 and CQ+3.
When measured, this metric can help you answer following questions –
How likely are you to achieve your immediate short-term targets?
Do you have sufficient pipeline to improve your chances of achieving your targets in the upcoming quarters?
Do I have adequate data points to substantiate my forecasts and projections?
Is the team constantly putting in efforts to build and nurture pipeline?
Which teams or segments or geographies are lagging behind?
What support can you provide to your teams to improve the pipeline?
Can you envision specific marketing campaigns or promotions to improve your pipeline?
Weighted pipeline is calculated by considering the likelihood or probability of an opportunity conversion.
Weighted Pipeline is calculated as the weighted average of all your opportunities or deals (opportunity value x probability of deal closure)
The below illustration explains the difference between sales pipelines and weighted pipeline. Total sale pipeline for 10 deals is reflecting as 1300K in this case. However, the weighted pipeline after considering the individual deal probability is amounting to only 800K. This value is more realistic than a simple summation of the total sales funnel.
While arriving at an accurate sales forecast is very tricky in sales, a weighted pipeline is one of the ways to give you a realistic sales forecast. It is a good idea to compare this with the verbal forecast that you get from your sales team to come to an even better assessment.
WHAT ARE THE DIFFERENT STAGES IN A SALES PIPELINE?
Stages in the sales pipeline are a set of step-by-step processes to be followed to win any opportunity or deal.
One of the most critical aspects to succeed in sales is to make sure that your sales process is aligned to the customer’s buying process. So you should consider the customer’s buying process in your industry while arriving at the right stages for your funnel. This forms the basis of a strong Sales Management Framework.
I like to refer to the buying cycle framework recommended by renowned sales consultants and authors – Neil Rackham and Mike Bosworth. As per this, a typical buying process of any customer involves 4 stages – (a) their identification of a latent need (b) analysis of their needs (c) their evaluation of possible solutions (d) their commitment to a specific solution to address the need
Based on the above, I recommend the following stages in a sales pipeline –
While you may consider adding additional stages to this, my personal view is to keep it very objective and easy to measure. These sales stages are well aligned with the customer’s buying process and it also considers your internal milestones.
Lead is also referred to as “cold prospect”. This stage is more of a placeholder to capture basic details of a prospect like their name, industry, contact details etc. It is an effective way to create a good target database. This database will be used by your sales and marketing teams for their outreach plans and campaigns.
At this stage, you may not have much details about the customer’s needs and priorities. However, as a best practice, it is a good idea to capture as many criteria of a good target customer. That way, you make sure that your campaigns and outreach plan is focused and the probability of conversion is maximized with minimum efforts.
You may want to categorize this further into –
As the name suggests, Warm Leads are slightly more mature than the Cold ones. In this case, companies expect the lead generation or demand generation team to further qualify the Lead before assigning it to the concerned sales rep.
Once a Lead is identified and assigned to the sales rep, he or she is expected to qualify the Lead. The most popular framework used for lead qualification is the BANT leads management framework –
Budget (B): has the customer allocated a budget towards the initiative or project?
Authority (A): who in the company has the authority to evaluate and make the decision?
Need (N): what is the extent of need definition and clarity?
Timeline (T): is the customer having a timeline to decide and implement the solution?
This is a very important part of pipeline management where the sales reps are expected to either qualify-in or qualify-out an opportunity.
A good rigorous methodology for lead qualification has the following benefits –
team will save a lot of time and resources when they go after only the Real opportunities as against a wild-goose chase
focus on the right deals will improve your team’s chances of winning more deals and meeting their business goals consistently
You can expect an increase in average deal-size when the team engages deeper on opportunities
Higher Intensity and focus on engagements could reduce your average sales cycle
You will witness improvement in your team’s forecasting accuracy
In the Evaluation stage, your team is engaged with the customer on a regular basis helping the customer evaluate options to address their requirements.
Here are some of the activities usually part of this stage –
Interviews with customer stakeholders for need gathering and requirement analysis
Discussion on technical specifications of your solution
Assessment of problem-solution fitment
Presentation of your offering to all customer stakeholders
Solution demonstration or proof-of-concept
Submission and discussion of your techno-commercial proposal
Providing customer testimonials, references and other proof-points to customer
Once the opportunity matures, the next logical step is the Negotiation stage. This will constitute a detailed discussion with your customer on multiple parameters across –
Solution specifications and fitment
Overall scope-of-work, roles & responsibilities of teams involved etc.
Payment terms and schedule
Project delivery schedule and milestones
Contracting and legal terms & conditions
During the negotiation stage, the objective of your team should be to closely engage with the customer to arrive at a win-win proposition. This is important for a successful long-term mutually rewarding partnership.
By this stage, your team will have a good assessment of your chances to win the opportunity. By now, the team should have addressed all the questions and concerns raised by the customer. They would also have a good view into the probability of deal closure.
If the probability of opportunity closure is very high, then the team could Commit the deal to the management. This also gets referred to as Sales Forecast.
Sales Forecasting is one of the most critical aspects of opportunity management. It helps organizations to predict their order flows and make necessary plans to fulfill the same. This could include planning across resources, procurement, production, cash-flow etc.
Closure is the last stage of the funnel. Every opportunity at the closure stage needs to get categorized as one of these –
Won: deal signed by customer and ready for booking
Lost: deal lost to competition
Discontinued: customer postponed the decision indefinitely or opportunity does not exist anymore
8 ESSENTIAL BEST PRACTICES IN SALES PIPELINE MANAGEMENT
Let us now look at some of the best practices for effective pipeline management in sales.
As discussed above, it is essential for you to define the right sales stages specific to your industry. You should then communicate the same to your sales teams. They should understand the implication and meaning of each of the stages so that they could accurately categorize their opportunities.
Consistent lead generation activities
Lead generation is an important aspect of pipeline management. It is critical for organizations to undertake many initiatives to maximize opportunities at the top of the funnel. Teams need to make consistent efforts quarter-on-quarter to make sure the pipeline does not go dry and has a constant flow of deals for a strong pipeline.
Most organizations, assign this responsibility to the marketing team. They are the ones who plan and execute demand generation activities across multiple channels.
Lead assignment and management
Having a structured process of lead assignment and management goes a long way.
It is essential to keep a close watch on this process to make sure the leads are acted upon within stipulated timelines. If not managed well, there is a possibility of leads slipping out and falling between the cracks weakening the overall pipeline.
Stringent Deal Qualification
It is prudent to have two levels of deal qualification.
An ideal scenario would be to get the marketing team to qualify the leads using proven frameworks like BANT (Budget, Authority, Need, Timeframe) etc. before assigning the same to sales teams. These are often referred to as Marketing-Qualified-Leads (MQL).
Once the leads get assigned, it is the responsibility of the sales team to qualify further and nurture the opportunity towards closure. Health of your pipeline heavily depends on the quality of deal qualification by the sales team. This is referred to as Sales-Qualified-Leads (SQL).
Deal qualification by the sales team is normally achieved by thorough understanding of customer’s needs, urgency, decision criteria and business drivers.
An important aspect of pipeline management is your team’s ability to nurture and quickly progress the deals towards closure. This would vary according to the deal size and solution complexity.
It is always advisable to follow a structured process. The steps involved could range from – working through multiple stakeholders, detailed impact analysis, executing activities like presentations and demos, handling objections, sharing credentials to win client’s confidence, getting access to decision makers, analyzing compelling events etc.
Measure and track metrics
Peter Drucker had said that “you can’t manage what you can’t measure”. If you need to improve your pipeline metrics, you have to put in place a system to measure and track them regularly. This is why it helps to invest in to CRM software that makes this process very easy and efficient.
Discipline and hygiene in capturing data
This is where the concept of garbage-in-garbage-out (GIGO) becomes relevant. If you need to get relevant insights and intelligence, it is essential that your team captures and updates data periodically.
You will need to put in place a system that helps you to drive this discipline and hygiene among your teams. Easy-to-use intuitive mobile CRM software can play a significant role to achieve this objective. The right CRM tool can help you drive usage among your reps; that directly impacts the quality of information captured by them.
Your team’s endeavor should be to maintain up-to-date information relevant for tracking progress.
It is recommended that periodic weekly meetings are scheduled between sales and marketing teams to review pipeline progress. It helps to encourage collaboration and making sure the teams are on the same page always. This is often a neglected practice and can have immense impact on your business performance.
These meetings should be used as an opportunity to understand what works well and what the areas of improvement are. You could also review the status of leads, rate of qualification, deal movement etc. It is a good idea to also discuss your competitor activities and other market trends.
Moreover, you should also periodically analyze the status of dormant leads and inactive opportunities. Periodic updation and data cleanup will help you with a single-version-of-truth at all times.
7 MOST IMPORTANT BENEFITS OF PIPELINE MANAGEMENT
Effective pipeline management in sales offers a plethora of business benefits. Let us analyze some of them.
Improve Business Forecasting
Sales pipeline measurement brings in a lot of predictability in your business. If managed and measured well, you will have good visibility into the opportunities pursued by your team and their chances to win them. This will give you the ability to consistently forecast your business better.
Measure Sales Effectiveness
Funnel management is a great way to measure the effectiveness of your sales teams. You will have a good view of your team’s ability to create new opportunities, engage with customers, and convert deals.
You can also measure efficiency parameters and take the necessary steps to improve their productivity and effectiveness.
It is important for your teams to prioritize their opportunities to get the maximum bang for the buck. With limited resources and time at our disposal, it is vital to pick your battles carefully.
Visibility into your sales pipelines would allow you to quickly assess and prioritize the top opportunities in-terms of opportunity value, stage of the deal, your ability to win, sales cycle and possible steps to deal closure.
If you fail to prioritize, the biggest risk you carry is to spread yourself too thin and end up with sub-optimal results.
Cross-Sell and Up-Sell Opportunities
When you measure and analyze your pipeline across solutions, it will enable you to identify and pursue cross-sell and up-sell opportunities. This in turn will help you to increase your wallet share and solution penetration with each of your customers.
A good assessment of your sales funnel would enable you to make intelligent decisions with respect to resource optimization and allocation.
This includes factors like the type of resources, their skill levels, amount of time you want them to invest, depth of engagement and activities etc.
Each of these factors has a direct bearing on your cost of sales and sales efficiency.
Planning for Effective Decisions
A consolidated and detailed view into your sales pipeline will enable you to effectively plan your business ahead and make strategic decisions. As popularly said, failing to plan is planning to fail!
If analyzed well, you can make effective plans and make decisions on –
Number of accounts assigned to each team member
Territory definition and assignment
Customer segmentation – large, medium, small etc.
Deal segmentation – value, volume, transactional etc.
Technical and pre-sales resource allocation
Investment into demand generation activities
Marketing and promotional related activities
Training needs for your team
and many more such crucial aspects
Sales Hygiene & Compliance
Last but not the least, visibility into your pipeline health gives you a view into the hygiene and discipline followed by your teams to build a healthy pipeline. After all, effective execution and rigor by your teams play a significant role for business success.
ROLE OF CRM FOR EFFECTIVE SALES PIPELINE MANAGEMENT
Selecting the right CRM plays a vital role in effective pipeline management. The tool should allow your teams to easily create and update opportunities across –
Deal stages configured as per your industry-specific requirement
Product or solution selection
Once this basic information is captured in your CRM, the system should help you track the metrics that we discussed.
The biggest challenge that you may face is that your teams may not capture and update these opportunity level details on a regular basis. That happens when they find the CRM tool very cumbersome and difficult to use; and they do not find personal value in using them. As per an analyst research, only 30% of actual information gets captured and updated in CRM.
To avoid this issue, business leaders should select a CRM software that is designed with your end-users in mind. In our experience, we have witnessed that the usage is highest when you select a CRM with a mobile-first strategy.
Effective pipeline management goes a long way in driving successful predictable business. While sales is most often referred to as an art, pipeline management brings in the scientific aspect. The combination of this is what would help you achieve some method and discipline to the madness in sales management!
If measured, tracked and analyzed well, the seven metrics we discussed, specifically sales velocity, can provide significant competitive advantage for you to outperform competition.
We discussed that intelligent pipeline management offers a plethora of opportunities – both tactical and strategic. However, this is most efficient when you empower your sales reps with the right CRM tool that they will find easy to use and add value to their work. Our recommendation is to select a platform like HappSales; which is possibly the most comprehensive and affordable B2B CRM for Key Account Management that can help you drive frugal sales transformation. It also offers a free mobile CRM app with personal-assistant designed to help your teams easily execute their plans and make them effective.
You and your teams can then manage, measure and track the most critical metrics that matter for your business with ease.
Original Source: Sales Pipeline Management – A Detailed Guide To Grow Your Revenue
