We all focus on our revenue targets and we all obsess over our live pipeline, but what if we shift our focus to pipeline generation and pipeline composition instead?
In this short piece, I’ll share 5 key pipeline management considerations to bolster your chances of hitting target.
- Pipeline Value
- Opportunity Volume
- Pipeline Pace
First thing’s first, what value of pipeline do you need to create month in month out? Note, this is not how much pipeline you are carrying (think 5x), this is how much pipeline you need to create.
Firstly, take your win ratio (let’s say it’s 5:1), multiply that by your revenue target and hey presto, this is how much fresh pipeline you need to produce month in month out.
Next, and to ensure you de-risk, how many opportunities do you need to create? Simply, take your Average Order Value and divide your pipeline value target by it.
It’s crucial you are able to monitor both volume and value.
If value is on course, but volume is behind, this means you are carrying fewer, larger, and therefore, riskier deals. If this is the case, you best be helping your reps because you need those deals to come in – there is no cushion!
Often the most overlooked element of pipeline creation, composition is key to understanding the quality of your live pipeline.
As a starting point, look into two key areas of composition:
1. Average Deal Value Range
If you have the tools to do so, try and work out your deal value strike zone. This is the range of deal values across which you have win rates more or less in line with your average. For example, between £10k and £25k your win rate hovers in and around 20% but drops off either side.
Now, looking at new pipeline created, what proportion falls within this range? Ideally you’d be looking for 70%+, or again, we are carrying far riskier sales pipeline and you’re on the tightrope again – eek!
Needless to say, this will bolster your business development efforts and links nicely when creating your ideal customer profile, or ICP.
2. Average Sales Cycle Range
Very often, I see businesses completely forget about how long it takes them to make a sale. But your average sales cycle is crucial to understanding how much pipeline you need to create, by when, to hit your moving revenue targets in the future.
If your win rate is 20%, your average order value is £10k, your average sales cycle is 100 days, and July’s revenue target is £100k, then:
Gosh, you need to create £500k of pipeline in April to make sure you hit target in July!
Additionally, and as with Deal Value, it’s crucial to understand the range of sales cycles that fall within (or close to) your typical win rate. The 70%+ rule applies again here.
Pipeline generation needs to be consistent, repeatable, and predictable. Therefore, the pace at which we create it needs to be constant. If our Pipeline Generation target is £500k, then naturally we need to be at £125k by 6pm (4pm, let’s be honest), Friday, week one…
But if you fall behind, you can’t simply muster more by shouting “More pipeline please, everyone!” No, for this you need to reverse-engineer your pipeline creation funnel. In other words, what key events take place before an opportunity is created AND how many of these key events are required to create one opportunity?
This, you can influence. Keep the right volume of key events coming, and your pipeline pace will blister like Michael Johnson on a world record run.
The last and often forgotten consideration. All of the above needs to be engineered for EVERY salesperson.
Looking at the group picture is not enough, in fact, it’s lazy! Managing this with each salesperson is the only way it’ll work. They all sell differently, with varying comfort zones, conversion rates and nuances, unless you have an army of sales robots, and to be fair, the robots ARE coming!
This should be at the core of every 1-2-1 and should be recalculated every 3 months or so to account for changing skill levels and conversions.
Make sure your salespeople are generating enough (value and volume) of the right composition of pipeline with enough time to hit revenue targets — easy, right?