Working with sales cycles of 20-120 days? There’s a fast way to spot risk in your sales pipeline and its likely impact on revenue.
To spot risk in your sales pipeline fast, you need to understand two simple metrics.
In Period Pipeline
Pipeline created within the closing month or quarter that is expected to close (or reach a conclusion) in that same period.
Out of Period Pipeline
Pipeline created prior to the current closing month or quarter that is expected to close within the current closing period.
What does this tell us?
This will vary from business to business, but the above can be a huge indicator of how your sales team manage their pipeline and get to their revenue number.
Understanding the trend here, and comparing it to your live situation, will help you spot the risk you are taking into the closing period.
Let’s start with proportion.
Dyson Cars Ltd wins 60% of its quarterly deals from opportunities that are created within the same quarter (in period). Naturally, 40% of the deals that they win come from opportunities they create prior to the quarter (out of period).
Now, let’s look at the different behaviours that surround in and out of period pipeline and how they could impact the likelihood of winning from each.
We tend to see something likes this:
- In period pipeline = 25% win rate
- Out of period pipeline = 17.5% win rate
This is significant. Keeping the right balance (60/40) or understanding how the volume of each we have booked for the closing period is now critical.
Often these numbers are indicative of pipeline quality and control. Out of period pipeline is more likely to carry deals where deadlines have been missed, or have gone on a little longer than we’d like.
Using the information
Here’s how to use this information to spot risk before it impacts your sales pipeline.
- If 40% of wins come from out of period pipeline, target is 100k revenue, and win rates are at 17.5%, then we know we need to have £228k of pipeline booked for the quarter before it even begins (£40k / 17.5 x 100).
- We then know that we need to create a further £240k of pipeline throughout the quarter to be closed in the same closing period (£60k / 25 x 100).
- Tracking the pace or run rate of both types of pipeline creation is then crucial. Are we creating pipeline fast enough for next quarter? And are we creating pipeline fast enough for the current quarter? A true balancing act.
- What does the data tell us about how we manage our pipeline? This will require closer inspection. However, let’s say 15% of our pipeline typically misses its planned close date and pushes to the next period where we know it has a much lower chance of winning. That’s a whole lot of reason to invest in desk-to-desk closing training.
I talk about this a lot. The above information at company level is a mere warning system, signalling our FDs and CEOs to buckle their belts for a bumpy ride. However, when we get granular with a system like this we can change behaviours. We can turn the ship back onto a steady course.
Of course, I’m really talking about salespeople here. Every salesperson should have the identical system set up for themselves. Visibility into how each salesperson affects the overall company story will afford you data-driven action points to direct their activities and behaviours, making the puzzle complete again.
Now we know how to spot risk in our sales pipeline. So without further ado, let’s get in, out and shake it all about.