5 Best Practices for Managing Your Pipeline
Editors Note: Guest Post by Matt Smith creator of The Predictable Revenue Bundle. The bundle offers anyone the tools and training of Silicon Valley’s best sales teams.
The sales funnel is at the core of everything we do in sales. Your sales reps are staring at their funnels all day, everyday. The sales pipeline/funnel is a visual representation of all your team’s open opportunities. The results of all the lead gen, calls, emails, meetings, and processes all come together to create the sales pipeline.
Mastering pipeline management is one of the most effective ways to increase revenue because it helps you find and improve areas of weakness. But what pipeline metrics are important? What can reps and managers due to improve their pipeline management skills?
1. Know Thy Numbers
Pipeline management is all about understanding the numbers and components of the sales funnel. If sales managers know the averages they are able to better predict and create predictable revenue. You must know:
- New leads created per month by source
- Conversion rate of leads to opportunities
- Conversion rate of opportunities to closed deals
- Average Won Deal Size
- Average Sales Cycle Length
- Win Rate
- Total # of Open Opportunities
The more accurate the data the better. Getting better data requires making sure reps are putting quality data in the CRM. Obviously sales managers need to make data quality a priority in order for it to occur. History, solid data, and previous trends will help you better predict future results.
Let’s look at an example using the Pipeline Velocity metric. This formula can be interpreted as dollars earned per day by the sales team. The key point with pipeline velocity is to focus on each input not the final output metric. The equation for Pipeline Velocity is:
Each of the 4 components of Pipeline Velocity is a lever that can be pulled to impact business results. Below is an example that illustrates how improving any 1 of the 4 metrics can lead to sales growth.
2. Execute Regular Pipeline Reviews
At Predictable Revenue, we constantly see that the best way to increase Pipeline Velocity is through increasing the number of qualified, open opportunities. This is partially due to the fact that the lead generation system, once well-defined, can be scaled rather easily. While increasing the win rate requires focusing on a variety of interrelated factors and activities that can be harder to systemize and improve.
Every Sales Manager conducts regular forecast meetings. Unfortunately, like most things in sales, forecast meetings only focus on opportunities that are expected to close by the following week. Although forecast meetings can be helpful, Pipeline Reviews are more beneficial. Pipeline Reviews focus on opportunities that are at the top and in the middle of the funnel. In Pipeline Reviews:
- Sales teams can review the quality of opportunities recently added to the funnel
- Sales managers can have a greater influence on the outcome because these are newer opportunities
- Sales reps and managers have a more comprehensive view of the entire pipeline
According to Aaron Ross author of Predictable Revenue, “in pipeline reviews or one-on-one coaching sessions, be merciless.” Grill your reps on the quality of their opps, the decision makers involved, and their pipeline management processes.
3. Focus On Small Improvements at Each Stage of The Funnel
As you may have heard :), sales is a numbers game, and teams using a Predictable Revenue system have high volumes of leads to take advantage of. This often causes reps to focus less on quality opportunities.
Limited focus on quality opportunities can be detrimental to their pipelines. Small improvements in pipeline management by funnel stage can lead to some promising results:
4. Keep Those Pipes Clean
If reps increase conversion rates by 5% in 2 macro funnel stages, there is a potential 50% increase in the number of won deals. Just like with a marketing funnel, a sales funnel must be optimized and measured. The evolution of the SaaS Sales Stack is making sales more like marketing each day. Know the apps, know the funnel metrics, and keep an eye on the pipeline conversion funnel.
Use Pipeline Reviews as an opportunity to eliminate weak sales opportunities. Salespeople are inherently optimistic which can cause them to waste time on TOFU opportunities because they truly believe these new opportunities are “definitely in our strike zone.”
The reality is a percentage of the opportunities in your team’s funnel are WAY outside of your strike zone. According to Aaron Ross, “every month, go in and clear your pipeline clutter to create space for new, high quality opportunities.”
Predictable Revenue ensures steady lead flow. Steady lead flow allows your salespeople to focus on the best qualified opps that are in line with your ideal customer profile and strike zone.
5. Create a Formalized Pipeline Management Operations Manual
Create case studies of specific opportunities from open to close. Give reps scripts and specific activities to do at each stage of the funnel. Sales Managers should ask themselves:
What does the buyer journey look like?
If an opp gets stuck in a specific stage what is the rep supposed to do? What has worked in the past?
What is the average conversion rate by each funnel stage?
All Sales Managers can do a better job of helping their salespeople manage their pipelines. Each sales team member plays a crucial role in building sales pipeline. Sales Development Reps are responsible for the number of opportunities, Account Executives are responsible for win rates, but it is up to the sales manager to manage the machine that is creating the pipeline. Don’t work in the system, work on the system to create a Predictable Revenue pipeline machine.