Sales Pipeline Management

In a previous post (Sales Management Software Considerations), I discussed the basics of sales management software.  As noted, there are many “must-have” benefits to such a system, not the least of which is something called pipeline management, or sales forecasting.

Pre-CRM, sales forecasting was somewhat of an impossible exercise. At least, that’s the way most sales managers and business owners thought of it.  (Most believed, and some still do, that it involved a combination of tarot card reading, dart throwing, and maybe even using a Ouija board). Today, with tools such as CRMs and SFAs, it doesn’t need to be that way.

Sales is a process.  Like any process, when you pay attention, track metrics and anticipate the data, you can manage your sales pipeline and forecast with relatively good accuracy.  “Relatively good accuracy” is a somewhat subjective phrase, but in my experience, if you use the tools correctly, pay attention, and properly manage the optimism of your sales team, you should be within 5% of your annual sales forecast.  (If you miss, you typically miss on the conservative side and within +5% of your annual forecast.)

Let’s take a deeper look at what I mean by “use the tools correctly,” “pay attention,” and “properly manage the optimism of your sales team.”

Use the tools correctly

Pipeline management reporting is only as accurate as the data your sales team inputs: bad data in, bad data out.  Most forecasts are inaccurate because of bad data, which is then input and discussed too early in the sales process.  Personally, while I have my sales teams input each sales activity into the CRM immediately from the first contact, I do not require that they enter revenue numbers until we formally quote the prospect.  I ask them to input each sales activity at first contact because I want to track my ratios: dials to contacts to appointments to first meeting to discovery (or analysis) to presentation to quote to close.

All of these are important for training purposes. However, it isn’t until we generate the quote that specific dollars are attributed to that opportunity.  Guessing or averaging earlier in the sales process dilutes the ratios and the forecasting.

Pay attention

I quickly ran through a typical sales process above, and then briefly mentioned why I track all those ratios.  Let’s dig into this in a bit more detail, because this is what I mean by “pay attention.”  Today’s pipeline management systems are terrific in their use of a very popular tool called a dashboard.  This dashboard gives you what you determine to be the most critical data in summary, generally in a graphical view.  While this is a wonderful tool, the devil (as they say) is in the details.  Each one of your steps of the sales process needs to be in your pipeline management tool.

As a salesperson moves from step to step within the sales process, you will naturally have opportunities “leak” from the pipeline.  The leak informs you about what you need to fix with your sales rep.  Is it an objection that can’t be overcome?  Is there a gap in the product knowledge?  Is he not meeting with the right decision makers, uncovering the decision making process or determining the buying criteria?  Are presentation skills weak?  Does the company have a competitive, pricing, market or product problem that needs to be resolved?  It is questions like these (and many more) that you need to ask yourself every day – and you cannot answer these questions without digging deep into the details of the pipeline analytics.

Manage the optimism of your sales team

Salespeople (good salespeople) by their very nature are eternal optimists.  The glass is always half full and everybody they meet with is going to love (and buy from) them.  They have to be this way.  You want them to be this way.  They have to believe that each time someone hangs up on them or slams a door in their face and escorts them off the premises, they are just one more phone call or one door away from making a sale.  If they don’t think this way, they shouldn’t be in sales!

However, this tends to cause a problem with pipeline management.  You are not going to have a 100% close ratio.  Even with the science of using the tool correctly and paying attention, there’s an art that owners and managers need to apply to the sales process.  Over time, if you track the data correctly, you can determine a sales rep’s close ratio and use that ratio to back into the activity numbers to arrive at a relatively accurate (+/- 5%) forecast accuracy.  Sometimes, it comes down to using some SWAG (“scientific wild…and guess”).   But you still should be within 5%. 🙂

In conclusion, pipeline management is about managing the optimism of your sales team, paying attention to the data and using the tool correctly.  No matter how much money you spend on a tool to manage your pipeline, and regardless of how cool your dashboard graphics are, you must use it correctly and react to it appropriately, or you may as well go back to your Ouija Board.

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