Sales pipeline/sales funnel management for most companies we have studied is an underperforming, underutilized tool. Most often the pipeline/funnel is intended to be a forecasting tool and a general barometer of company health. Despite this modest objective, forecasting for most organizations is a broken process and most sales pipelines are clogged with salesperson wishes, dreams and hopes. Meaning, there are too few real opportunities. Therefore, the forecast is almost always too far off to be trusted without some adjustment by sales leaders. Further, the health of the business, at least as far as the sales organization is concerned, is impossible to evaluate clearly.
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Sales pipeline management is a process that roots in three principles:
A sales pipeline that is singularly organized around seller activities fails to capture the most critical information both sellers and their managers need. For example, if pipeline stages are organized around meeting types (i.e. Discovery, Demonstration, Pricing, Contract Signature, etc.) and deals move from stage to stage based on sellers completing these tasks no one can possibly know how to forecast when and have only a slight indication if the deal will close. Sellers in these organizations are following a "sales process" that has nothing to do with consultative selling, being a decision coach or being able to employ the most critical sales skills that today’s sellers must have to maximize performance.
Aligning the sales pipeline process with how a buyer buys eliminates these difficulties. Specifically, if the sales team knows how to recognize that sellers go through recognizable stages when making a complex, B2B purchasing decision, and that each of these stages requires a different selling strategy they can be prepared to use in each encounter with a prospective decision-maker. Further, having this capability allows sellers to employ an array of best practices with comfort, confidence and alacrity.
How many times have sellers told themselves or their managers, "they like me….we had a great meeting"? Nothing destroys pipeline health as fast as wishes, dreams and hopes of sellers with "happy ears". This issue can be eliminated quickly if the sales organization is trained on using what we refer to as "the four questions". These four questions, that sellers should ask themselves before and after every sales interaction, not only align perfectly with the customer decision process described above, but they will ensure that sales pipelines remain focused on real opportunities. They form a template that allows sellers to design and implement opportunity-specific sales strategies.
The questions sound quite simple:
Note that a single word separates the way most sellers operate vs the discipline required for effective sales pipeline management: evidence. Without training, sellers naturally rely on an amalgam of emotion, gut feel, information, etc. By understanding what defines evidence in each of these questions, sellers can quickly achieve clarity, develop effective strategy, employ consultative selling skills and move opportunities through or out of their pipeline in the most productive way possible.
One point of caution. These questions must be answered in sequence. For complex sales this means that until sufficient evidence has been uncovered to warrant a firm yes to the first question, there is no point in considering the second. Until the second question has been satisfied, there is no point in considering the third, and so on. The reason sellers need to ask themselves these questions after each sales activity is because things can change. What constitutes solid evidence that an opportunity exists, for example, could change at some point during the sales journey, therefore sellers need to periodically validate previously confirmed evidence.
Research into more than 1000 companies’ sales pipelines/sales funnels and related KPI’s revealed more than 367 different metrics these companies have collectively employed to monitor funnel health. 367 different metrics!! Wow. Unfortunately, most of these have proven to be counterproductive.
The key to effective sales metrics is to use ratios of success over effort and to limit the number to no more than five or six. Just because something can be measured doesn’t mean it is necessary to do so.
The central issue is understanding that the only thing that a seller can control are their activities; specifically, the things they choose to do every day, week or month. Too many companies put too much emphasis on results. Did the seller meet quota? Is their product mix hitting the expected marks? Did the seller generate enough average margin? Etc. While these may be of interest, they provide little guidance for sellers which helps them improve.
By focusing on activities, managers can identify where a seller needs training, coaching and or generating interim outcomes that indicate they are effectively moving opportunities through the pipeline. Further, by associating the level of activity a seller is executing successfully in a ratio of how often the key activities are being conducted, a wealth of useful information emerges.
This effort takes a bit of analysis. Understanding what defines "success" before a sale is closed requires a seller who knows sales best practice. Generating these ratios can reveal a direct line-of-sight as to how well sales training is generating results. Properly implementing this approach will give sellers clarity as to what proper execution of best practice looks like.
It makes little difference how many stages any particular sales pipeline has. Generally, there needs to be at least four or five. But as discussed above, movement from stage to stage needs to rely on the decision gates the decision-makers have passed though.
As an example, focusing on Question 1; evidence of an opportunity, has the seller uncovered what the collective decision makers have determined they want to fix, accomplish or avoid. No deal should be moved to stage 2 until the seller has uncovered and verified what (at least several) of the decision makers have defined as what they want to address and have shared their answer to why now is the time to consider a solution.
For each of the four questions, similar information needs to be uncovered. Until the seller can satisfy the specifics of what constitutes evidence in each case the deal should not advance to the next sales pipeline stage.
Proper implementation of the concepts and tactics reviewed above reveals common mistakes that impede the effectiveness of the sales pipeline:
How many sales executives have confidence in the forecast that their company funnel generates? Funnel Clarity's research indicates that less than 11% of executives report that their sales forecast is accurate. As a result, they blame sellers for these inaccuracies. In truth, it is not their fault. It is the result of too little evidence in support of what matters when it comes to closing a sale or justifying that no further pursuit of an opportunity is warranted.
If the steps in constructing a sales pipeline are properly implemented and producing an accurate forecast should be effortless and virtually automatic. Research demonstrates that a properly constructed sales pipeline, supported by sellers who are clear on which best practices are appropriate at each stage, consistently generates a sales forecast that is within plus or minus 3% to 5% of actual results.
A properly constructed sales pipeline/sales funnel will function as not only a process for memorializing the deals being worked but can serve as a strategic asset for the sales team. It is worth the effort. Inaccurate sales forecasts are a symptom of an incorrectly developed sales pipeline. Research reveals that companies with a properly constructed funnel consistently have the highest close rate in their industry, the most productive funnel in their industry and the greatest degree of task clarity that allows sellers to always put their sales calories to their best and highest use. Ask yourself how valuable that could be. How would it change the performance of your company?
Tom Snyder is the founder of Funnel Clarity; a training and consulting company focused on humanizing sales. Snyder’s passion is helping companies achieve measurable sales performance improvement. Previously, Snyder spent 10 years with the sales training firm Huthwaite Inc, culminating in the role of CEO. He later founded Business Performance Partners, a sales and strategy consulting firm that evolved into Funnel Clarity. Snyder is a sought after international speaker and was named one of the Most Influential Sales Leaders. He has authored two McGraw Hill best sellers, “Escaping the Price Driven Sale” (2007) and “Selling in a New Market Space” (2010).
