Introduction:

Previously on the Funnel, we discussed managing sales metrics and what sales metrics you should be tracking. This is a continuation of that discussion where we are going to ask the big question in sales metrics: how healthy is your sales teams pipeline? Today, we will discuss gauging your sales teams pipeline health, pipeline velocity, and the beauty of pipeline velocity. As always if you have any questions please schedule a free 30-minute consultation and I’ll do my best to help in any way I can.

 

What we’re going to cover:

  • Gauge my health
  • Pipeline Velocity
  • The beauty of pipeline velocity

 

 

Gauge my health

 

What’s working? What’s not working?

“You want to know what’s working with your pipeline management. Do I have enough deals individually to drive my number? Do I have enough deals collectively as a team to drive my number?”

 

Get ahead of the problem

“Really what you want to do with pipeline management is get ahead of it before it becomes an issue. Make sure it is strong enough to handle what can be the ups and downs of business, what can be the ups and downs of the individuals.”

 

Predictable revenue

“If you recognize the problem before it becomes a problem, it makes my revenue predictable and that’s what you’re after here, predictable revenue. In other words, predicting the outcomes when you get to your forecast, knowing what business you have and knowing behind you in the pipeline is plenty to keep you going next month, next quarter, whatever it is. It’s all about the health and well-being of your pipeline.”

 

Pipeline Velocity

 

What is it?

“Pipeline velocity is a way for you to determine where you are at any given time in your sales team pipeline. It’s a nice little way of mastering the pipeline and understanding each individual piece of the pipeline. So, you can predict the kind of revenue your company, your sales rep, or your sales team are going to produce.

Now the inaccurate data that’s in there needs to be taken out, you need good quality data. So, you have to make that a priority first, because the velocity is going to tell you about where you are in a deal.”

 

How fast?

“How many qualified opportunities do I have and how fast can I close those opportunities? Pipeline velocity looks at qualified opportunities, your win rate,  your average deal size, and how long it takes to close a deal.

Basically, you’re taking the number of opportunities, you’re multiplying it by the win rate, you’re multiplying that by the average deal size and then you’re dividing it by the sales cycle.”

 

Qualified Opportunities, Win Rate, Deal Size, Length of sales cycle

“Those are the four pieces of the pipeline velocity and those are what are going to give you great insight into where you are in the process.”

“You’re looking for the output here, you’re looking at what it’s going to do for you, and you’re looking at all four of these components because that’s going to tell you the speed at which your deals are going to come through. That’s going to tell you the health and well being of your pipeline.”

 

The data needs to be right.

“It cannot be stressed enough that the data needs to be right. The qualified opportunities have to be the maximum number of opportunities in your pipeline that are going to close within the time frame that you’re measuring, it needs to be right.”

 

Where to start.

“I would start with the sales team and then work with individuals. If you know your win rate and you know how many deals are in there, then you know what it’s going to take to be successful. So, now you’re looking at win rate and you’re saying okay I’ve got the win rate, I’ve got the qualified opportunities, I know the average deal size of the closed and won because I’ve done the numbers on that, now how long does it take to close?”

“I want to know are they pushing stuff through the pipeline? Is it slowing down? Are they converting in the stages? Run the numbers on the sales pipeline velocity,  even if you’re not sure that the data is 100% correct, and see where you end up.”
 

The beauty of pipeline velocity

 

It’s fixable. 

“If you have regular pipeline meetings and you’re measuring the velocity, it can be overwhelming. Some people look at that and say ‘the numbers don’t bear out what we need here, oh no!’.And maybe you’re right, maybe it doesn’t! But here’s the cool part about pipeline velocity: It’s fixable.”
 

Fixing one part can improve the whole

“Not only is it fixable but all you have to do is fix one of the four components and you can improve performance.
 

 Example:

“So, let’s say your average deal size is kind of small and your win rate is not as good and the sales cycles, and you just don’t have enough open opportunities. So, what if you put more opportunities in the pipeline? Even if you don’t fix the other parts you will still have instant performance improvement.”

 

Great, what does that mean?

“You don’t have to have this big change in everything you do. You only have to change one thing at a time. It means those four components can be addressed individually. This is really about looking at the pipeline from a higher level and dealing with it one on one and in the overall. If I can increase that rate and I can keep the pipeline nice, clean, and tight, I can drive business.”

 

The Formula

“Opportunities x win rate x average deal size ÷ average sale cycles.”
 

Keep Filling The Funnel

We would love to hear from you. Let us know what you think about this episode. Please feel free to reach out to us if there is a specific sales topic you would like me to cover.  You can find me on Twitter at @Sheajohnr or email me at jshea@alignment-group.com.  And if you get a chance, please feel free to review us on iTunes.

 

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