5 Sales Pipeline Strategies for a Record Breaking 2014
Many of our customers are reporting a mixed sales story in the first 6 months of 2014. February was outstanding, May was down, and there was substantial fluctuation in the other months.
In this article, CEO of Natural Training Matt Drought, with a little help from his friends, explores 5 ways to ensure that you have a healthy 2014 sales pipeline that will finish the year off in record-breaking fashion. A must read for any organisation looking to come home strong in 2014.
Note: We are formatting this article into a Special Report, with a much bigger deep-dive into the world of Pipeline. To pre-register to receive this Report for free, please send an email email@example.com requesting to be put on the list.
Firstly, let’s define sales pipeline so we are all talking about the same thing:
Pipeline is a dashboard that predicts all the unclosed sales (likely leads and opportunities) that typically come in outside the current reporting period. So, if you operate on a monthly reporting period, pipeline shows the accounts that are likely to feed into this period beyond one month. In this example, Pipeline might therefore be 31+ plus days. Typically for deals inside the current reporting period, the term used is “Forecast”.
So, you might have a Forecast for August of £6m, a Forecast for Q3 of £18m, and a Total Pipeline for 2014 of £32m.
Pipeline Management describes the sales person and manager’s ability to ensure that there is an appropriate mix of opportunity coming through the pipeline to feed accurate forecasting reports and data. This, in theory anyway, takes out the large fluctuations in sales performance at your company, delivering more consistent revenue generation.
Now we can move on to some principles that will feed pipeline success…
The principles of pipeline success
Paying close attention to the following sales pipeline principles will help ensure that you have a strong finish to 2014:
- Pipeline is an instrument, not the hero
- Rocket to the moon theory (AKA Pipeline Velocity)
- Power is in the truth (AKA The Real Deal)
- Foster a culture of help (AKA Coaching Culture)
- Know your pipe universe
Pipeline is an instrument, not the hero
Sales pipeline is an instrument to help you sell, but shouldn’t dominate your sales operation so as to cause panic. We find that the emphasis Sales Managers place on pipeline varies greatly, from industry to industry, and company to company. Pipeline therefore has a mixed reputation, depending on where you work, and the emphasis your culture demands of it.
In some organisations we consult to, pipeline is akin to an austere step father – disciplined and foreboding. In others, it’s a familiar cousin, turning up at the occasional family wedding with a nod and a wink but then disappearing until the next special event.
Within healthy sales teams, revenue (closing!) is always King, and pipeline is best regarded as a dashboard of likely success. It is a tool, an instrument, that used well will give everyone more certainty, confidence and direction. If used poorly however, it can zap the life out of every meeting. After all, being hit over the head with pipe hurts!
The question really is: What is your culture as it relates to pipeline? It might be time to redefine how you are using it. To get to that point, it may be worth surveying everyone in the team, and any other stakeholders who touch it, to ask them how you can be using pipe more effectively. What suits one organization will be different for another. The point is – make pipeline work for you and your culture, rather than jar against it.
We use this word “culture” for a reason. The culture you have, or strive to have, will define the type of psychological atmosphere that your pipeline creates. How do you want people to regard pipe? With respect? With fear? With nonchalance? Pick your pipeline culture, and then create the mood. Rather than letting pipeline “happen to you”, use it to your cultural, and commercial, advantage.
2. Rocket to the Moon Theory (AKA Pipeline Velocity)
When Nasa launches a rocket to the moon, the Engineers and Scientists don’t set the coordinates, launch the rocket, and pop off to lunch for a few hours. Instead, they monitor the rocket carefully, making tiny adjustments according to environmental dynamics, such as atmospheric pressure changes that can throw the rocket off course by 3mm. As we know, 3mm close to earth can, without adjustment, turn into 3000 metres when compounded over time. A key lever for space rockets is velocity – defined as acceleration over time.
Pipeline velocity is a bit the same. You have a revenue goal, which is the equivalent of landing on the moon. Along the way, you have to keep on changing the coordinates as sales dynamics throw you off course. In this way, pipeline isn’t a spreadsheet that can be glanced at from time to time. Pipe is alive – it is a living, breathing organism that reflects the hundreds of different movements, internal and external, of your sales team. Movements that can bring your organisation closer to the moon landing, or that can thrown the rocket off course.
Velocity is the cycle time of the sale from initial lead to closing – sometimes we call that contact to contract. Complete that cycle faster, and you free up time to prospect or close other deals. Double the velocity of each sale – and you can sell twice as much.
This sounds simple in theory, but it’s not – otherwise everyone, including you, would be selling at maximum efficiency.
The reason why it’s not easy is because:
- You might not have the right visibility of your “velocity levers” (see sample below), and
- You might not have the know-how, belief or authority to impact each lever.
Here is how Pipeline Velocity works, as it relates to Opportunities (OPP), Average Order Value (AOV), Frequency of Win (FOW), and Sales Duration (SD).
Average sales per month
100 (OPPS) X 1000 (AOV) X 20% (FOW) = (£)20,000
10 weeks (SD)
= Sales Velocity Number (2,000)
Now, add 10% to each of the numbers above the line, and take 10% off the bottom of the line
110 (OPPS) X 1100 (AOV) X 22% (FOW)
9 weeks (SD)
= 2,957 Sales Velocity Number
The point is: Small increments make big changes (tiny adjustments get the rocket to the moon). Just by adjusting each lever by 10%, we are achieving close to a 50% improvement in our sales velocity number.
Think of the opposite. Quite often our Managers demand of us, and we demand of ourselves, major changes in our sales results. “Everyone – we are 35% down quarter on quarter – we need to lift – C’MON LADS!!!”. However 35% is MASSIVE – it is hard to imagine working 10% harder let alone a third harder.
Smarter Managers understand the magical effect of small changes, within Pipeline Velocity. They realise that asking for 5% or 10% increments in effort is much more achievable from a team (imagine if a Football Manager asked for 30% more effort from exhausted players post-match!), and will result in the type of revenue generation and results that you are after.
The multiplier effect in the velocity chain is truly remarkable.
3. The Power is in the Truth (AKA The Real Deal)
A culture of truthful and open communication is essential with organisations using pipeline as a useful sales tool. The opposite of this is an organisation with unclear policy on pipe, which can result in a pipeline that doesn’t actually represent reality. “Real deals” are lacking, and hopeful deals, without real substance, may abound. There are a few different reasons for this:
- If sales people don’t have a clear definition of what should be in their pipeline, then everything will be thrown in there (see criteria examples further down in this section).
- If there is a culture of boasting about massive pipeline, then the tendency will be for sales people to put in accounts that shouldn’t qualify, keep them in for longer, and excessively justify why they should be in there.
- If pipeline is a “box ticking exercise”, rather than a sensible, truthful approach. Box ticking has been encouraged by some modern Customer Relationship Management systems. In some systems, sales people must be seen to be moving deals along, so will therefore be more encouraged to show they are, particularly if there is a public forum that rewards momentum rather than strategy.
The risk of a pipeline that lacks reality is a condition known as “Pipeline Bloat”. This term describes a pipe that is full of moribund or dead opportunities. The only person who really believes the deal is real is not the client, but the sales person.
Bloated pipelines of course serve no one, least of all the sales person who has to face the embarrassment of mentioning the same client every week for a quarter. If you recognise that this is a challenge for you, then it’s time to establish an environment of professional openness – to confront the truth, the client, and therefore the reality of the pipeline.
There are a few ways to achieve this:
For Leaders and Managers:
– Encourage sales people to come to you for help. Then, lead one-to-one “safe” (non confrontational) sessions where you get to the heart of real pipeline that generates the forecasting that helps the business.
– Remember – this isn’t a finger-pointing exercise, but an environment of collaboration, coaching and help. The more helpful support you provide, the more realistic your pipeline, the more accurate your forecasting, the better you are able to iron out the inconsistencies in your year.
– Ask the questions you are most scared of asking. The truth might not be what you want to hear, but it’s what you need to hear, because you must value your time, your reputation, and your ability to generate sales. See further down this section for an example of a question to ask to move clients out of your pipeline.
– Talk to strangers. While our Mums warned us against talking to strangers, it’s actually a habit that will reward you time after time in sales. One of the greatest ways to inject life into your pipeline is to resolve to talk to as many strangers as you can manage each month. Talk to 100 strangers every week, and there’s a superb chance that you will never have to worry about the top of your pipeline again.
Supercharge your Pipe with entry-point criteria
You can ensure that whoever is in your Pipeline has a better chance of closing if you put in place some agreed criteria that qualifies them to be a part of your future deal flow. Criteria such as:
- BANT: You have visibility of Budget, Authority (Are you talking to the right level of contact?), Need (Why training? Why Natural Training? Why now?), Timeframe.
- Likely to close in the next X days (90 days is a common measure)
- Customer has a fully-costed proposal in front of them
- Customer knows your value proposition, and/or your point of difference
- Customer has a genuine need
- Customer is excited
- Customer can articulate your proposition in 30 seconds to anyone who asks
- Customer is in X stage of buying cycle (proposal stage, review stage, shortlist stage)
- There is more than 1 contact known to you at the customer
- The customer has called or talked to one of our referral sites
- The customer has trialed our product successfully
- You have been to their premises and presented at least once
- We are known to be on a shortlist of 3 or less,
- And so forth
If manager and sales person agree on the mix of criteria above, and it really ought to be agreed and formulated together, then there is a much greater chance of genuine pipe. Perhaps there’s an agreement on 6 criteria, and 4 out of 6 criteria is good enough, with 2 “non-negotiables”. The next part of this is for the Manager to calmly help remove the accounts that keep appearing in pipeline without movement forwards, or backwards. Emma Seaman, Managing Director of Firebrand UK, calls these accounts “dead birds”. She actively encourages her sales people to put direct questions to the client to ensure that they don’t hang around. One of her questions is: “I haven’t heard from you, so I take it you’re not really interested in this anymore?”
The final word on truthful pipeline is that doesn’t turn into a box ticking exercise. A sales person might be very adept at promoting their large pipeline, but never actually close any deals, which is of course less favourable than a sales person who is poor at managing pipeline (and public perceptions) but brilliant at closing deals. Turning prospects into new business revenue is of course the aim, so we believe this always must be celebrated first and foremost.
Regardless of how you culturally want to use pipe, the secret to success is of course The Truth. Both managers and sales teams need to buy into the idea that if pipeline is going to be used at all, then the numbers might as well be real.
4. Foster a culture of Help (aka Coaching Culture)
Pipe shouldn’t be the centre of the universe, as we described in point 1. What should be the centre is the relationship between sales person and manager. If the sales person wants and receives great help and coaching around dealflow and strategy, then pipe will be functioning healthily as a wonderful byproduct of the relationship between seller and manager.
Emma Seaman, Managing Director from Firebrand Training agrees: “Some salespeople, especially when they are starting off, have a point to prove to themselves and others, which is effectively ‘I can do this by myself, and show them what I’m made of.’ But this often has the reverse effect, as they are really beyond help, shutting out the very people such as Managers and senior colleagues who can help get deals closed.”
Emma, and many other successful Sales Managers, focus less of their time on “Why isn’t this closing?” and more time on the behaviours required to drive the success.
“The best sales people are the ones that come to you the whole time and ask ‘How could I have done this differently?’. They are the people who thrive on learning something new every day”,says Seaman.
At Natural Training we believe that Sales Managers often take on too much, and this can be detrimental to the main thing that sales people really need, which is to coach them to win new business. Note: this is not “win new business for them”. It’s to enable sales people, through coaching and pipeline management meetings, to win it for themselves. So many Managers take over and win deals, which is a great short term boost to numbers, but of course doesn’t help sales people in the long term.
The best advice we can give is to establish one-to-one meetings that foster this environment of health and support. The sessions are even more useful when the sales person leads them, rather than the Manager. Set an agenda such as:
- What’s working well in my current pipeline deal flow?
- What’s my forecast for this month and which deals are likely?
- If that number isn’t reached, what might be the reasons?
- What are my blockages, if any?
- One stuck deal…
- Anything else I might need in terms of help and support?
Sales Manager as Coach is more than a title – it’s a philosophy underpinned by asking great questions. For a list of great coaching questions, please email us at firstname.lastname@example.org
We also, from time to time, can provide one of our sales coaches to you for a very reasonable price to come out to your office for an hour or two and do a session on what constitutes great coaching in your environment.
The final word on a coaching environment: it shouldn’t just be up to Sales Managers. Encourage an environment of help and support within your teams too. A dozen coaches is much more effective than just one, and quite often it doesn’t matter which set of eyes and ears it is listening to a pipeline problem – we can all see things clearly as an outsider looking in to a challenge.
5. Know your Pipe Universe
“My sales guys are so busy knocking off the gas stations that they are forgetting to rob the banks.”
Larry Ellison, Oracle
One of the more successful business operators of the modern era, Larry Ellison, doesn’t hold back when talking about the type of universe his sales people need to be focusing on. Your sales team may be the same, always chasing smaller deals, or the opposite in that you are chasing exclusively big deals, or in between in that your team is after a blend of accounts.
The point is: if left to default behaviours, your sales people will chase the types of deals they are most comfortable in closing. This is no surprise – we all operate in comfort zones, tending to do the things that we are good at, rather than those which we are not. The truth is, a healthy pipeline is a reflection of the behaviours of the team. If the team is in a small-deal comfort zone, then the deals will mostly be small, or transactional, or “run rate” business. Which is okay, if that’s your strategy. If it’s not, then the leaders and managers need to establish a new set of behaviours, skills and desires that target the blend of accounts that are most likely to get you to a winning number.
If, like many organisations, you need a healthy blend of different account types to hit your number, then the following simple matrix might help. It shows a second half 2014 focus for a customer looking to bring a blend of clients into the pipeline and bottom line.
Starting with the total target first: this company, ABC Enterprices, has identified that there this is the blend to get their Q3 number. It represents a nice challenge for the sales team, and importantly they are set up to deliver a quality experience to clients if they bring in this type of blend. Here is a break down of each box above, starting with the bottom left, and finishing with the bottom right.
Run rate business: ABC has indicated that they need 20 “Run Rate” clients into their Pipe for Q3. Run rate is defined as transactional, easier to get, and usually they close 30% of the business that enters their pipe.
SMEs: For this particular type of client, defined as around 250 staff and £60K avg spend, ABC needs a different strategy and approach. They will get fewer of these clients into their pipe, with an average spend of £60K.
Billboarders: ABC likes the term “Billboarders”, because these are the aspirational clients, with a big spend, that the team usually passes on billboards on the way to work. ABC wants to establish a culture of being confident to chase “the banks” as Larry Ellison put it, so this fits in with their strategy.
Other: ABC didn’t want to rule out the deals that pop into the pipe that come from unexpected, in bound sources such as referrals. Sometimes they recognise that it is healthy for sales people to want to chase a deal that doesn’t fit in with normal parameters. It keeps the place fresh, and forces ABC to innovate, for example. Plus, some sales people are naturally creative, so it nourishes this side of their brain to go for some new clients, in new industries, doing different things.
This is one way to define the various communities of clients making up the Pipeline Universe, to set a strategy based on balance and logic that suits the team, yet pushes them, and suits the delivery mechanism of the business too.
The key word here is balance. A healthy sales pipeline needs a compelling, interesting, accurate blend of the types of clients who you need to hit your numbers. That’s the pipeline universe, and you’ve got to know this universe, target it, and make it work for your business.
The bottom line is the bottom line
Referring to point number one, pipeline is an instrument, but shouldn’t be the hero of your organisation. Until the customer is signed on the line, there is no cause for celebration. Money should always be the sole measure of success – of course it should. However, an accurate pipeline gives you the chance to do something few organisations seem to have the ability to do, which is to anticipate future success, or otherwise, and have enough time to do something about it.
At Natural Training, we send out a coach to you to set up the right type of Pipeline Culture for your business. This doesn’t have to take days – we can set you up in a few hours. Give one of our Training Consultants in London a call on 0207 043 1582 and tell us about your needs, or send us a contact form using this link.
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