How Sales Pipeline Management Helps You Sleep Better

How Sales Pipeline Management Helps You Sleep Better:

About 10 years ago I started to sleep really badly. I had just agreed to run our medium-sized training business and though we were doing well, I constantly worried about meeting our sales objectives. Luckily my insomnia didn’t last long because I learned to think about sales as a pipeline very quickly.

Sales pipeline is one of the best indicators of a company’s health. Hands down. It can literally show you the money (that you are going to make in the coming months). Therefore, it’s invaluable to regularly check what your sales pipeline looks like, and what’s in it. Once you know that, you can take steps to manage your pipeline, and feel more in control of your sales figures in weeks and months down the line.

Start by measuring the health of your sales pipeline.

There are four important metrics that show how healthy your sales pipeline is:

• Number of deals in your pipeline (#).
• Average* size of a deal in your pipeline ($).
• Average* percentage of deals that successfully makes it through the pipeline (%). This is also known as lead-to-customer conversion ratio.
• Average* time deals stay in the pipeline before they are won (days). Also referred to as sales velocity.

*Averages can be calculated using a meaningful time period (trailing 3 or 6 months, for example). If you don’t have any historical data yet, then using gut estimates is a great way to start.

The conclusion is very simple: The more open deals you work with, the bigger they are, the better percentage that you are able to convert of them and the less time it takes to get a customer, the bigger your revenue (and profit, if you’re all set to make it).

All these pipeline metrics will reveal even more useful information if measured separately for different stages:

1. Number of deals in the first (second, third, fourth) stage.
2. Average size of the deal in the first (second, third, fourth) stage.
3. Average percentage of deals successfully converting from first to second stage (and second to third, third to fourth, fourth to won).
4. Average time deals stay in first (second, third, fourth) stage.

Check your current numbers against your best metrics

Here’s an example from real life. Below are the numbers for a 2 person team and they’ve measured these metrics both for whole pipeline and each stage separately. If this demonstrates good effort and results in their opinion, then they can use this as a benchmark and compare it with current and upcoming numbers.

For example, if they have currently just 7 deals in the first stage (while the average is 13), then they know they should quickly find at least 6 new opportunities to be able to make the numbers they’ve made previously. Or, if the average deal size of their current deals in the pipeline is $15,000, then they have obviously found a way to propose higher priced services to potential clients (or they just increased their prices). This, of course, will reflect on their revenue as soon as all these deals convert to customers.

You might pick up other things this team could do to improve sales by just looking at this pipeline, for example:

• try to get deals faster from first stage to second;
• put more new deals into pipeline (maybe even consider hiring a third person to do this, if the calculation supports it);
• think how to convert more deals from 2nd to 3rd to 4th stage since now they are losing 7 out o 10 deals during this movement; etc.

Unfortunately, it’s not overtly easy to measure all these things. It takes some effort to gather the data on a regular basis. But it’s definitely worth it. It’s both the source of confidence to go forward and knowing where you need to make vital improvements. And I cannot personally overlook the fact that understanding your sales pipeline can save your sleep.