You are misleading yourself when you measure your pipeline!
For many years sales people have been driven to build large pipelines. Back when sales was a 'numbers game', sales managers placed great emphasis on ensuring that each sales person built a pipeline that was 3-5 times quota. This would ensure that there was always enough sausage meat in the machine so that the required amount of sausages would drop out the other end. Those days are over.
Sales is no longer a 'numbers game', and measuring pipeline size only drives the wrong behaviors. When sales people are forced to focus on building pipeline size, then quality suffers. That is, pipelines get filled with deals that should never have been there and businesses get an erroneous forecast of the health of their business.
Instead the focus should be to qualify-out of as many deals as possible, and only allow well qualified opportunities to enter the pipe.
John: I’ve got Graham Hawkins with me again – welcome back, Graham!
Graham: Thanks, John!
John: Hey, you made a statement that floored me because it’s counter-intuitive to an old sales manager like me, and that is “we shouldn’t be measuring the size of our pipeline“.
Graham: Yes, correct. It’s controversial, I know, but I argue that the way we’ve managed sales teams in the past, which is all based on volume metrics, so looking at how big the pipeline is, typically three to five times the quota in the pipeline, measuring activity based on how many meetings you’ve had, how many phone calls you’ve made… I think those days are over, and I think they’re over because buyers are changing the way they buy, the buying journey.
John: Yes, but we still have to know what business we’re doing, we still have to track that business. Why do you say that we shouldn’t measure the pipeline? I still don’t understand!
Graham: We measure the pipeline, but we have to be much more brutal and uncompromising about what goes into the pipeline. I’ve seen in my own teams, I’ve seen so much company resource wasted on opportunities that never come to fruition because they’re just poorly qualified.
John: I understand that and that’s always been an issue, even prior to this need for transforming the way we sell, right?
John: Because the world has changed and the vendors now are driving the agenda and all the things we’ve talked about. Why does that change drive us to the need that we shouldn’t measure too much in the pipeline?
Graham: Well, let’s go back to the buyers, because it all starts and ends with the buyer, right? As buyers of anything these days, we all know – because we can access research – what it is that we want. I take the example of the car dealership. If I go to buy a car now, I know exactly what model, what make, what colour, what accessories before I go to the dealership; I’m not relying on the salesperson to tell me.
Graham: Depending on which analyst you read, buyers have done between 60 and 80 percent of the buying process, the research, before they even contact the vendor. So if you’re a sales guy coming in late and you’re being asked simply for a quote, chances are you’re being used as column fodder.
John: I totally agree with it. I think that’s always been the case though, but probably the pressure’s even more now, because yes, you’re definitely being asked in late and there’s a high chance you’re not going to win that business. So I agree, qualification is really, really important. But we still need to measure the pipeline, don’t we?
Graham: We do, we do, but your ability to control and influence the sale has changed dramatically. If you’re coming in late and you’re putting that opportunity in the pipeline, you’re creating a pipeline that’s potentially misleading.
John: And based on the last discussion we had, we need to make sure that the vendor stack allows us to actually sell to that opportunity.
Graham: Correct. So, qualifying out, I argue now that qualifying out is more important, walking away from opportunities where you don’t have some kind of inside running if you like, that’s more important for the sustainability of your company and your career potentially as a salesperson. If you don’t qualify out and walk away, you can have the greatest pipeline in the world, but it will mean nothing when it comes to conversion.
http://strategicsellinggroup.com/wp-content/uploads/2016/09/pipeline-owl.jpgJohn: Okay. I think what you’re saying is we need to change our mindset.
John: It’s not a key focus on the numbers and how many are coming through the pipeline and all that. It’s having the right things in the pipeline and maybe a quarter of what’s in the pipeline, but it’s highly qualified, we know that we can take that through to fruition.
Graham: Spot on. It’s about quality and not quantity.
Graham: And being more sophisticated in the way we bring our pipelines to the business.
John: It reminds me of that message that a lot of entrepreneurs talk about, where they need to fail often and fail early, or fail early and fail often. You were saying earlier, perhaps we need to actually motivate salespeople to qualify out of opportunities in some form or another, because that creates a lot more value for our organisation, if we start putting all the resources on the opportunities that we really can influence and get a result.
Graham: Look, we all know about opportunity cost. When you’re focused on an opportunity over here, opportunity A, that’s not likely to really result in any revenue, you’re missing opportunity B over here. So yes, moving away from opportunities that are not going to result in any revenue and focusing just on the ones that you can actually win. Now, I would go back a step and say how about we all focus on our existing customers and get them right first, before we start worrying too much about new ones.
http://strategicsellinggroup.com/wp-content/uploads/2016/09/pipeline-opportunity-cost.jpgJohn: Let’s come back and talk about that. I want to talk about that, I want to talk about your views on the buyer journey versus the sales process and a number of other subjects like that, so let’s get together. The key message, which I think is quite controversial, is we shouldn’t be putting so much focus on measuring what’s in the pipeline and driving as much into the pipeline as we possibly can. We should actually be driving stuff out of the pipeline, and motivating salespeople to get stuff out of the pipeline more than into the pipeline.
John: Pretty controversial, it’d be interesting to see how much discussion this generates – thank you very much, Graham!
Graham: Pleasure, John – cheers!