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What charactarizes a healthy Sales Pipeline?

Posted 9/6/2015
When I’m faced with a new sales pipeline (also called sales funnel) the first thing I want to understand is if it’s healthy. My check is based on 4 aspects: Timeliness, Balance, Size and Content. 
 
Let’s start by looking at the definitions that are used for the sales pipeline to know we compare apples to apples: 
Sales FTypically the sales pipeline is split into at least something like Opportunity, Solution, Closing, Delivery. Many people enter the opportunities at the last moment to still get the needed approvals. Before going into Solution phase you need resource commitments. Before going into Closing you need approval to submit an offer. The term Sales Funnel indicates you need to have many more cases in Opportunity than Solution, more in Solution than in Closing and only a few will go to Delivery. The recent thinking is going more towards the term Sales Pipeline is based on that all effort you put on cases that are not going all the way to Delivery are wasted. Hence you want to loose these non value adding cases quickly and turn the Sales Funnel into a Sales Pipeline that has almost as many cases in Solution and in Closing as in Delivery. Before I start to analyse I need to understand the offer cycle time or velocity: how long does a case normally take to go through Solution and Closing? That is from starting to design our offer to having the deal agreed and signed. I also need to understand the win rates, how many cases are won of the ones that are entered? The actual time and win rate-% will vary by type of business, by region and many other variables, but you need to build a sense for it to get perspective on the sales pipeline you analyse.
 
Back to the health check:
Timeliness: My health check starts with looking at how recently the cases have been updated. That aspect goes forward by looking at when the cases are going to close. For how many of them is the closing date in the past? I look at how realistic the expected closing date is for the opportunities compared to usual opportunity-to-closing times. Are the closing times realistic given past performance on duration of closing deals? Are all cases planned to close at same time? 
 
You want a healthy balance between what phase the cases are in and when they are supposed to close. 
Balance: Let’s make some assumptions for illustrative purposes: it takes you on average 4 weeks (Solution duration) to go from first planning what to offer to contract negotiation start. You reach negotiation on 2 of 3 case (yield) you offer on. And you normally negotiate for 2 weeks (Closing duration) before signature. 
 
In the pipeline you want to have at least: One case that you have just moved into Delivery, one case in Closing, three cases in Solution (you can loose one but on average want to get out one case to Closing every 2 weeks) and two cases in Opportunity so you know you will get more into Solution if more cases than usual drop out of the pipeline. So you want about 3 X as many cases in Solution than in Closing and at least as many cases in Opportunity as you have in Closing and Delivery together.
 
You might have more phases and the duration and yields might vary by type of deal, by region and will most certainly ”depend” on a lot of different factors, but the analysis remains similar.
 
Size: The value of all cases in the sales pipeline will have to be comparable to the quota that shall be achieved, adjusted by win rate and Velocity. 
 
Revenue value of cases in sales pipeline * win rate %  /  sales cycle times in quota period   = quota
If there is a winning probability used in the Sales Pipeline you can compare the average winning probability to the win rate%. You want to be able to understand why the difference is as it is.
 
Content: The company typically wants transparency on the sales pipeline also to ensure the strategy is being deployed. We need to identify what type of products and customers are strategically more important than others and verify that we are going in that directions.
Looking at biases in form of ”too few customers” or ”wrong type of customer”.
For example: If the strategy says we want to grow by 30% annually we cannot grow only with our current customers.
Next I would look at the product mix, does that represent what we want it to be, or can we account for the bias?
 
My last stop would be to look at the sales pipeline by competitor. Are we seeing the competitors that seem to be growing? If not, they might have found a way of selling so we don’t get invited or find the opportunities.
 
So, once you have the pipeline you can analyse it clearly. It would however be good to have measures & KPI:s in place to show how ”healthy” your funnel is. So you could start seeing when it gets unhealthy by looking at the KPI, rather than having to analyse each funnel manually.
 
Are you using such metrics? What metrics are you using? How does it work out for you?

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