I’m often asked by sales managers:
How do I measure AND improve the quality of the sales pipeline?
It’s an ongoing challenge.
In this blog post I explain EXACTLY how to use salesforce to manage pipeline quality.
Not only that.
I tell you specifically where to get the highlighted relevant reports and dashboard charts to measure funnel quality – for free. And give examples of actions managers can take based on the information within salesforce.
Let’s start with a summary.
3 Step Approach to Managing Pipeline Quality
Here’s the 3-step method that increases pipeline quality and funnel health.
1. Measure overall pipeline quality health. This is often the starting point for newly appointed VPs of Sales. They need to quickly and accurately gauge the health of the pipeline. However, existing sales leaders must also regularly assess overall funnel quality.
2. Assess the viability of individual deals. For example, I’ll explain how to manage by exception, identifying deals that are in the forecast, but which have a reduced chance of a successful outcome.
3. Improve quality through appropriate salesforce configuration. This can systematically improve the quality of the funnel. In particular, adapt your CRM system to improve deal qualification and validation.
Naturally, other factors can also drive funnel quality. Salesperson training, for example. However, unless you get these foundations in place, the impact of any other positive steps will be significantly reduced.
That’s why these steps are so important.
Benefits of High Sales Pipeline Quality
On the other hand, why bother?
Why not simply focus on increasing pipeline size? (By the way, if size is your main focus right now, then here are the reports you need: 4 Vital Dashboard Charts That Measure Pipeline Size).
It’s because if you accurately measure and improve sales funnel quality, three things will happen:
1. Sales forecasts will be more accurate. This is because forecasts will not be muddied by poor quality deals that have little chance of closing successfully.
2. Salespeople and sales managers will waste much less time on irrelevant deals. Consequently they have more time to spend on viable opportunities, thereby increasing overall revenue.
3. You will have a realistic understanding of whether there is enough pipeline to meet your sales target. This is because when you compare a high-quality sales pipeline with your quota, you immediately know the chance of hitting your number.
Name me a sales manager who doesn’t want these benefits.
Step 1: 3 Reports That Measure Overall Pipeline Quality
Here are three quick and easy reports that give a great indication of overall pipeline health.
The three reports are:
1. Pipeline by Close Date.
2. Pipeline by Created Date.
3. Conversion Rate / Win Rate.
These are the three reports you should examine first.
Because each delivers insight into overall funnel quality from a different perspective.
Pipeline by Close Date and Stage
Normally we use this report when looking at pipeline size and sales forecasts.
But it’s a great quality indicator report too.
Take a look at the example below:
In this example there are open deals where the Close Date is in an earlier month. So unless the salesperson has a Hogwarts time-turner, these opportunities are not going to close in a previous month.
There are two possible explanations for these deals:
– The deal is still open, but the Close Date hasn’t been updated.
– The deal is closed, but the Opportunity Stage hasn’t been updated.
Either way, it’s a pipeline quality issue.
In fact, when I see a pipeline that has many opportunities with close dates in the past, it tells me something important:
The overall sales pipeline quality, as defined by open opportunities in salesforce, is highly suspect.
Here’s another way to run the same report:
Now we can see that two salespeople, in particular, are responsible for the bulk of the deals with a close date in the past. Personally, I would be very interested in discussing the individual pipelines with these two team members.
I talk about this report more extensively in this blog post.
Pipeline by Created Date and Stage
Here’s the second funnel quality report to look at.
Its shows the current pipeline, grouped by the opportunity Created Date and current Stage.
For example, let’s say in your business the average sales cycle is 3 months. Obviously some deals will take less time and some will take longer.
However, what you’re looking for is a disproportionate number of opportunities created many months ago, which are still open.
That’s the case in our example.
In particular, many of these aged deals are still in early Stages of the sales cycle. That indicates a pipeline quality issue.
Conversion / Win Rate as an indicator or poor pipeline quality
You might be wondering:
How can conversion rate reports highlight potential funnel quality issues?
Let’s say that intuitively, the opportunity win rate in your business is around 30%. However, here’s a salesforce dashboard chart I often see:
In other words, the win rate averages 70%.
There are three possible reasons for this.
One: You have a world-class sales team and an irresistible product / price combination.
Maybe. Or perhaps it’s one of the following two reasons.
Two: Only deals that have a good chance of closing are being entered into the pipeline. Effectively, this means your pipeline quality is too high! In other words, the pipeline size is artificially low and you have poor visibility of the true funnel.
Three: Deals that no longer have legs are not being removed from the pipeline. Consequently, the overall quality of the funnel is low. That’s because it contains many opportunities that have no realistic chance of closing successfully.
So why does this last reason boost the conversion rate?
It’s because the conversion rate is the ratio of Won to Lost deals over a given month.
For example, let’s say that in April you win three deals, and lose seven. That means your conversion rate is 30%. However, deals that are never going to be won are often not set to lost in the system.
Let’s say, for example, only two deals are set to lost rather than seven. Your conversion rate is now 60%. And unfortunately, the pipeline now contains five low quality deals.
High Win Rates In Your Business
So, let’s say the conversion rate in your report is unrealistically high.
How do you tell which of these reasons is the cause in your business?
Take another look at the Pipeline by Created Date and Stage chart. If there are many deals that have been open for too many months, then it’s likely to be the second of these causes. Weed them out.
Conversely, if the overall age of the pipeline looks good, but the win rate is too high, then it’s likely the first reason. Probably, early-stage deals are not being entered into the pipeline.
You can validate this by reviewing the funnel chart. It probably shows that the early stages of the pipeline are artificially small.
What’s the easiest way to get these three salesforce reports into my system?
Install the free GSP Sales Dashboard from the AppExchange. It contains these three reports plus others that give visibility into the size, quality and trend in your sales funnel.
Step 2: Assess the Quality of Individual Sales Deals
So far, we’ve looked at how to examine overall pipeline health.
However, how can we identify individual deals that are reducing overall pipeline quality? For example, deals forecast to close this month, but about which we should have low confidence.
Three opportunity metrics highlight these deals:
1. Number of month Close Date changes.
2. Days since last Stage change.
3. Opportunity age.
Fortunately, the three metrics are also included in our GSP Sales Dashboard, so you don’t need to create them yourself either.
Number of Month Close Date changes
This metric counts the number of times the Close Date on an Opportunity has shifted from on month to another.
Usually, we’re not interested in changes within a month. Rather, it’s when the opportunity moves to a different, often a later month, that matters.
In the example above, that’s happened four times.
Days Since Last Stage Change
This sales metrics counts the number of days since the Opportunity Stage was last updated.
In our case, it’s 90 days since the Stage was last changed.
This metric counts the number of days the Opportunity has been open.
For example, 200 days. That’s well above the average of 120 days.
Quality Metrics Dashboard component
Pull these three metrics together into a dashboard chart to see the bigger picture.
You might want to filter the underlying chart to focus on opportunities due to close this month.
This helps us manage by exception in an effective way.
For instance, I’d be very sceptical about the first two opportunities in the chart. They’re due to close this month.
XXX, for example, has been open 200 days. It’s still at the Proposal Stage. In fact, the Stage hasn’t been updated for 90 days. And the deal has slipped from one month to the next three times already.
You’re telling me this deal is going to close this month?
Tip: When implementing the GSP Dashboard, read the Configuration Guide to find out how to set these metrics running for existing opportunities.
Step 3: Configure Salesforce to Improve Pipeline Quality
We talked about reports and dashboard charts that provide insight into the overall health of the funnel.
And metrics that highlight specific low-quality deals.
However, here’s the next question:
How can salesforce design and configuration to drive pipeline quality management?
The answer lies in supporting the opportunity qualification process.
What is sales opportunity qualification?
Here’s Eduard’s definition of a high-quality sales pipeline:
A high-quality sales pipeline contains only deals where the salesperson can answer three questions positively. First, can we win it? Second, do we want to win it? Third, is it worth winning?
For a sales deal to be regarded as ‘high quality’, the salesperson must be able to explain and justify why the answer is ‘yes’ to each of these questions. If not, the deal should be qualified out.
It’s a good a definition of deal qualification. Simple, but effective.
It follows that if you include only deals that pass this 3-step test you have a high-quality funnel.
I DO recommend creating early-stage, unqualified opportunities in salesforce. Set these deals to Prospecting. Often, they come from converted Leads. If you’re unsure when in the process to convert Leads to Opportunities this blog post will help.
Opportunity Qualification Field
Create these qualification tests as fields in salesforce.
Incidentally, you can see in this example we also have fields to track the close plan and other information.
Capturing this information in salesforce does several things that improves pipeline quality.
1. It forces salespeople to think-through the deal. Simply taking a few minutes to enter the information means reps must mentally analyse and justify the deal in their own minds.
2. It surfaces qualification rationale and makes it available for discussion. If managers, team leaders and sales operations can read the qualification rationale, then they can discuss and validate this with opportunity owners.
Note: this discussion should not be confrontational. Use the information entered by the salesperson as the starting point for logical discussion and non-emotive dialogue.
3. It makes the information available for marginal gains and improved sales and marketing alignment. For example, look back at lost deals and re-validate the qualification rationale. Did we qualify the deal robustly? Or, for example, did we kid ourselves that it was a deal work pursuing.
If you use other criteria to qualify deals fine. Create those fields instead.
But you get the idea: surface the information.
Formal deal qualification approval process
For some businesses, a few fields on the opportunity simply isn’t going to cut it in terms of deal qualification.
For example, Kentech deliver large-scale infrastructure projects within the oil & gas industry.
In this marketplace, every deal is subject to a formal bid and tender process by the customer.
Here’s the snag:
Simply bidding for an opportunity can cost Kentech over $250,000.
So you don’t want to get it wrong.
All the qualification information and documents are stored in a custom object related to the opportunity.
Not only that, a formal approval process is used at each Stage in the opportunity lifecycle. In other words, a separate, formally controlled Bid / No Bid at each step.
That’s pretty heavy duty. Not many companies need that level of justification.
However, it’s horses for courses: capture the level of information that’s appropriate to your sales process and marketplace.
Pipeline quality management in your business
Has this blog post made you stop and think?
Then here’s what I recommend you do next:
1. Run the overall health reports. Doing this determines your overriding pipeline quality management approach.
2. Analyse individual opportunities. Weed out the specific opportunities about which you are sceptical.
3. Create qualification fields. This means that from now on, salespeople are taking a more thoughtful approach to deal qualification and funnel health.
4. Watch the video. It will give you more insight into driving pipeline quality management in your business.
5. Get in touch. I’ll hold a no-charge 45-minute web meeting with you and walk through the issues and challenges of pipeline management in your business.
That’s right. All you need to do is ask here.
In fact, I’m looking forward to hearing from you!
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