How to tell if your sales funnel is emitting warning signals
It’s easy for sales managers to get distracted with the here and now. Especially when there’s constant pressure to hit this month’s target.
Today may look rosy. Or not. But your sales pipeline shape may be a warning signal of a future revenue problem.
And that problem is a missed sales target three, four or five months from now.
Sales managers need to understand whether they’re storing up a problem for the future. They can do that by looking at the shape of their sales pipeline.
It needn’t take long.
Here are two eyeball checks to see if your sales pipeline shape is emitting a warning signal. The checks will tell you whether you should be initiating marketing and business development activities now, to meet sales targets in the future.
Let’s say your sales cycle is typically 3 months. The shape of your sales pipeline tells you whether you have enough early stage opportunities to win revenue three, four or five months from now. That’s the first check.
The second check is to look at the timing of these opportunities. You need to understand whether the early stage opportunities that you do have, are in the right place.
Sales pipeline shape
Take a look at the pipeline chart below taken from a salesforce dashboard.
The chart shows all open opportunities grouped by opportunity stage. What we’re interested in are the shape of each segment. They show the breakdown of the sales pipeline by opportunity stage.
In this case our early stage pipeline looks good. The colour shading and numbers on the chart show that we have progressively more pipeline at earlier stages in the funnel.
Now have a look at the pipeline chart taken from another business.
This time it’s not so good. The early stage funnel is smaller than the middle or later stages. Just one look at the chart suggests we’re storing up a problem for the future.
In other words, the pipeline chart shows at-a-glance, whether the overall shape and composition of our funnel is a cause of concern.
And of course, you can run this chart at any level in the sales hierarchy. So examine the pipeline shape at individual, team and product level to understand the health of the pipeline.
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Sales pipeline timing
The funnel chart gives an immediate indication of the shape and health of the pipeline.
But we also need to know about timing. Specifically, are the early stage pipeline opportunities related to deals that are due to close some months from now? If your sales cycle is 3 months and these early stage opportunities are all due to close this quarter, then you might have a problem.
Look at the chart below. It relates to the second funnel chart we looked at a moment ago.
We saw in the funnel chart that the early stage pipeline is too small. And now look at the timing. A significant proportion of the early stage pipeline is due to close this month. So now I’m immediately sceptical that I’ll meet the revenue target for this month.
In this case there is relatively little early stage pipeline three to four months from now. In many B2B sales environments, that’s a sure sign of an impending revenue problem.
In comparison look at the dashboard chart below. It shows the time-based spread of the opportunities in the first funnel chart.
There’s relatively little early stage pipeline due to close this month or the next. In contrast, most of the early stage opportunities are due to close three to six months from now. There’s a good head of steam built up to meet future sales targets.
By the way, we’re written a blog post specifically on using and creating the Open Opportunities by Stage dashboard chart. The article includes a video of Gary demonstrating how to apply the information in the chart and step-by-step on how to create it. It’s chart #2 in our series of the ‘12 Charts that should be on your salesforce dashboard’.
Investigate the pipeline shape further
These dashboard charts tell you in one eyeball glance whether you’ve enough early stage pipeline. If you think you’ve a problem then the first thing to do is look into more detail. Find out exactly where the funnel shape is wrong.
Drill down on the charts by team and opportunity owner. Look to see whether the shortage of early stage opportunities lies predominantly in one territory or geographical area. If you use products on opportunities (which you should!) then create the same reports based on opportunity line items. That way you can determine whether the problem is confined to one product family.
Also check there’s not sandbagging going on. In other words, are sales reps deliberately holding opportunities outside salesforce until they’re confident the customer is going ahead? If that is the case, then you’re missing the visibility of sales performance needed to manage a team effectively. It also makes it impossible to accurately assess how deals are leaking from the sales funnel.
Once you have a detailed understanding you can decide on the marketing and business development actions that will protect future sales volumes.
So act now – create the dashboard charts that tell you about the shape and size of your sales pipeline. Then have a quick glance to check they’re not giving off warning signals!
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