Sharpening the "Sales Pipeline Tool"

It is time to get back down to the workshop and examine the condition of another critical tool of business.

If we can sharpen this one to a razor’s edge or even an edge that is a bit blunt, it will serve us extremely well in delivering the revenue performance that you expect in your business plan.

The tool is the one I call the “Sales Pipeline” tool, sometimes referred to as the sales funnel.

Let me start out by defining the three process elements of a successful sales business.

They are ‘Find’, ‘Sell’, ‘Implement’. Let’s call them ‘F’, ‘S’ and ‘I’. ‘

“Find” refers to the work activities the sales person performs to find qualified opportunities for products, services, and solutions.

‘Sell’ means the program of activities that lead from finding an opportunity to closing it and include education, presentations, proposals, closing, objection handlin, and so on.

‘Implement’ means all those activities that have to happen to supply products, services and solutions to clients, to ensure they are happy with what they
have purchased, to bill them and receive payment from them.

Now here is a definition of the look of this Sales Pipeline tool.

“Sales Pipeline is the continual creation of sufficient qualified opportunities to ensure the overachievement of the business revenue objectives.”

The fact is that selling IS a numbers game. The fact is that I will not win every deal that I try for.

So remember:
• They may not like me.
• They may not like my product or service.
• They may not like my price.

BUT
• The more opportunities I have, the more I will close.
It is that simple.

So the Sales Pipeline is necessary to keep the sales person focused on FINDING enough opportunities to make sure, given a certain “hit rate,” that they will win their necessary share.

Sales Pipeline is all about ‘Finding’ qualified opportunities.

Unfortunately, this is the one activity that many sales people most dislike and feel most uncomfortable doing and so, they will put it off and either not do it or not do enough of it.

In our industry it is a fairly common thought that in a working week, a sales person will need to spend between 30 to 50 per cent of their time doing ‘finding’ activities.

‘Finding’ activities seek to discover opportunities for a sale. ie, telephone prospecting, physical cold calling, direct marketing activities, seminars, presales workshops, advertising campaigns, follow up.and so on.

In all the sales training work that I have done over the years it turns out that most sales people do at most between 3 to 10 per cent in ‘finding’ activity.

This difference in percentage time doing ‘finding’ work is huge and accounts for many of the issues found in underperforming sales people and businesses.
Sales Pipeline asks the question… Have I found enough opportunities to ensure I will close enough deals to make my revenue goal?

Most sales people work very hard on all sorts of things but never really know the answer to that question.

Part of our work here in this workshop is to give you some parts of this tool to enable you and your sales people to answer the question.

1. Work out the size of your pipeline
To find out how big your pipeline needs to be you can use the following equation:

P = Q X HR
Pipeline = Quota X Hit Rate

This is the fundamental equation of the Sales Pipeline.

Let us say that we had a sales person whose monthly quota was $100K of sales revenue and their “hit rate” was the industry norm of 3 to 1 (i.e. they close $1 for every $3 they have in their Pipeline).

In this example, the sales person would have to have a pipeline of qualified opportunities equal to $100K multiplied by 3, in other words $300K, in order for us to have any confidence that they would meet their quota.

So now we have a measure that we can look at to see with some confidence that the revenue number is able to be achieved.

2. Make sure you have a realistic view of available opportunities
The next thing to look at is what happens if there is insufficient opportunity and how we can be aware of it.

I now introduce you to one of the best business ratios I have ever seen, in order to help flag a shortfall in opportunities.

It is called the “Coverage Factor” and, if you can get this operating, you are well down the path of having a superbly well managed pipeline of business.

The equation we use here is…

CF = P / Q
Coverage Factor = Pipeline divided by Quota

So using the example from above, let us say our salesperson at the beginning of this month has a sales pipeline of $150K that represents the closable opportunities for the month.

Using the equation, we then find that their “Coverage Factor” is equal to $150K divided by $100K (which was their quota or target for the month), in other words CF = 1.5 for the coming month.

Now we already know that, for success, they have to have a “Hit Rate” of 3.0 (need to see $3 to get $1) and so, with a “Coverage Factor” of only 1.5, immediately we know we/they have a problem and now we can focus on solving it.

3. Plan your next steps
The question now becomes: How can we improve the coverage factor to the point where it is 3.0 or better.

So, here we are at the beginning of the month and we have a salesperson who has a sales pipeline half of what it needs to be.
What would you have them do?
I know what I would have them do!

I would ask them what actions they could take immediately to lift the number of opportunities for closure this month and help them where I could to do it, get the resources and make it happen.

I am sure there would be many things that could be done as soon as possible to lift the number.

The key to this Sales Pipeline tool is knowing what the numbers are and being able to recognise a problem well in advance (Coverage Factor) and then being able to put actions in place to remedy the situation.

Top sales people intuitively understand this and go about finding opportunities as a part of their daily workload. I would like to tell you a story now of a colleague of mine from my IBM days whose is a perfect example of this. Let’s call him Jim.

Jim was one of IBM’s elite, having had 13 Hundred Percent Club awards and 10 Golden Circle Club awards in a row.

One day when I was just starting out in the selling game, Jim turned to me and asked me if I had a database.

This was long before we had a database or CRM available to us on a laptop. Jim had a database in the 3rd floor typing pool .

“No,” I answered.

“Why do you ask, oh great one?” He then told me he had a database of all the MDs, Financial Directors and DP Managers (CEO, CFO, CIO in modern speak).

He said that when he read something of interest in, say, the Sydney Morning Herald he would cut it out and give it to the typing pool girl and ask her to insert it into letter number 1 (he had 5 standard form letters) for all his Financial Directors so he could sign them tomorrow and they could then mail them out the following day.

I said that this sounded good but why was he telling me this.

He then said that he was telling me because he had just had a phone call from one of his Financial Directors who said these immortal words:

“Jim, you don’t know me but I feel that I know you. Up to now we have not been in the market for a computer but we are now interested to see what may be possible. Could you come out and talk to us?”

Well, there you have it.

Jim, had a little Marketing Engine working away in his weekly routine such that every so often a prospect or opportunity would present itself to him, as if by magic, and Jim would be the first one to get involved.

I think this is a great story. (It is a true story and Jim does really exist and he is a champion.) It illustrates what it takes for a professional sales person to keep the sales pipeline full and flowing.

This “Sales Pipeline” tool is a very simple but a very difficult tool to implement within a sales team but it is essential that it happens as the cost to the business of poor revenue results is something none of us wish to face.

Once you start working on your Sales Pipeline it is important to have a weekly sales meeting.

Reviewing the action plan with each sales person individually will also help them focus and encourage them to talk through any challenges they are facing.

If you would like to have some help sharpening your Sales Pipeline, contact Barry at barry.freeman@quantify.com.au.

For more information on Quantify Corporation go to www.quantify.com.au.

If you are thinking, “If only I could know that I was working on enough business to ensure the overachievement of my quota.”

Remember: A good Sales Pipeline will do this for you and your team.

Barry Freeman, principal of Quantify Corporation