Leading on from the previous two articles on Pipeline Management, this article explores the key building blocks a Pipeline plan.
We have already recognised the pipeline as the best ‘leading indicator’ of future sales results and of the effectiveness of marketing activities. Let’s now assume you have clarity on your sales cycle; with clear stages identified, qualification criteria and typical customer engagement activity defined for each. You should now have a better informed view of the current state of your sales funnel, from which deriving forecasts should now be more straightforward.
The next big step in taking control of your sales success is to build a pipeline plan.
A pipeline plan is a key vehicle to harmonise and align sales and marketing resources. It is predicated upon the definition of a relationship between the sales quotas and the targets upon which marketing resources should be measured – usually the delivery of qualified sales leads.
There are several key components to a Pipeline Plan:
- A pipeline target must be set. Usually this will be defined as a number or value of qualified or part-qualified leads. Often the pipeline target is simply a multiple of the sales quota. For example a pipeline target of 4x sales quota is based on an assumption that one in four opportunities will ultimately close having first reached the ‘qualified’ opportunity stage.
- Marketing need not operationally own the whole pipeline target. It may be appropriate that you plan to generate qualified sales opportunities by working with partners or vendors and that sales people are expected to generate their own leads by cold calling.
- Either way, the pipeline plan will detail the programs and activities to be undertaken by sales and marketing, along with the expected contribution to qualified pipeline. As with any plan, its objectives must be realistic.
- Insofar as resources in marketing and sales have a remit to deliver qualified leads, they must be held accountable for their contribution, and if possible have some part of their remuneration tied to their pipeline generation performance.
In the best-run companies, opportunity pipeline is second only to sales as the key metric against which sales and marketing performance is measured. A rigorous review of the pipeline plays an intrinsic part of the sales forecasting process; management can create a cultural awareness of the importance of pipeline – and drive accountability for this as well as sales.
Avoiding Pipeline Shortfall
Of the many reasons why companies do not always implement a pipeline plan, high on the list is that it’s often simply hard to do. Aligning compensation and maintaining sales focus on the pipeline requires effort and often, cultural change. But few low-cost initiatives have the same potential to impact the sales performance of your business over the short to medium term.
In the early days of building and executing a pipeline plan, you may well find that you have a pipeline shortfall – that is a lack of leads of the right quality to meet your plan.
If you are unable to address this pipeline shortfall, but you still make your sales quotas, it is possible that your conversion ratios from ‘qualified opportunity’ to ‘close’ are better than you have anticipated. Tracking the actual close rates over time will allow you to hone your model and set appropriate targets.
But if your plan is accurate, you should take a shortfall in qualified opportunities – or a pipeline gap – seriously.
With appropriately aligned compensation your team should already be concerned about a pipeline gap, understanding that it will impact their income either now as part of their demand generation compensation plan, or later under their sales compensation plan. As part of your business’ regular review cycle it should be entirely reasonable to review the demand generation plan and insist on change if pipeline targets are not being met – much the same as with sales numbers.
ProAptivity specialise in the deployment of CRM solutions into small and medium size businesses. They are the Northern Ireland solutions partner for Maximizer CRM which offers both on-premise and on demand solutions with full Mobile CRM capabilities. For more information contact 028 90735630