As a business leader, you understand that the success of your business heavily relies on the effectiveness of your sales pipeline. To achieve your vision for growth you need a predictable pipeline to achieve monthly and quarter revenue targets.
However, building sales pipeline that offers a predictable and clear view of your sales funnel can be quite challenging. Pipeline forecasting necessitates meticulous planning, coordination, and synchronization of your processes and systems. Our clients tend to have anywhere between 3-5 lead stages and another 4-7 deal stages. This totals 7-12 points to define and proceduralize in the pipeline. For inexperienced teams, building this infrastructure is quite daunting and time-consuming.
But it doesn’t have to be this way. The goal of a solid pipeline architecture is to ensure consistency and provide critical conversion metrics for ROI and attribution purposes. Consistency is crucial to accurate pipeline forecasting. This can be accomplished with simple improvements and added rigor to only three points in the pipeline: lead creation, lead conversion, and deal conversion. Designing guardrails around these three points alone makes the task of properly aligning a pipeline forecast an attainable bite-sized task. With this enhancement, your company will establish better pipeline forecasting and management. This ultimately leads to the achievement of your revenue targets. To see what it looks like when a company follows through on pipeline forecasting, read our case studies. This will also give you an understanding of the full set of benefits that come with properly executed pipeline architecture.
Before going into strategies to enhance alignment in the sales pipeline, it is crucial to comprehend the key stages constituting the pipeline. These stages encompass lead creation, lead conversion, and deal conversion. Each stage will be described at a basic fundamental level that will help you track where these steps fit with what you have vs. what you need to build.
Lead Creation in Pipeline Forecasting:
The initial stage in the sales pipeline involves collaborative efforts between your marketing and sales teams to generate leads. A lead refers to a potential customer who has expressed interest in your product or service. During this stage, your marketing team employs various tactics, such as email campaigns, social media ads, and website forms, to capture leads. Once a lead is generated, the sales team commences the qualification process, assessing factors such as budget, authority, need, and timeline (BANT) to determine their potential for purchasing your product or service.
Lead Conversion in Pipeline Forecasting:
This stage signifies the point at which a lead has been successfully qualified and is prepared to proceed with a purchase. The sales team converts the lead into a customer by understanding their needs and effectively showcasing how your product or service can address their specific problem. This stage assumes utmost significance as it directly influences the success of your sales pipeline. Once a lead is converted, a deal is established. This phase encompasses the creation of proposals, negotiation of sales terms, and finalization of agreements. The deal must align with the customer’s needs as well as your company’s objectives. This article from Monday.com, a leading project management software, discusses the importance of tracking lead conversion. Focus on driving rapid improvements through a streamlined process to experience all of the benefits of accurate conversion tracking. This approach is attainable as a quick win and does not require a robust infrastructure to be built.
Deal Conversion in Pipeline Forecasting:
The final stage of the sales pipeline involves closing the deal and completing the customer’s purchase. Deal conversion also includes closing deals that do not result in a customer purchase. Effective management during this stage ensures customer satisfaction is met with prompt resolution of any potential issues. Most organizations place a heavy focus on why a deal should be considered “won” or “lost” but often miss the “when” component. A key factor to the process detailed below is removing as much qualitative conversion influence as possible. This helps you orientate your teams to criteria-driven, fact-driven decisions.
The Process of Improving Pipeline Forecasting
To ensure accuracy within each metric of the sales pipeline, it is imperative to establish a defined process. Incorporate a clear understanding of the criteria associated with each stage of the pipeline and how these stages relate to the overarching sales goals. This article about lead conversion metrics dives deep into the various lifecycle stages. It highlights the importance of having clean calculations and how those calculations can provide KPIs for marketing and sales pipeline performance. Building a scalable architecture is a significant development task and well worth the investment.
Let’s start with lead creation. The lead creation stage requires predefined criteria marking the minimum requirements a potential buyer must exhibit to become a lead. This can be a specific behavioral action such as a form-fill or response to various campaign content, a website visit or all of the above. Only once these actions are completed can a lead be created. The criteria themselves are less important than the consistency with which the business captures and creates leads in the CRM. Lead creation marks the entry point into the pipeline. With a clear understanding of why and how a potential buyer was tagged, marketing and sales teams know how to proceed.
The next critical point is lead conversion when the deal gets created. Between creation and lead conversion, there are several marketing motions, behavioral indicators and qualification requirements to move the lead towards conversion. Building structure throughout those interactions is important but again, time-consuming and requires experience. It is more important and easier (from an architecture standpoint) to focus efforts on building rigor around lead conversion. Doing this requires answering the following questions:
- What are the minimum qualification requirements to reasonably believe this lead is in the market to purchase?
- Typically BANT, MEDDPIC or other acronyms are used to capture and assess qualifying information
- What attributes of the company or the potential buyer need to be met to proceed? I.e., how well does this lead fit our ideal customer profile?
- What are the minimum indicators required to show enough intent to proceed?
With these parameters defined, businesses can ensure consistency around lead conversion and deal creation. With a few system alterations, the first conversion point for reliable attribution analysis is established. This places your business on the path to better pipeline forecasting.
The final and arguably most important point of the pipeline is deal conversion. This refers to when and why a deal is closed. There is a positive and negative outcome at this point as deals can either be closed and won or closed and lost. The most important aspects to define at this stage are:
- The minimum repeatable requirements to mark a deal as won (typically occurs upon contract signature or receipt of a purchase order)
- The timing of when to mark a deal as won or lost, with lost deals requiring far more clarity
The “when” component of closing a deal is more important for deals that are lost than won. The wins tend to have a defining action (such as a signed contract) that supersedes any timing. Lost deals, however, can occur at any point in the process. To avoid having a bloated pipeline with stale deals, sales teams need guardrails for how long a deal can stagnate before it is tracked as lost. It should be captured as ‘closed abandoned/no decision’ to differentiate from competitive lost deals. The point of having well-defined infrastructure around the pipeline is to ensure what is in the pipeline is accurate. Allowing long-lost open deals to remain in the pipeline will make it more difficult for business leaders to deliver accurate forecasts. Plus the ROI on marketing activities is muddied with inaccurate pipeline data.
A key benefit to added structure around these three pipeline data points is the ability to accurately calculate the sales velocity. This critical metric measures the speed and efficiency of your sales pipeline. Sales velocity is determined by multiplying the number of opportunities in the pipeline by the average deal size and the conversion rate. The resulting value is then divided by the length of the sales cycle.
Accurate data for each stage of the sales pipeline, including lead creation, lead conversion, deal creation, and deal conversion, is vital to calculating sales velocity effectively.
By enhancing alignment in your processes and systems concerning lead creation, lead conversion, and deal conversion, you can significantly improve your ability to forecast and manage your sales pipeline. This alignment ensures accuracy in each metric, streamlines the sales process, and enhances the speed and efficiency of your sales pipeline. Ultimately, these improvements enable you to achieve your revenue goals and foster business growth.
Transitioning from Conceptual to Operational
At this point, you may be asking yourself the real cost of improving your pipeline management infrastructure. Shown below are two GTM funnels or pipelines. The first shows an ideal pipeline. Building and executing an ideal pipeline requires investment in several key components. This investment of time and effort is required to yield the benefit of an accurate and reliable pipeline. These deliverables are required:
- Comprehensive lead management process aligned to the buyer’s journey
- Requires input, alignment, and enablement from marketing and SDR teams
- Comprehensive deal management process aligned to the buyer’s journey
- Requires input, alignment, and enablement of sales teams
- Stage-gated exit criteria for each lead status and deal stage
- Formal SLAs for each handoff point between teams
- Automation of processes, rules, tasks, and data migration for efficient funnel management
- System synchronization between marketing automation, sales excellence (if applicable) and CRM
As shown in the graphic, this can take 6-12 weeks to design, build and implement. It also introduces fundamental changes in several business processes, which requires impacted users to be trained.
In contrast, the right side of the image shows a simplified effective GTM funnel. In this version, rigor is placed at the three inflection points discussed above. Transforming your existing funnel to this version will require:
- Stage-gated criteria for funnel entry (lead creation), lead conversion (lead to opportunity), and funnel exit (win or loss)
- Formal SLAs for each handoff point between teams
- Automation of processes, rules, tasks, and data migration
- System synchronization between any existing and impacted systems
Because the pipeline infrastructure is significantly scaled down, the time to implement is shortened drastically to under 3 weeks. The benefits are comparable to those of an ideal pipeline.
Key Pipeline Forecasting Takeaways
Effectively managing your sales pipeline involves embracing the balance between various stages, aligning processes, and streamlining systems to foster productivity and efficiency. Most businesses will require significant effort to improve pipeline reliability. Plus building the appropriate infrastructure for each stage can seem to be a daunting task. A streamlined approach focusing on the foundational stages discussed above will provide major gains without significant development requirements. By defining the requirements of each stage and implementing strategies to enhance alignment, you can pave the way for success. This will result in achieving your revenue targets, while you witness the accelerated growth of your business.
Designing this pipeline in such a way that it reflects the true situation your business faces can be daunting. Schedule a call with our experts to enhance forecasting accuracy, track precise conversions, and empower your growth with data insights. Turn your pipeline into a strategic asset and hit those revenue targets with confidence!