Last time we talked about the Fallacy of Win Rates, and how deceiving averages were for forecast predictions.  If you didn’t get a chance to read the article, just click on the article title above.

This time we want to shine the light on a tough problem that goes to the heart of every Sales and Operations manager: When will the opportunities in the funnel result in an order?

What good is a full pipeline if your opportunities are dying on the vine? Just ask yourself: How many opportunities have expired quotes that did not result in a purchase? Was the customer ready for action when you issued the quote? What part of your funnel population is sitting at the qualification stage? For how long have they been there?

In pipeline analytics, we often talk about Sales cycle length, which is essentially how long it takes for an opportunity to march through all stages of the customer’s buying journey.  Yes, not the internal process of qualification to booking in your ERP, but how long the customer’s organization actually takes to go from articulating a problem statement to issuing a purchase order.  If you’re used to looking at this aspect of your pipeline, you’re probably looking at the ‘aging’ component of your opportunities.

We prefer the term #velocity to aging, because velocity is more useful to measure the rate of change with which an opportunity goes from definition to solution development, a proposal, and finally to the win or loss. If you’ve asked about the length of your Sales cycle and the answer was “don’t know, it depends, or I don’t have a crystal ball,” keep reading. 9 out of 10 Sales teams don’t trust their own ability to nail the booking date within a month of the customer’s purchase order. 

While Sales teams often resist losing opportunities that have gone stale, Sales time needs to be focused on what and where it matters. Typically, when we apply our diagnostics tool to the pipeline, we find that more than half of the population is stale. This means the Sales team has created a virtual parking lot for opportunities.  If you have a lot of stale opportunities clogging up the pipeline, it’s hard to tell which will deliver revenue, and by when. 

The holy grail of every #forecast is to not only predict the probability of opportunities reaching goal, but when they result in an order. If you know the timing of an order, it’s a simple multiplication: If Sales enter an opportunity that is worth $100k at the beginning of the Sales cycle with a 1/10 chance of winning and a Sales cycle of 90 days, that opportunity will result in $10k of bookings the quarter after it was first defined. Add the opportunities in the funnel for each stage at their respective probabilities and win rates, and you know the value of your entire pipeline. Easy, right?

Of course not. The trouble is that most opportunities are not managed to a Sales cycle velocity. Yet your customer’s buying cycle rarely exceeds a calendar quarter or two at most. When we connect our funnel analytics to a given pipeline, this is what we find:

When you look at the vertical axis, you can see the Sales team has created a virtual parking lot for opportunities. Why should opportunities sit in qualification for more than 30 days if the customer is clear about the problem they’re trying to solve? If you have a lot of stale opportunities clogging up the pipeline, it’s hard to tell which will deliver revenue, and by when.  In our example, about half of the pipeline is inactive. Lose it, you’ll win on the remaining opportunity field with more precision and predictability.  

Would you be surprised if typical data sets proved that you’d be better off losing 40% of the population because it’s stale? I bet you’re cringing at the thought of forcing opportunities to the Close Lost stage “only because it’s taking a bit longer.” 

It can be sobering to cut your pipeline in half, but what if your company was operating just to deliver revenue on predictable bookings? Exceptional companies do this, actually. Profits rise, and the remaining Sales time can be used to market to new prospects. But they’re the exception, as the name suggests. Most of the time, forecasts are not only inaccurate, they’re an unhappy compromise between a top down revenue growth target and a bottom up fit to make management happy. I don’t have to tell you how well that works out.

Let us help you analyze your #funnel. When times are tough you can hardly afford to waste your precious SG&A on opportunities that won’t deliver. We’ll help you get the focus on what matters, and empower you to maximize the selling envelope for each opportunity – real opportunity, that is.