Which is better – a sales pipeline that has $40m in opportunities, or one that has $60m in opportunities? Without knowing more about the quality of the deals in the pipeline and the velocity with which they are moving, it is, of course, impossible to answer the question.
It may be that the deals in the $40m pipeline are well qualified, moving quickly through the funnel, and well distributed through the different pipeline stages. On the other hand the opportunities that comprise the $60m number might be old, languishing in unqualified territory, but just not disqualified because of the desire to maintain a large pipeline number.
I recently received an email from one of our customers looking for some assistance in this matter. The customer – I will call her Carol – is an avid sales methodology user, and Carol’s team has seen significant revenue growth since she deployed opportunity management in Dealmaker about 15 months ago.
All good so far, right?
Well, the problem is that through the use of the methodology, Carol’s team has adopted a far more rigorous approach to opportunity qualification, and because Dealmaker identifies inactive deals, and measures things like pipeline velocity, she has a much greater understanding of what should or not remain in the funnel.
So, where’s the problem?
Well, because of her disciplined procedures, and her team’s diligent (and voluntary!) application of the methodology, she has weeded out all of the unqualified deals from her pipeline. In fact her pipeline has shrunk by over 30%, and now she is getting grief from her manager about it. That’s where she is looking for my advice.
To put this in context, and to be fair to her manager, we should say that she is getting credit for the 37% increase in revenue she has achieved. It is acknowledged that when her team requests internal resources to support a deal, then the deal is qualified and is a good use of her company’s resources. Everyone loves the fact that her sales forecast is more accurate that any other division in the company.
But because her pipeline per head has reduced, she is subjected to a monthly grilling by her boss and she is looking for help on how to educate her boss on the difference between pipeline ‘volume’ and ‘pipeline value’.
I remember a saying that I learned early in my business career. It referred to the relative value of revenue and profit.
Revenue is vanity. Profit is sanity.
In the context of a sales pipeline, I think we could borrow that phrase and say:
Pipeline Volume is vanity. Pipeline Velocity is sanity.
I’ve given Carol my input as to how to communicate the value of pipeline velocity to her boss, but I’d love your opinion.
What advice would you give?