I participated in a fascinating discussion about Disqualification. It was on LinkedIn, led by Steve Hall. Click on the link to look at the comments, it’s pretty interesting.
But a part of the discussion was really intriguing and brought out how badly we understand pipeline’s and our numbers. As a result, we drive for the wrong things and fail to produce results.
It started with me taking my usual extreme position around Vicious Disqualification. Along with Steve and others, we believe sales people waste too much time chasing the wrong deals. Too many pipelines are filled with garbage–stuff that isn’t real, isn’t qualified, isn’t in our ICP, and more likely to be wishful thinking or desperation on the part of sales people.
Several people brought up the point, “But managers will never allow disqualification, they will insist on full funnels!”
While it is what I see too often, this concept almost makes me explode.
It shows how blind managers and sales people are in understanding their numbers, what drives business, and what drives their pipeline.
Let me walk through this.
First, a full funnel is absolutely critical. It’s the responsibility of the sales person to do everything possible to keep a full funnel. Not keeping the funnel full–over the long term–is absolutely unacceptable!
So far, I don’t sound any different than any other manager beating the sales person up about full funnels.
But here’s the issue: What is a full funnel?
Let’s run the numbers. Let say I’m a sales person with a $1M target. My average deal size is $100K. My win rate is abysmal because I qualify everything that fogs a mirror or clicks on an email or answers a phone. As a result it’s 10%.
With those numbers, to maintain a full funnel, I have to constantly be working 100 qualified deals (As a side note, this means I have to be prospecting 100’s to 1000’s to find those 100 deals.
If I fall to 70 or 80 in my qualified funnel, my manager beats the crap out of me (verbally), but to tell you the truth I deserve it.
Now, imagine I’ve seen the light. I’ve all of a sudden understood the concept of our sweet spot, our ICP, and the customer urgency or commitment to change.
Imagine I viciously disqualify bad opportunities–they never make it to my qualified funnel. I focus only on my sweet spot and within the ICP. Furthermore, the only opportunities I let into my qualified funnel are those where the customer is committed to change.
All of a sudden, I’m focused on really high quality deals. Without changing anything about how I sell, purely because I’m focusing on the right deals, and not being distracted by garbage, my win rate will skyrocket. It hits 50%–which in our experience in doing this, is not unrealistic.
All of a sudden the dynamics of my pipeline change. At a 50% win rate, with everything else constant, a full funnel must have 20 opportunities!
But this is what many sales people and managers miss. The definition of a full or healthy funnel depends on a number of things. What could be a great very healthy funnel for me might be a disaster for you.
To many managers miss this, they stick to a fixed definition of a full funnel. It may have to have a certain number of opportunities, or we have to have a certain pipeline coverage—3 X seems to be the default, though few managers can explain why or if it’s even right (At my 10% win rate I need 10X).
This is simply sloppiness, it’s management malpractice.
Of course we have to have full funnels!
But what a full funnel is depends on a number of things—quota, average deal size, win rate, sales cycle, etc.
Full funnels have to be high quality/high integrity funnels. If they aren’t then we have no way of knowing what a full funnel is.
My apologies, to many of you, I’m starting to sound like a broken record. But I’m astounded with the level of misunderstanding about this fundamental concept. If we can’t get this right, we are not likely to get anything else about meeting our goals right.
Hi Dave: because the contents of funnels are dynamic, I think the more pressing concerns are throughput and balance, not fullness. A company can be highly efficient at converting opportunities into purchases, but if the aperture at the funnel bottom is inadequate for meeting the cash requirements, the viability of the organization is at risk. Similarly, if the bottom aperture is too large, incoming orders will overwhelm the company’s capacity to fulfill them. That creates a host of problems. So it’s impossible to judge the efficacy of funnels without understanding how the funnel’s input and output relate to a company’s financial and operational situations, along with its risk capacity.
Either way, if full funnels (however they might be defined) are the goal, then maximally full funnels will appear favorable to decision makers, when in fact, significant risks might be lurking for the reasons I described. Pipeline/Funnel fullness – or the perception of it – therefore, often represents a false positive to managers that things are less risky than they actually are.
Equally vital in the funnel’s visualization is its taper. It’s important to understand that the delta between top-of-funnel diameter and the bottom represents risk, so the ratios are meaningful. A funnel in a 100% efficient organization is a cylinder: the diameter at the top equals the diameter at the bottom. That rarely, if ever, occurs, but I sometimes represent it that way for clients so they can understand the ideal state, or utopia.
The keys to effective funnel management are 1) to make sure the opening at the top is no wider that it needs to be, 2) the opening at the bottom matches the company’s revenue needs, 3) that the taper aligns with the company’s risk capacity, and 4) that the throughput speed can sustain its financial operations – or vice versa.