Two Reasons Your Pipeline Opportunities May Fail to Convert to Revenue
Understand common but typically unseen root causes that create challenges with sales pipeline opportunities and you can take positive steps to quickly turn things around
By Bruce Wedderburn
For some, the delta is a small crack. For others, it’s the Grand Canyon.
What delta is that? As we move further into the back half of the year, sales leaders are examining in greater detail, and in some cases with greater urgency, the delta between the revenue that’s already been recognized so far this year and their organization’s yearly sales targets.
Regardless of the size of that delta, where do you look to for answers to the questions:
“Can we get there?
“If so, how?”
If you’re like most VPs of Sales, CEOs, Sales Directors, CSOs or anyone responsible for achieving a target number, the first place you scrutinize is your pipeline opportunities and the associated forecast. And you may be one of that fortunate subset of sales leaders who are initially comforted when you see that you have a sufficient quantity of opportunities and appropriate deal sizes in your forecast to reach your year-end target. You may even breathe a sigh of relief.
So why do you still have that uncomfortable feeling in your stomach?
If you’ve been a sales leader for more than a short time, you’ve seen how a small pipeline delta can transform into a broad chasm very quickly—often in a matter of a few weeks. Pause for a moment and reflect on these questions:
- Do you have sales opportunities that initially progress through the early stages of your pipeline, only to have momentum stall, the deals stagnate and eventually be removed altogether?
- Do you have late-stage revenue that shrinks in value or disappears from your forecast without warning or explanation?
- Do you have sales pipelines that initially promise so much but fail to deliver on that promise?
If you answered “yes” to any of these questions, then it’s no wonder you might be getting a little uneasy in the back half of the year. The good news: There are some common but typically unseen root causes that are creating these challenges—and once you understand what they are, you can begin to take positive steps to quickly turn things around.
Why a “Healthy” Sales Pipeline Isn’t Always What It Seems
There are two frequently unrecognized issues that contribute to these problems:
- Focusing on Pipeline Quantity vs. Quality: A common challenge is that sales leaders will focus on the quantity of forecast deals, measured by such things as the number of opportunities + dollar value of those opportunities. Measuring the quantity is relatively easy with the multitude of CRMs and reporting tools available. However, measuring the quality of those deals can be tougher, too often drifting into subjective opinions and gut feeling.
Make no mistake, quality is the forgotten key to pipeline health.
Recommendation: Here are three simple questions that I urge you to go to the appropriate sales rep and ask for every opportunity in your pipeline. We call these questions the Funnel Filter. They’re not the only ones that you should be asking, but they’ll get to the heart of the quality of each deal.
a. Describe the five types of needs that the customer has expressed for this opportunity. In other words, does the sales rep really understand the opportunity from the customer’s point of view?
b. Identify the decision process the buying company will follow, including buying role of key contacts. (Is the salesperson talking to the people with the spending and/or decision authority?)
c. Are your customer commitments moving the opportunity forward? (Is there momentum in the deal? Or is the salesperson waiting for the customer to “get back to him”?)
If you’re not getting answers to these questions, you may want to verify that you’re not sinking time, costs and resources into deals that are never going to close.
- Failure to Align Sales Processes with the Customer’s Journey: There is another trap that sales organizations unknowingly fall into when trying to qualify and progress opportunities: having a sales process that doesn’t connect to the customer’s buying journey. Be very careful about attempting to progress opportunities through the activities that a salesperson is able to achieve in the sales process vs. the actions that the customer is taking throughout their buying process.
Reflect on the kinds of milestones that are built into your sales pipeline opportunities. Milestones such as “initial meeting completed” and “delivered capabilities presentation” can often contribute to bloated pipelines and inaccurate forecasts.
Recommendation: For every milestone in your pipeline that denotes a seller action, ask your team what commitments you need the customer to be making so that you’re both aligned. Then examine all pipeline opportunities and ask if the customers have indeed been making these commitments! It can be a sobering wake-up call, which is far better to get now while you still have time to take action and address it.
In our webinar with Training Industry Inc., we addressed these key pipeline pitfalls in greater detail, along with strategies you and you and your L&D team can take right now to make sure those opportunities convert so you can confidently hit those year-end revenue targets.