A sales pipeline is a view of all of your opportunities. As such, it must show everything — from a newly identified opportunity through to opportunities ready to close. A forecast, on the other hand, is only that smaller segment of your pipeline used to forecast expected revenue in a specific time period.
The mistake most sellers make is that they think only about the middle and latter stages proposal delivery and negotiation, for instance of their pipelines and ignore the top end of unqualified leads. The reason? The problem with this behavior is that it makes gauging pipeline health impossible for sales leaders and prevents you from:. Putting opportunities in the top end of the pipeline has nothing to do with those opportunities being certain to close.
It has everything to do with revealing the true quantity of opportunities in the marketplace, and measuring your true conversion ratios between every stage in the pipeline. Ultimately, this discipline will allow you to create accurate forecasts which are true reflections of your revenue potential from well-qualified opportunities. Stop talking about probability of close at each stage and start talking about percentage complete in the sales cycle.
The main difference between the pipeline and the sales forecast is that the prospective customer must meet certain pre-defined objective criteria to qualify for the sales forecast.
Prospects in the sales forecast are not at various points in the sales cycle; they are nearing the end of it. Sales forecasts help a company determine whether or not they can pay their bills, pipelines do not. It is very common companies to focus too much on the sales forecast and very little in pipeline management. However good forecasting requires a milestone driven pipeline process and continual improvement. A forecast represents a moment in time, and since the landscape is constantly changing, forecasts need to be continually refined.
You may experience changes in your business or in the marketplace that indicate that an additional milestone be added to your process. Each stage, as you work down the funnel, should have a higher probability associated with it. You should determine those probabilities by reverse engineering deals that you've won. Ask "Okay, what would be the probability based on those prior stages?
To recap, the first thing we're going to do is to have objective criteria for each stage. Then we're going to assign reasonable probabilities for each stage. The third factor is really important. You must track velocity to make sure there are only active opportunities in your pipeline.
This gets to the idea of doormat opportunities. When you track velocity, let's say, of a six-month sale cycle, a reasonable time and stage may be up to 60 days. But if you look at most pipelines, many opportunities are stalled out. To base your forecast only on active opportunities, remove these, or classify them as inactive. When we have an accurate sales pipeline, we can create an accurate forecast. But it's also the manager's role to help salespeople advance those opportunities, because the more we can advance our opportunities, the more business we're going to close.
That's the whole goal of pipeline management. We also want to help our sales people better qualify each opportunity. There are five questions you can ask about each opportunity to facilitate coaching. That may seem like a basic question, but the answer depends on asking the customers questions.
We need to make sure we understand what problem they're trying to solve. Unfortunately, many salespeople will give us somewhat of a circular response, "Oh, they're looking for a solution like ours. Why are they looking for a solution from us?
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