Chances are your pipeline is suffering from a fatal flaw based on delusions about sales that will never close (closed-lost). What’s more that delusion is flowing right up through the company. When reps pour all their opportunities into CRM and leave them unchanged for months, sales managers see a healthy pipeline and pass it along to the chief revenue officer. From there it goes to the board of directors. That’s four layers of delusion. But by year’s end the delusion rears its ugly head when only a small percentage of the business is booked. That’s when people get fired and your CRM becomes unusable as a sales forecasting tool.
If an opportunity turns cold – for whatever reason you are sure your prospect is not going to purchase your product or service – move the opportunity to closed-lost immediately. When you move an opportunity to closed-lost early in the sales cycle you’ll create a smaller pipeline and book a higher percentage of business. Let me share a hypothetical scenario with two companies that get very different results.
A Tale Of Two Companies
Once there were two companies. Both had been selling network security solutions for three years. They had comparable sales forces (in size and aggressiveness) and similar marketing budgets. Both had good products and great reputations. Yet, Company B closed almost twice as much business.
Company A had a pipeline of $10 million. The sales representatives worked their prospects aggressively and finished the year with $1.5 million in bookings for a close rate of 15 percent. Of the remaining $8.5 million, the sales manager deemed $6 million closed-lost at the end of the year and allowed reps to move $500,000 forward into the next year’s pipeline with revised estimated close dates.
|Company A||Company B|
|Pipeline||$10 M||$4 M|
|Booked||$1.5 M||$2.8 M|
|Closed-lost||$6 M||$1 M|
Company B had a pipeline of $4 million. The sales reps worked it aggressively and finished the year with $2.8 million in bookings for a close rate of 70 percent. The reps and sales manager deleted $1 million as Closed-lost and rolled $200,000 forward.
While the story is fictitious, it’s based on my real sales experiences with one difference. Instead of two companies, the results represent what happened both before and after I took a hatchet to the sales pipeline. When I come into a sales organization, the first thing I do is delete the 75 percent of so-called opportunities that are delusional and unqualified. We cut the dead weight and spend all our time on those that are left.
But here is the problem. Anytime you move a lead through the pipeline you’re spending time on it. If the pipeline is filled with junk, you’re wasting precious resources marketing to non-opportunities. When your pipeline represents a smaller universe of qualified leads, you’re focusing on prospects with the highest likelihood of closing.
So here are eight rules to help you cut your pipeline and book more business.
- Determine the probability of closing should rise as a lead moves through the pipeline. With each sales stage from qualifying through need confirmed and solution discussion to proposal, probability should go up because you’re constantly qualifying. Your funnel can start wide but it needs to narrow quickly.
- Apply Budget Authority Need Timeline (BANT) guidelines. Ask tough questions up front to determine budget, authority, and need. The sooner you can get prospects to say no, the faster you can closed-lost them. Similarly, delete leads that fail to move forward in a timely fashion. Leads allowed to sit in the pipeline for as long as two years don’t have a timeline to a decision.
- Remember that a pipeline is not a to-do list. Use your CRM to build a realistic bookings pipeline that feeds into revenue forecasting and is reported to the board.
- Dissuade sales reps from filling the pipeline with junk. Because it may take management two or three months to discover a problem, reps are trying to keep from being fired. What’s really happening is management doesn’t have a chance to intervene early and maybe help a rep close more business.
- Break bad habits and your close ratio will rise. After a couple of quarters of seeing how you want the pipeline managed, reps will understand the process. Break their bad habits, and your pipeline will grow and the leads will be better.
- Qualify out not in. You may think you want those contact forms filled out, but you really need people to self-select “in” because they understand your product and have a budget. If they don’t have the chops to buy, they need to qualify out and not waste your time.
- Don’t kick the can down the road. Keeping opportunities in the pipeline by revising the estimated close date out a few quarters is not the same as closed-lost. Delete them. If they’re interested at a later date, they’ll come back.
- Be realistic about your addressable market. Not every company is an opportunity. Build your pipeline based on criteria of companies proven to buy. Companies with similar criteria are your market.
When you use closed-lost to focus on your best opportunities and are realistic in defining your addressable market, marketing and sales can put their energy into companies with the highest probability of closing and book more business.
This article was originally published on HG Data’s blog.
This article was syndicated from Business 2 Community: 8 Rules To Increase Bookings By Focusing On The Best Leads
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