Sales Pipeline Prioritization: A Formula

    By | Small Business

    Have you ever noticed that the hardest working salespeople don’t always put up the best numbers?

    At my first sales job, I was always the first in the door and usually the last out. As a Sales Development Rep (making cold calls), I brought in the most leads every single month. After a promotion to Account Executive, I worked even harder. I worked longer hours and had a better win rate than the other AE, but somehow he consistently brought in 50% more revenue than me.

    After two months of struggling to meet quota, the other AE pulled me aside and explained exactly what I was doing wrong. I’m paraphrasing here:

    “Salespeople are hunters. A lion that chases every animal she sees will starve. If you split your time evenly between every deal in your pipeline, you’ll starve, too. You have to learn to prioritize.”

    But what’s the best way to prioritize?

    The answer is simple: Do the math.

    A bit of arithmetic will help you decide how much time to invest in each deal. The math is slightly different for everyone—depending on quota structure, sales cycle, and contract value—but this equation is a good starting point.

    Protip: There is no need to prioritize if you have enough time for all the deals in your pipeline. Also, the math is different if your quota is monthly but your sales cycle is longer than a month or two.

    Here’s what you’ll need to know to do the math (with example numbers added for clarity):

    1. How much is your time worth? I work roughly 220 hours per month (startup life), so I divide my monthly revenue goal by 220. If my quota is $90,000 in revenue, then each hour is worth roughly $400 in the pipeline.
    2. What is your chance of closing? Historically, my win rate is roughly 30% for all prospects who complete a demo. However, this number changes as the deal progresses—it’s OK to estimate.
    3. What is the deal worth? Determine the TCV (total contract value) or LTV (lifetime value), depending on how your quota is structured.

    Once you have this information, you can estimate the number of hours to spend on each deal. Here are a couple of examples:

    Deal 1

    TCV: $10,000

    Chance of Closing: 60%

    Projected Value: $6,000 (TCV x Win Rate)

    Value of 1 Hour: $400

    Budgeted Hours: 15

    .

    Deal 2

    TCV: $15,000

    Chance of Closing: 30%

    Projected Value: $5,000 (TCV x Win Rate)

    Value of 1 Hour: $400

    Budgeted Hours: 12.5

    Conclusion: Do not go over the number of budgeted hours you’ve calculated for each deal. Don’t chase every animal you see!

    Doing the math is easy. Having the discipline to consistently prioritize according to the data is not. One thing that all great salespeople have in common is strong time management and the ability to accurately prioritize their pipeline.

    Next time you are unsure where to focus your time and energy, this simple exercise can mean the difference between spinning your wheels and smashing your quota.

    This article was syndicated from Business 2 Community: Sales Pipeline Prioritization: A Formula

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