Siftwork Short Article

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1 Siftwork Short Article Business Pipeline Management As on the athletics track, a few sales victories are won by luck, but consistent performance requires planning, fitness, technique and faultless execution. Business pipeline management brings together techniques to analyse, control and improve the business acquisition process including early business prospecting or lead generation conducted internally or externally conversion to orders by direct sales personnel review and action to shorten sales cycles, reduce opportunity losses, raise margins. Successful organisations have documented their most effective sales processes. Sales processes are divided into stages, see this very simple example. 1 receive enquiry 2 validate enquiry (qualify) 3 pass technical trial 4 negotiate price/delivery 5 receive signed order. Each stage has a target duration which might vary even in one vendor organisation according to product, territory or sales value. Likewise each stage has a target conversion ratio to the next stage. Conversion may also vary by product, service, region, etc. At each stage a gateway occurs, for example, the customer s acceptance of the product trial is a gateway that unlocks the progress of a sales opportunity from one stage to the next. Multiplying the conversion at each stage indicates the overall conversion. Clearly, a 50 per cent conversion ratio at each of 5 stages represents an overall conversion of less than 10 per cent. The lower the conversion ratio, the greater the waste of sales resources. Not all Opportunities have the same revenue value or margin so in addition to setting targets for pipeline dynamics and stage conversion, it s also vital to do the same for pipeline value, margin and discount. Pipeline Management Issues Lead allocation and progression In many businesses the allocation and progression of leads, enquiries and opportunities is not successfully managed therefore Insufficient or inappropriate leads are progressed Leads don t always get to the best equipped sales person or team Businesses sometimes fail to monitor the follow up of leads Sales people sometimes hide early stage opportunities from management to avoid scrutiny Pipelines are often top- or bottom-heavy or contain too many slow-moving opportunities at mid-stages resulting in unfit profiles Individual pipeline stages often contain? too few opportunities? too many opportunities? opportunities with wrong value profile

2 Short termism Too much management time is often spent scrutinising imminently closable opportunities that affect short term performance and incentives while the longer term pipeline is neglected. Opportunity cost and inefficiency Businesses suffer cost and efficiency penalties because Opportunities take longer than necessary to close leading to excessive consumption of resources Opportunities are discovered too late and competitive pressures force down margins Opportunities are lost late in the pipeline once they have consumed substantial resources. Lack of confidence in forecasting Many senior executives have lost confidence with any type of bottom-up sales forecasts or pipeline planning. In our experience, they tend to disregard these inputs because they lack rigour and they are consistently wrong; always plummeting in the last few days of the period. Senior executives often prefer to use extrapolations and models. This is unfortunate since, when professionally managed, the business opportunity pipeline is capable of providing critical data for more general business resource planning and for communicating with directors or investors about the future of the business. Pipeline value fitness The purpose of pipeline value fitness measurement is to assess the cover for the later stages. At stage 1 (below) we have a value pipeline of approx eight times that at stage 6. However, at stage 4 we seem to be managing a peak of business potential. Is this deliberate, for example, because of a known seasonality, or does it absorb too much resource form capturing new opportunities at stage 1? Actual value at each pipeline stage Pipeline stage Sum of of Actual value (currency units)

3 Pipeline opportunity count fitness In the pipeline of the business depicted below the ideal (broken line) opportunity count relationship between stages 1 and 6 is 130/9. In other words, for each 14 opportunities entering the funnel we expect to close 1. Right now we only have 78 opportunities at stage1. What are the consequences for our business? Is our lack of focus on stage 1 due to the bulge at stage 4? Ideal and actual count of opportunities by pipeline stage Pipeline stage Ideal opportunity count Actual opportunity count Count of opportunities Opportunity value analysis Each stage in the funnel must cover the pipeline revenue plan (see below). Excessive cover at Stage 4 may not contribute to future success. On the contrary, the bulge at Stage 4 may prevent discovery of enough new opportunities at Stage 1, from which there is typically a high loss rate. Sum of Actual value (currency units) / Pipeline stage Stage 1 Stage 2 Stage 3 Stage 4 Stage 1 4, % Stage 2 1, % Stage % Stage 4 2, % Stage % Stage % Total: 10, % Stage 5 Stage

4 Opportunity count analysis Because typical conversion rates from stage to stage are known, the most efficient performance requires that pipeline stage targets should be met. In the charts below they are not met except in Stage 4 where they are significantly exceeded. Unless seasonal influences are at play, this excess is likely to be a detraction from new business prospecting. Actual and ideal count of opportunities at each pipeline stage Stage 1 Stage 2 Stage 3 Stage 4 Actual count of opportunities Ideal count of opportunities Stage 5 Stage 6 Our approach First we collect information from our client s internal team about their pipeline management process. This might include interviewing business planning, marketing, sales, general management and other team members, as well as users of the pipeline information. Unless clients already have these metrics in place we help them to Identify their sales process, its stages and the hurdles or gates that must be achieved to pass from one stage to another. Clarify the number and value of opportunities at each stage Display the overall fitness of the funnel (for example, are there enough early stage opportunities to support the next period s business plan?) Reveal the dynamics of the funnel stages including? overall conversion velocity? relative speed to close for different enquiry sources? dwell times at each stage. Understand the conversion efficiency of each stage (how many stage 4 opportunities are converted to stage 5) and implications for stage volumes Conduct win/loss analysis that reveals? How many opportunities are won? How many opportunities are lost? How many are withdrawn by the customer? How many are abandoned by the vendor? Examine the opportunity loss profile comparing the number and value of losses at each stage, perhaps further analysed by team or geography

5 Collection of data Any Business Pipeline analysis requires collection of data. Many clients already have a CRM or sales automation application in place. It doesn t matter much whether this is a sophisticated system with hundreds of users or simple deployment of ACT!. In this case we embed the sales process identified in that application. When the sales team members update the opportunity data calendar, win/loss and stage information is captured and stored. In many CRM applications, once captured, this data is not easily accessible. However, we can access it using either the application s own analytics or with additional reporting tools. Where no such CRM application is in place we can either recommend and implement one or agree another data capture approach. Once armed with data we recommend initiatives that Accelerate opportunities through process stages Protect deals at vulnerable stages Avoid purely comparative tendering See all the opportunities being worked by the sales team Reflect territory and functional changes in measures Configure sales automation and CRM applications to processes Estimate and compare profitability of each opportunity Plan dedicated resources to support individual stages. We deliver process improvements through Team workshops and education New procedures New reports, analyses, dashboards and scorecards New incentives Better alignment of objectives between sales and marketing and with outside suppliers like? lead generation teams? CRM and sales automation solution vendors More Information Thanks for taking the time to read about our approach to Managing the Business Opportunity Pipeline. By contacting us you can request more information a discussion a free on-site audit of your current information sources. Contact Mike Meyer at +44 (0) (0) mike.meyer@siftwork.com

6 About Mike Meyer Mike helps businesses which sell technical products and professional services to reap greater value from their CRM investments. For example, by deploying detailed transaction and service history previously locked up in operational databases to remote field sales staff. Mike has hands-on implementation, customisation and training experience with several sales, marketing and CRM solutions. He has a CRM specialist certification from Sage and is a Business Objects accredited consultant. Mike launched his own company, Siftwork, in Previously Mike worked at Business Objects as a CRM analytics consultant to top European businesses. He joined Business Objects from Baan where he was world wide product marketing director for Baan Front Office, Baan Company s suite of automated sales, marketing, contact centre and order management applications for manufacturing companies