Take a moment to answer this question: How healthy is your sales pipeline at this very moment
What was the first idea that popped into your head? That’s right… The size of your pipeline. And your next step was probably to compare it to your overall quota. Three times quota? Four times quota? It’s the most classic measure of all, and it is founded on an assumption that has governed most sales forces since the beginning of the profession – Bigger is better.
I have come to believe that this measure of pipeline health is not only misleading, it is also too simplistic. In my firm’s work with companies that are the leaders in their markets, we’ve found that successful sales forces take a more robust perspective on the health of their pipelines. More specifically, they tend to examine three different pipeline characteristics to determine its health, namely, Size, Shape, and Contents. Let us examine each of these traits and the interesting interplay between them.
Size, you might think, is the easiest one to judge. According to our foundational assumption, a bigger pipeline is a better pipeline. However, recent research into pipeline performance revealed that salespeople with smaller sales pipelines are actually more productive than their peers with larger pipelines of deals. At first, this finding puzzled us, but after a little digging it became apparent why this was the case.
The reason why most productive sellers had smaller pipelines was that they were experts at disqualifying bad deals early in the sales cycle. By eliminating those deals that they either didn’t want to win or knew they couldn’t win, they were free to pursue fewer, more desirable deals with greater attention and focus. In fact, the smaller pipeline of active opportunities enabled them to make 20% more prospecting calls, conduct 25% more meetings with prospects, and close 50% more deals than their peers (by dollar amount). All this because they jettisoned the junk from their pipelines and used their time more wisely. As it happens, bigger is not always better.
This strategy of ‘jettison the junk’ also has a profound impact on the second characteristic of a healthy sales pipeline, Shape. If the bad deals are removed from the pipeline early in the sales process, a pipeline that is in good shape will taper dramatically at the early stage. Pipelines that drag a high percentage of deals late into the sales cycle and then lose them towards the end are junk pipelines. These pipelines are fat, but there is relatively little muscle. When it comes to sales pipelines, thin is in.
The final pipeline characteristic that high-performing sales forces obsess over is their pipeline’s Contents. By Contents, we mean the types of customers that are being pursued and the types of products that are being sold. Most companies have a stated go-to-market strategy. That is, they want to sell certain types of products (the most profitable ones) to certain types of prospects (the ones most likely to buy). However, salespeople have the happiest eyes in the world, and any deal can look like a good deal. For a pipeline to be healthy, the Contents of the pipe should reflect the company’s overall go-to-market strategy. There should be a blend of customers and products that mirrors the desired combination for the aggregate sales force. Senior leadership often scolds the sales force for stomping all over their marketing strategy, but management is somewhat to blame for letting it happen. Unless any revenue is good revenue in your company, you’d better keep an eye on what’s coming through the pipe.
In summary, our research and our work with world-class sales forces has shifted our thinking on pipeline health away from the traditional multiple-of-quota approach. As sellers become more effective and go-to-market strategies become more complex, the Shape and Contents of the sales pipelines are just as important and are highly intertwined with the pipeline’s Size. Size, Shape, and Content… Three critical signs of enduring corporate health.