Introducing the sales pipeline
Ahh, the sales pipeline, one of the most important elements of all businesses and one of the least understood.
This article will help you understand why the sales pipeline is such an important element of your business and give you an insight as to how you can utilize it to get more sales in, reduce the pressure of selling and make a significantly more amount of money, very easily.
As I say in my book, Cellular Attitude; “It’s all in our heads”, this is never more true than in sales.
The great sales trainer Warren Greshes says in his sales training course, ‘Supercharged Selling’; “Business is never good or bad out there, it’s only ever good or bad inside your head!”
He’s right, of course. Any salesperson or businessperson that thinks business is too tough, that the market is dead and that there are no sales to be made is quite correct.
Conversely, any salesperson or businessperson that believes that there are sales to be made and that there are deals to be done is ALSO quite correct.
To paraphrase Ford; “If you think you can or you think you can’t, you’re right!”
SO, let’s first understand what the pipeline isn’t.
It is NOT the list of deals that your company will definitely be closing over a particular period. It IS a list of deals that your company may be closing over a particular period.
A sales pipeline, worked correctly, will ensure that your business is always busy, profitable and successful. This is NOT the Sales Funnel, although many people get the two confused.
Here’s an image of an empty pipeline.
You can see that we have ten silo’s, all currently empty.
Each silo represents a particular stage in the sales process. In this example the stages are:
- First contact
- Client interested
- Appointment made
- Meeting to discuss requirements
- Proposal submitted
- Proposal agreed
- Purchase order received
- Good or services delivered
Your business may have a different sales process, that’s to be expected, this is just a sample to give you an idea of the concept.
Each silo has a value in % terms above them. These represent the PROBABILITY of the deal going ahead, based on being at the stage they are currently.
In this example, it looks like this;
|PROBABILITY OF DEAL SUCCESS||DETAIL OF STAGE|
|40%||Meeting to discuss requirements|
|75%||Purchase order received|
|90%||Goods or service delivered|
Every completed sale goes through each stage of the sales process.
Sometimes, they go through the process very quickly and one could go from first discussion to purchase order received in the very first conversation. In other scenarios, it could take weeks to progress from one stage to another. Every business is different in that respect, but all business deals have a sales process that they go through.
Each prospective deal therefore can be placed in the corresponding silo that represents the stage that the deal is at.
Now, we also know that for every ‘First contact’ at 10% probability that becomes a ‘Paid invoice’ at 100% probability, nine ‘First contacts’ don’t make it all the way through the sales process.
According to the example, only half of the ‘First discussions’ move along to ‘Client interested’,
The percentage of probability is based on the knowledge that 10% of the first discussions we have end up being paid orders, in the example.
For example, you might know from your business KPI’s that half of your proposals submitted become paid orders, hence 50%.
Please note that you only get to 100% when the order is PAID, that’s something I’m pretty rigid on with my clients.
So, whilst there’s a clear objective of getting as many deals paid for as possible for your business, the real objective should be making sure you are filling your pipeline and moving the deals along the sales process.
Reverse goal engineering your business
With this in mind, you can reverse goal engineer your business to ensure you get the correct amount of deals through to achieve your business goals.
Let’s say that your average deal is worth £1,000 and that you require 10 deals PAID every month to ensure you achieve your business goals.
Reverse engineer the goals like this, using the sales pipeline.
To get 10 deals PAID, on average, taking into account that you may get an occasional bad payer, you need to send out 10.5 invoices. This continues through the process, for example, not all proposals submitted become paid invoices, therefore in order to get 10 paid invoices, you need to have 20 proposals submitted and so on.
Here’s what this chart looks like:
|PROBABILITY||STAGE DETAIL||LEADS REQ|
So, in order to get 10 paid invoices, your pipeline needs to be full of potential deals.
The sales pipeline is a conveyor belt
Think of the sales pipeline like a conveyor belt. The conveyor belt has ten stages that correspond to the pipeline probability of success stages. At the beginning of the belt, there’s a hopper. This hopper drops 100 ‘First contact’ leads onto the pipeline at the first stage. These 100 ‘First discussion leads are moved from the first stage to the second stage.
Of these 100 ‘First contact’ leads, only 50 of them make it through to the second stage, ‘Client interested’. The other 50 have dropped off. They have been removed from the conveyor belt. These are clients that were not interested enough to move forward. They remain in the database but once they have moved on to the next stage, they leave the first stage empty.
So, if the hopper doesn’t disgorge another 100 ‘First contact’ leads into that first stage, it will remain empty. This is an important aspect of the pipeline. Let’s just focus on a single group, and not have the hopper refilling the pipeline.
Let’s go back to our original 100 leads that are now only number 50 by the time they reach the second stage. So, you have 50 interested clients, you speak to them and try to make appointments. Of these 50 only 33 agree to an appointment with you. Another 17 leads fall away to go back into the database but come off the conveyor belt.
Now, of the original 100 leads that came onto the conveyor belt from that hopper, only 33 remain in stage three. Stages one and two are empty. These 33 appointments are followed up, some cancel, are taken off the conveyor belt and the remaining 25 leads move on to stage 4.
You have a meeting with the 25 remaining leads and 5 do not want to progress any further. These 5 go back into the database and the remaining 20 move to the next stage on the conveyor belt, ‘Proposal submitted’. At this point the likelihood of becoming a ‘Paid invoice’ has increased to 50%. There are now just 20 leads left from the original 100 and we are at 50% probability of closing.
The 20 leads continue along the conveyor belt, of the 20 proposals submitted 16 get agreed in principle, 13 have purchase orders raised, 11 are delivered and eventually 10 get paid. This is a sample of course. In reality, you want to get all goods paid for,
The point is that to get the 10 paid invoices through in the month, it required 100 first contact leads.
However, in this example, we didn’t get any more leads from the hopper and now we have a completely empty conveyor belt. The hard work has to start from the beginning as there’s nothing left to process.
This is a common error that businesses make. They get leads in, process them all the way through to completion and have to start all over again at the beginning because they neglected the pipeline.
How the sales pipeline should work
The sales pipeline should work like this:
Into the hopper (remember the hopper at the beginning of the conveyor belt?) goes all your prospecting activities. This can be networking contacts, email campaigns, leafleting, advertising, social marketing activities, cold calling, existing database leads, etc.
The hopper drips out ‘First contact’ leads onto the conveyor belt, and the process continues with these leads being moved along the sales pipeline.
The important thing to remember is that this hopper needs to be constantly fed. If it is constantly fed it will supply leads. If it keeps supplying leads onto the conveyor belt, the sales pipeline will constantly have leads that move along the conveyor belt to eventually become ‘Paid invoices’.
It means that in order to achieve your business goals, you’d need 289 leads moving along the conveyor belt to hit your ten sales everyone month.
The hopper needs to be fed constantly and the leads, at all stages of the sales process, need constant attention to keep the conveyor belt moving along.
A good CRM (Like the free ZOHO CRM as well as most to the others) will have a tool that can work as your sales pipeline.
Creating your own sales pipeline terms and probability percentages
The example above is a good guideline, however, your own business may have different elements to consider in the sales process.
To create your own version, write out the important stages of the sales process, then look to your own KPI’s (Key performance indicators) to calculate the ideal percentages and stages.
It’s important to be able to understand your own sales process in order to reverse goal engineer process to identify what sales activities you need to undertake.
Identifying and using the pipeline
The sales pipeline can be used to give you an immediate overview of your business today by looking at how many deals are in the pipeline and where they are to indicate what you can expect from the business over the coming three to six months.
If you’d like to discuss this with us at Cellular Attitude, or want to know how joining The Buccaneer Team can help your business, please get in touch on 020 8530 9797, visit www.cellularattitude.co.uk or www.buccaneerteam.co.uk