I still have to meet the sales executive who is happy with her/his pipeline. When you ask them for the reason of their concern, the answer usually is: “it is not fat enough”. How do they know this? Obviously from experience. They know that only a fraction of the deals they and their people are currently working on will be won. The rule of thumb often heard in the High Tech Industry is that one out of three deals is usually won.
The obvious thing to do, is thus to make the pipeline fatter. To pump it up by finding new deals to enter into the pipeline (Prospecting and Lead Generation). As sales people function best when they see monetary rewards for their activities, you might beef up your campaign for pumping up the pipeline with some extra incentives and you set a goal on the number of leads you expect from each individual. This makes perfect sense following the principle that you can only expect what you inspect and what you pay for.
Chances are that sales executives taking such a decision have just shortened the tenure in their current position. Let us see how this can happen.
If you are in a business where the sales cycle (Lead to Close) is some 6 to 9 months, the action you have undertaken will bear fruit at best after the time it typically takes to get a deal through the pipeline. So this action will not be of any help if you are faced with the risk of a short fall already in the next quarter.
Worse yet, you might just have changed your rule of thumb. If you do not have a rigorous qualification process in place which determines when a lead can enter the pipeline, your lead to close ratio might actually worsen. There is a high likelihood that you get the number of leads you have asked for. Your risk is that they are of lower quality and thus a smaller percentage of them can be won. If that is not bad enough, it can come worth. Depending on your Forecasting process, these lower quality leads can also beef up your forecast. The changes to make this forecast are though slimmer than usually due to the lead quality problem discussed before.
There is yet another aspect that can lead you into trouble applying your rule of thumb. If the deals you and your people are working on are not evenly distributed in the pipeline, let us say a higher than usual proportion is only expected to close within six months, then your feared short fall for next quarter will be even more horrid than anticipated.
The reaction to correct a too thin pipeline as described above is human. I see it a symptom of what I call “Sales Executive’s Tunnel View”. I will tell more about this phenomenon in one of my next entries. A further entry will then be dedicated to the question whether the pipeline is a good metaphor to describe our list of deals we are working on.
For a quick measure to prevent you from “Sales Executives Tunnel View” may I suggest that you have a closer look into your pipeline and then apply the principle “try to get more from what you have”? As you might already have guessed by now, this principle will also need some further explanation in a subsequent entry. Stay tuned.