As salespeople know, the pipeline is a vital part of the sales process. But what is the usual definition of a sales pipeline? It may be a list of prospects at various points in the sales cycle, from leads to those ready to close. At times, a sales pipeline could be a set of leads and nothing more. In order to maximize the sales process, the sales pipeline must be a well-planned management cycle with specific components. In this view, today’s sales pipelines are not quite fact, but not quite fiction, either. Let’s find out how to upgrade that sales pipeline into a true sales cycle management system.
The first component of sales cycle management is opportunity management. In short terms, opportunity management is the act of focusing on the most promising sales possibilities. When you manage opportunity, you are expending energy and time on probable sales instead of the “maybe’s”. But how do you go about managing opportunities? First, you must identify them. Which possible sales are moving forward? Which ones, based on forecasting, will be more likely to close?
Next, prioritize the list based on expected income generation, time to close, and expense. Finally, allocate resources to those opportunities. Sales people can also maintain their list in “top ten” or “top five” format, that is, focus on the top opportunities and update them constantly as the sale moves forward.
Next, sales forecasting is an important component of your cycle. Forecasting is simply the prediction of sales based on past numbers – along with analysis of existing conditions.
When you forecast, you’re creating an objective view of the future and rooting your sales pipeline in reality as opposed to “fiction”. Forecasting also gives a good view of the price of products as well as the cost of closing sales. But to be completely rooted in reality, your forecast must take into account the factors acting upon sales, including seasonal need, general economic conditions, competitors, and consumer conditions. There are various formulas for sales forecasting based on qualitative and quantitative measurements, but you have to determine which one is right for your organization, products, and sales measurements.
The third component of the sales cycle is account planning, or building a realistic sales plan. From your opportunity management and sales forecasts, you can establish sales goals, strategies, and tactics. As part of account planning, you should take these goals, strategies, and tactics all the way down to the individual customer level. By doing this, you’ll be able to develop sales plans for the best opportunities – and break goals down into time periods. The combination of plans for opportunity and time-based goals will create a strong account plan.
The final piece of sales cycle management is performance analysis, which essentially closes the gap on your sales cycle. Sales performance analysis is sometimes brushed aside in favor of “keeping the cycle moving”, but you should spend a considerable amount of time and energy here in order to adjust your entire process. In order to analyze performance, you first need to know your close rate. From knowing this bit of information, you can improve your definition of a qualified lead in opportunity management – if close rates are low, your opportunity management process is out of line. Through your analysis, though, you’ll be able to shorten your entire cycle by spending targeted, quality time on the most probable sales. You also need to review sales goals consistently, by time period. Are sales falling far short of the goal or in constant excess? What you find out may again point to flaws in the other components of your process. Another point in performance analysis is to audit each sale and determine how much was spent to generate the income from the sale – everyone involved in the sale should understand the profit margin. As you consistently analyze sales performance, you’ll be able to make adjustments at all phases of your sales cycle.
So a traditional “sales pipeline” is not necessarily “fiction”, but it must be modernized to include the four components of sales cycle management. In our next series, we’ll look at each individual sales cycle component in more detail so that you can move your pipeline into firm reality.