How to Manage a Sales Pipeline

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Good economic times sometimes mask bad sales behavior. Even during boom times, pipeline management is critical. Here are a few pipeline management challenges facing salespeople:

Underpressured pipes
Even in great economic times, some salespeople struggle to find enough viable sales opportunities. The salesperson can have a tough competitor in his or her market. The salesperson could be brand new. Some salespeople can also rely too heavily on the big deals that fall through. Whatever the reason, these salespeople don’t have enough opportunities to fill their pipeline. This lack of opportunity leads to frustration and even self-doubt.

Overpressured pipes
Pipes can only contain a certain amount of material; a sales pipeline can only sustain a certain amount of opportunities. To focus everywhere is to focus nowhere. An abundance of opportunity creates an absence of focus. Salespeople miss details and must spread their attention.

During these peak economic times, opportunities can be taken for granted. Each opportunity becomes increasingly replaceable. Salespeople tell themselves, “It’s all right that I lost that opportunity. There will be another one.”

Clogged pipes
When pipes clog, nothing gets through. The same is true for sales pipelines. Too often salespeople fill their pipelines with massive opportunities that take too long to close. These massive opportunities obstruct the progress of other opportunities. Managing a pipeline is about achieving balance among various opportunities.

Whether you have underpressured, overpressured, or clogged pipes, the result is the same – poor performance. Identifying the issue is the first step. The next step is to fix it. Here are a few tips to help you more effectively manage your sales pipeline.

Label your opportunities
You can break down any opportunity into these three categories:

  • A red-hot opportunity (RHO) is a high-probability opportunity that is more “when” than “if.” You are 90 to 100 percent sure it will happen short-term.
  • A viable opportunity (VO) is a moderate-possibility opportunity that is more “if” than “when.” You are 50 to 90 percent sure this will happen in the intermediate future.
  • A potential opportunity (PO) is neither “when” nor “if.” It is “maybe.” You are less than 50 percent sure it will happen long-term.

Once you define your opportunities, remember to apply the 1:2:4 ratio. For each RHO in your pipeline, you need two VOs and four POs to maintain a steady flow of business. Another way to frame this is that for every short-term opportunity, you need two intermediate opportunities and four long-term opportunities.

For example, let’s say your monthly quota is $100,000. By applying the 1:2:4 ratio, you’ll need to maintain $400,000 in POs and $200,000 in VOs to attain the $100,000 quota. Achieving this will add balance and stability to your performance.

Review your opportunities regularly
Always be aware of where your opportunities are in your pipeline. On a weekly basis, analyze your sales pipeline.

Review your RHOs and determine what needs to happen to close the deal. Review your VOs and determine what needs to happen to heat up those opportunities. Analyze your POs and determine a strategy to turn them into more viable opportunities.

Every time you win (or lose) a sale, it’s no longer in your pipeline. Celebrate your successes and learn from your failures. And then find more opportunities to backfill the opportunity, won or lost. Likewise, every time a potential opportunity becomes a viable opportunity, you’ll need to find another potential opportunity.

Clean your pipes
Too often, salespeople allow opportunities to sit and settle in their pipeline. Salespeople don’t want to admit defeat. Foolish optimism takes over, and they become prisoners of hope. You can’t build a house on a weak foundation, just like you can’t build an accurate pipeline with weak data. It’s critical to purge your pipe regularly.

Some salespeople leave opportunities in their pipeline to gain a false sense of security. Salespeople will mask their failures until they can replace dead opportunities. A false sense of security is more harmful than insecurity. A positive sense of insecurity will compel you to act. For some salespeople, the loss of an opportunity can be more motivating than a win.

Review the size and timing of each opportunity. If you are working an opportunity that is three times the size of your normal opportunity, it’s less likely to happen. Don’t mistake that statement as pessimism; it’s just reality. Calculate the average time it takes to close a deal. If your pipeline is filled with opportunities that take three times as long to close, these deals are less likely to happen. I’m not suggesting that you abandon these opportunities. Balance these opportunities with smaller, short-term wins.

In sales, you cannot control the outcomes. You cannot control the buyer. Very few people can handle this level of uncertainty. Although you can’t control the outcomes, you can control the inputs. Use these tips to manage your sales pipeline more effectively. Managing your pipeline effectively ensures a steady inflow of new opportunities.

Paul Reilly is president of Tom Reilly Training and coauthor of Value-Added Selling, fourth edition (McGraw-Hill 2018). For additional information on training programs, call or email Paul at 636.778.0175 or paul@reillysalestraining.com. You can also visit reillysalestraining.com and sign up for his free newsletter.

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