If your not making your revenue number start by taking a long, hard look at your sales funnel. Here are some questions to ask and look for.
1. Are there enough opportunities with the right dollar value in the funnel to make your revenue number?
Let’s assume its January 1st and the start of your fiscal year. Your sales goal is $2M and your sales cycle is one year. Let’s further assume that your close ratio is 50%. If your funnel has $4M in it your in good shape to make your revenue number as long as your close ratio stays the same and no opportunities get stalled or leave. If you have $8M in your sales funnel then you only need to win 25% of the opportunities to make plan. If you continue to close at 50% then you are going to exceed goal by $2M. Tracking the number of opportunities and their dollar value is important. This measures volume. A best practice is to routinely look at the composition of your sales funnel.
2. Are the opportunities winnable?
All sales opportunities are not created equal. Quality is important. The closer the opportunities in your sales funnel match your ideal customer profile, perfect prospect profile, target customer or whatever term you use the greater the likelihood you will win. Typically, the target customer profile uses a combination of demographic and psychographic criteria.
3. Are the opportunities in the right buying stage?
A good sales funnel lists the stages or steps of the selling process and the buying process. What’s important is where the buyer is in the buying process. Buyers decide when they want to move forward or in some cases move backwards in their buying process. Their actions determine where they are in the buying process. If you haven’t mapped the buy-sell process then it’s a pretty safe bet that your opportunities are located in the wrong position in your sales funnel. The end result is your funnel-to-forecast accuracy is inaccurate. Ensure that each opportunity is in the correct stage by defining what customer actions have to be taken to be at that stage. If you have to move your sales opportunities to a new position its better to do it sooner rather than later. It may not make you happy to re-locate them but it will certainly give you an accurate portrayal of where the sales opportunities really are in the buying process. We call this funnel integrity.
4. Is there an appropriate product mix?
For most of us its not enough to sell just one or two products. In most organizations product mix is important because of margin, growth and penetration goals. A healthy sales funnel has a good mix of opportunities at all stages and with different products.
5. What is the funnel shape?
Shape equals balance. There must be enough opportunities in different positions or stages for them to flow with some predictability. If all of our opportunities are at the top of the sales funnel it will be some time before any revenue is generated. If all of the opportunities are at the bottom of the sales funnel then the quarter may look great but it may be a very lean period before more orders are closed if the sales funnel needs to be re-charged. As the opportunities move from one stage to another each one is becoming more qualified and thus more likely to buy either from you or someone else.
6. Are the opportunities moving or stalled?
To make your revenue number opportunities need to move through the sales funnel. We call this velocity. What is moving fast and what is moving slow? If opportunities are stalled there is a reason. No money, no more interest, poor timing and risk are common reasons for opportunities to stall. When this occurs develop strategies to move them forward appropriately.
Look for those opportunities that have velocity and are moving through the funnel at a predictable rate. Develop a strategy to get stalled opportunities moving. Always calculate the time an opportunity spends at each stage of the sales funnel.
7. What opportunities have exited the funnel?
At each stage of the sales funnel less qualified opportunities exit. Tracking removals is important. When opportunities leave the funnel there is a reason. Savvy Sales VPs know the reasons and look for patterns such as specific products, size of opportunities at specific buying stages etc. They also want to know if they can be rekindled at a later date. Savvy sellers loose early in the buying process and not later. Its painful to loose an opportunity that you have worked on for months after you have invested significant time and money and company resources. If you are going to loose- loose early.
In next week’s blog we will provide seven (7) more questions for you.