A common mistake I have seen companies make in analyzing their sales pipeline metrics is focusing on the tail end of the Revenue Realization Cycle (RRC). These include:
- Closing ratios,
- Sales cycles,
- Forecasting what will close this quarter.
Focus on Sales Pipeline Metrics
Focusing on these elements of the sales processes keeps them from performing all the necessary upfront work. The work needs to happen prior to these stages. Champion boxers say that the fight is won in the gym, not in the ring. To clarify, if they adequately prepare for a fight and are in great shape, they have the best possible chance of winning the fight.
In the same way, companies that measure only the tail-end of the RRC are basically entering the ring unprepared and expecting to win the fight, simply by trying hard. Truthfully, unless they have very short average sales cycles (less than 1-2 weeks), their ability to impact the current quarter’s outcome is minimal.
For companies whose sales cycle length is longer than 30 days, the battle to achieve quarterly revenue targets actually started in the previous quarter. If they didn’t start last quarter, they most likely will lose the battle this quarter.
If you don’t know your Funnel Math or desired sales pipeline metrics (how many impressions you need to generate qualified leads that result in your quarterly revenue targets—as well as how long it takes to do these), you don’t know what to measure to support revenue objectives.
How many impressions (touches, including number of emails; direct mail; ads; etc.) will it take to get to the optimal number of raw leads? How many to get to the right number of warm leads to hit your revenue target? Once you know the number of impressions required, you will need to understand the conversion rate of Marketing Qualified Leads (MQLs) and Sales Qualified Leads (SQLs). Are your MQL-to-SQL ratios 10%, 5%, or less? Knowing these numbers are essential elements for creating successful demand generation campaigns and building an SQL funnel or pipeline.
How many dials, on average, does it take to get a conversation with a decision maker? Who cares? At the end of the day, if your Sales Development (SDR) team isn’t having daily conversations with decision makers, you aren’t going to build a sales pipeline or generate revenue. To achieve this, your team must make a minimum number of daily dials to reach decision makers. There are tools out there that track phone connection rates and enable your sales team to “log a call”. In general, these tools are good and can support the day-to-day sales pipeline management of your team.
However, we recommend that you focus on the daily number of conversations that your sales reps have with decision makers. All opportunities to speak with decision makers can move the sales process forward. Call logging tools don’t track this kind of data; you will need to build this process into your CRM (SDR CRM Field Mapping Resource Here). Building the SDR Fields and metrics into your CRM will keep your SDR’s on their game, and give managers insight into the activities that matter.
Building the Sales Pipeline
MQLs take time to be nurtured and developed before they become SQL’s. Therefore, you’ll need to build a SQL pipeline to support the Sales pipeline. Most companies have no concept of a SQL pipeline, which is usually 4 times the SQL quota. Normally, 25% of SQLs convert to sales pipeline, but your ratios may differ.
You’ll need MQLs and callers to build a SQL pipeline. These are the front-end Revenue Recognition Cycle numbers and conversion rates you will need to track, measure, and know definitively.
In addition, make sure that you have a SQL quota for each Teleprospector. Track the SQL funnel regularly in order to get an accurate picture of your SQL-to-Closed Deal ratios. Knowing these RRC numbers will help you meet your key sales pipeline and revenue targets.
Download the free CRM Field Mapping Resource here.
Read the book The Radical Pipeline Strategy: How to Grow Pipeline and Revenue by Optimizing Sales Development. This book outlines tested best practices and implementation strategies that I developed while rebooting and building 65 SDR and Inside Sales organizations.
Find out more about SOMAmetrics’ Intelligent Prospecting Platform and get free resources on our website at www.somametrics.com.