Sales efficiency – the art of disqualifying in time
Efficient sales – pipeline control
If we knew from the beginning which deals we would actually win, I think all would agree that we would only be working with those deals. So, the earlier we can qualify opportunities and the better we do it, the less time we will spend on deals that will not be closed. The larger the opportunities, the fewer transactions we need to juggle simultaneously, and the better our life will be. Easy! Or…?
As the teams sales manager, one of your most important tasks is to improve and identify challenges in your team’s pipeline management and opportunity control. Pipeline efficiency should be your mantra.
Introducing pipeline efficiency
How much of your team’s time is spent on deals that will never happen?
Let’s say you get 300 online-qualified leads from marketing, and from those you close 10 deals on average. Great! But now look at the effort spent to get from 300 to 10!
Look at the picture below. All three curves start at 300 and end at 10. The conversion from lead to deal, win-rate or conversion rate is the same in all cases. The hours you and your team have spent getting there (the area under each curve), however, is very different…
You probably will have other names for your pipeline stages. These names are merely for illustration purposes.
The green rectangle in the bottom represents the work you do on the opportunities that actually become deals. If you had perfect information on who will buy from you and who will not, this is the effort you would spend. Needless to say, this will merely be your theoretical optimum cost of sale, but it will be useful to us as a reference for calculating our own ratios.
Consequence 1: Waste our time on “no-hopers”
The farther away from the green box you are, the more time is spent on deals that weren’t successful. The red curve represents a more inefficient pipeline, and the green line represents a more efficient one. The green line drops earlier in the process, because qualification is done better and earlier in the process. The red area, the difference between the curves, represents the improvement potential!
This is how much time someone at the red curve could save with better qualification.
You get the idea? Your pipeline should have the shape of a trumpet horn.
- The earlier it falls off downwards, the better. For every inch above the green line you are in any part of the process, you are wasting time and resources that you could have used on more leads, more prospecting, more sales…
- If your rep’s curve is very flat, only to drop off in the very late stages (the red curve), they are seeing the world though “rose-tinted glasses”, meaning they are hanging on to a bad qualification.
- The time spent on following up on no-deals is obviously lost time. This has a cost for the company, direct costs through salary and other costs, indirectly through the frustration for the sales rep, who may end up leaving (or get fired) when they never reach the expected numbers.
But, even more important, is the sales YOU COULD HAVE HAD if time was spent more wisely. If you manage to liberate 1/3 of your time for productive sales, you potentially will sell 50% more!
Consequence 2: Bad qualification makes bad forecasting.
There is also another reading you can make out of this. The red curve is common, because in sales, we tend to hope that everything will close, so as salespeople, we tend to hang on to old opportunities and bring them up month after month in our forecast, especially if we have few inbound leads to work with. This tends to give us a systematic forecasting error as well, as it will be very difficult to determine exactly HOW overoptimistic we are, and on HOW MANY deals.
Ever had sales tell you they would sell so much by the end of month, only to end up selling less than half? Bet you thought you were fine until the last week…. Beware of the rose-tinted glasses!
If you want a few ideas on how you can calculate your own pipeline efficiency, have a look at our article “How-to guide: Pipeline efficiency.“