Some sales managers are primarily focused on growing the number of opportunities in their sales pipeline. Others are more interested in making sure that the value, in dollars, of the opportunities in the pipeline is steadily increasing. Which type of sales manager is correct?
Well, both are. Don’t get into the habit of tracking only the number of opportunities in your pipeline or only the value of opportunities in your pipeline. Each metric is useful for different situations and you can save time by learning why and when to use one or the other. Read on to see how we break it down.
Why would tracking # of opportunities be more valuable?
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Dollar value estimates are highly subjective – The accuracy of opportunity value in your pipeline relies on your sales reps’ estimates. There is a good chance your reps didn’t qualify each one correctly. This is not their fault – sometimes, reps need to enter a value in Salesforce.com when the opportunity is only in the first or second stage, so they don’t have a good idea of how much the opportunity will actually be worth. Also, the value estimate does not take discounts into account. Each possible value range, no matter how accurate or inaccurate, still equals one opportunity – so number of opportunities in the pipeline is a far more predictable metric.
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Value analysis could be distorted by big opportunities – One or two abnormally large opportunities could throw your inflow/outflow by value out of whack because they don’t reflect the probability – or unlikelihood – that those specific opportunities will be converted into Won Deals. Count analysis is a more true representation of actual growth.
Why would tracking dollar value of opportunities be more valuable?
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Board members & investors care more about value analysis – The number of opportunities in your pipeline doesn’t mean much to your investors and board members. They’ll want you to spend more time going over the value in the pipeline – the amount of money you’re bringing in is a much more important metric to them as they plan the company’s financial future. Because value estimates are so subjective to reps’ estimates, make sure you analyze each opportunity before your meetings and leave out any opportunities that seem unlikely to close.
This should give you a better idea of how to think about each opportunity in your pipeline and when to talk to your reps about risky opportunities. The moral of the story: take each opportunity with a grain of salt and make sure it belongs in your pipeline before including it in your updates, reports, and forecasts. If, after a conversation with the rep who owns the opportunity, you still think it does not belong in your pipeline, have them take it out and explain why.
