We talk to people all the time who have just been handed a goal by their board, and they are scrambling to figure out how they are going to hit that number. The goal is usually a big increase from the year prior, so the pressure is on to pull together a strategy that is aligned across all revenue teams.
So as a sales, marketing or revenue leader, how do you put yourself in a position today to hit your targets 3+ months out? How can you predict future gaps in pipeline and lead coverage so you can plan accordingly? How can you develop a revenue strategy to not only meet but surpass your goals?
The answer lies in your pipeline.
Reverse Engineer Pipeline to Hit Your Goals
Sure, having an accurate forecast is important, but it doesn’t ultimately help you hit goals. There is very little you can do within a month or quarter to affect your forecast. The work needed to hit goals comes much earlier, possibly months or years earlier.
Enter: reverse engineering pipeline. By understanding your goals, pipeline requirements, sales funnel, sales cycle, and the sales activities unique to your business, you can work backward to put together a comprehensive revenue strategy to hit your goals.
Step 1: Understanding Your Goals
The first step is understanding what the board or your executive team expects. Usually, goals are passed down as yearly or quarterly revenue targets. Those targets are typically split down further by territory, product, team, etc. With InsightSquared, you can take those revenue targets and visualize what you need to work towards. For example, the report below shows you your goals, but also gives you key insights into what your deals look like, such as average deal size relative to your revenue targets.
What are our targets this year?
Step 2: Understanding Your Pipeline Requirements
Next, you need to understand your pipeline requirements. Some companies call this a pipeline multiple coverage ratio. Calculating this ratio will give you high-level insights into how much pipeline you will need to hit goal. The industry standard is 4:1, meaning for every four opportunities you have in your pipeline, only one becomes a closed-won deal.
To have confidence in this, any pipeline coverage ratio calculation should be done using your historical performance. You can do this by looking at how much pipeline you entered during a specific time period (monthly, quarterly, yearly) and how much pipeline you closed. This should then be divided by the different segments of your business. For example, an enterprise team is going to have different multiples and ratios than an SMB team.
How much pipeline do we need to hit our targets this year?
The next step is to understand your general pipeline trends. Maybe your pipeline is growing at a rate that will support hitting your goals, or maybe your pipeline is falling short of what you need. The report below will allow you to visualize your historical pipeline trends over any period of time. InsightSquared breaks it out by opportunity stage so you can see how the balance of pipeline is changing over time. When we plug into our clients’ Salesforce data, we often see growing pipeline value but all that value is in stage one or two. This is a disturbing trend and an indicator of false pipeline.
How has our pipeline been staged historically?
Another important aspect to better understand your business’ pipeline requirements is to examine historical patterns and pipeline inflow and outflow. The report below shows you how much you are adding to your pipeline over time (inflow) and how much you are closing (outflow). Comparing the view below, inflow/outflow by count, against inflow/outflow by value is important to see how pipeline is changing over time. This can give you insight into how pipeline may behave in the future.
Is our pipeline creation trend going up?
Step 3: Understanding Your Sales Funnel and Sales Cycle
Now that we have a general sense of how much pipeline we need to hit goal, we need to get more granular. The sales funnel helps us do that. Typically, companies we work with are just looking at their overall win rate, but we can take it a step further. The sales funnel looks at conversion rates and win rates from each stage, based on your sales team’s historical performance. With this information, you can start to get a sense of how your pipeline should be balanced based on how likely you are to win from each stage of the funnel.
Another way that a lot of our clients use this analysis is to increase their overall win rate. This is another great way to hit higher revenue targets. By understanding conversion by stage, you can put together a much more efficient and comprehensive plan of attack to increase win rates once you uncover where the gaps and bottlenecks are.
How should our pipeline be staged?
Now that we have an idea of how our pipeline should be staged, we need to figure out the timing of that pipeline. The sales cycle by stage report as shown below gives us a sense of how long deals typically spend in each stage. When you enter a quarter or month, pipeline balance shouldn’t necessarily look the same as the end of the quarter or month. For example, if it normally takes us 30 days to move a deal from buying process to closed-won, we should really have any deals we think we will close this month in the buying process stage by the time we enter the month. There will always be exceptions to this, but identifying patterns will give you insight into which deals will close and if you will hit revenue targets.
When should our pipeline be staged?
Bluebirds are hard to plan for, but they do happen. The longer your sales cycle, the less you can count on them. We call these in-period deals. In our in-period report shown below, we show you how much revenue you can count on historically from bluebirds.
What about bluebirds?
Lastly, the pipeline flow chart below doesn’t necessarily address the topic of reverse engineering your needs, but it’s a helpful view of how the current pipeline state is changing as new opportunities enter the pipeline, opportunities push, and opportunities close.
How is the current state of our pipeline changing?
Step 4: Turning Your Attention to Sales Activities
Now that we have clarity on our pipeline needs to hit goal and what that pipeline should look like, we can turn our attention to sales activities. Unless you are just counting on accounts finding you and entering a sales process with you organically, your sales team must be doing work to drive pipeline.
First, we have to look at our historical activity ratios so we know what kind of work is normally required to create an opportunity. The types of activities included in this will depend on your business, but if we turn to the report below, we can see what it looks like for some generic activity types. It shows us how many calls are required to get a connect, how many connects are needed to get a meeting, and how many meetings we need to create a true opportunity.
From here, based on our pipeline needs, we can reverse engineer how much activity is required to hit goal. We may find that the team needs to do more activity, or the activity level required is too high. If that’s the case, we either need to hire more people or improve our ratios through coaching and better targeting. Switching this particular view to understand how individual reps perform is also helpful so we can expose what our top performers do.
What do reps need to do to support our pipeline growth?
Another helpful metric to track is pipeline creation by rep. Again, this shows us, on a rep level, who is driving the most pipeline. From here, we can start to uncover what the top pipeline creators do. Do they have certain talk tracks that they use? Do they focus on certain types of leads or accounts? Do they target someone specific within an account? If so, these behaviors can be replicated by the rest of the team to drive more pipeline and close deals.
Is each rep creating enough pipeline?
Once we know the activity requirements to hit our pipeline and ultimately our revenue goals, we need to keep the team accountable. You can take those goals and input them directly into InsightSquared and track each rep’s progress against their activity goals. Bringing transparency to what each person is doing day to day will start to change behavior and actually improve CRM data quality.
How do we keep reps accountable to the day to day grind of creating pipeline?
So the next time your board comes to you with a new goal or number to hit, consider this post and reverse engineering pipeline. By understanding your goals, pipeline requirements, sales funnel, sales cycle, and the sales activities unique to your business, you can work backward to put together a comprehensive revenue strategy to achieve, or even surpass, your goals.
Want to learn more about how InsightSquared can help you reverse engineer your pipeline to hit your goals? Get in touch with us here.