In the frenzy to close deals at the end of the quarter, it can be tempting to focus only on those imminent deals – but this is exactly the time when sales leadership should be thinking ahead to next quarter. You should always balance immediate forecast goals with longer-term sales pipeline development, and end-of-quarter is no exception. Spend some time thinking about these questions:
How much revenue do you plan to book next quarter?
Exactly how many new deals do you need to earn that amount?
Do you have enough pipeline to cover next month’s sales goals?
Are you creating good quality pipeline fast enough to replace the deals that close at the end of Q1?
Swayne Hill, VP of Sales at Mintigo, teaches us how to anticipate whether each of your reps have enough pipeline to hit their sales goals in his article on calculating weighted sales pipeline. Figure out if your reps have enough pipeline to hit their goals by following his steps:
Step 1. Model for quality, not just quantity
Quality is based on the time it takes open opportunities from any stage in the sales cycle to close-win, and win rate by stage. You’ll need to analyze your historical data to find these numbers – use InsightSquared if you have it, or import your CRM data into Excel and build a report.
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Let’s take an example:
Sales wins 22% of Stage 1 dollars in an average of 110 days
Sales wins 45% of Stage 2 dollars in an average of 80 days
Note that we’re talking about sales dollars, not number of deals. Also, number of days refers to the average time from Stage 1 or 2 to close-win, not the average time a won deal spends in those stages, respectively.
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Step 2. Calculate each rep’s weighted sales pipeline
Using the model from Step 1, you can assess the value of each rep’s pipeline by calculating their “weighted sales pipeline.” Weighted sales pipeline is the sum of total deal value in each sales stage, multiplied by the win rate for that stage. Then, spread the pipeline out over time using the “Days to Win” number for each sales stage (not the close dates).[image source_type=”attachment_id” source_value=”32376″ align=”center” lightbox=”true” width=”600″ height=”338″ quality=”100″]
At the bottom of this table, you can see we’ve compared the sales rep’s weight sales pipeline to their sales targets for several date ranges.
Step 3. Measure the gap
Now it’s time to answer the question “Do you have enough pipeline?” by comparing each rep’s weighted pipeline to their sales targets. In the table from Step 2, the row below “Stage 5” shows the total value in the pipeline in different time periods (30 days into the future, 60 days into the future, and so on). That number minus the sales target number in the same column equals the Coverage Gap. A cover gap above zero is good, below zero is bad.[image source_type=”attachment_id” source_value=”32375″ align=”center” lightbox=”true” width=”502″ height=”479″ quality=”100″]
Step 4. Take action
If your average winning sales cycle is less than 60 days, it is OK to see negative numbers in the 90-day and 120-day gap coverages because the majority of deals you win that far in the future are likely not in your pipeline yet. It is problematic, though, to see a negative number in the 30-day range. In your next one-on-one with this rep, you’d want to let them know they don’t have enough in their pipeline to hit their 30-day sales target and help them come up with ways to get more opportunities in the pipeline before it’s too late.