Your sales pipeline is a great leading indicator, but to keep the pipeline flowing, you need a large number of opportunities. Where exactly do these opportunities come from? How do they enter and exit your sales pipeline?
In this post, we will break down which factors contribute to the inflow, outflow, and net flow of most companies’ sales pipelines and why they matter.
What is inflow?
At the top of the funnel, many companies see their pipelines filled by all or some combination of these various avenues:
Marketing: produces content to engage prospective customers through webinars, blog posts, social media, videos, and so on. Opportunities sourced from marketing often have the highest conversion rates because the opportunities are people who have expressed interest in learning about things that mirror the product or service your company offers.
Outbound sales team: also known as “cold callers,” the team of sales development reps that reach out to leads to gauge interest in your product or service.
Channel partners: a person or organization that provides services or sells products on a company’s behalf. Companies use them to promote products or services, and in return, the partners are often given discounts or other perks.
Referrals: referrals from your company’s network, including friends, customers and investors. Produces the smallest number of opportunities in the pipeline but tends to have high conversion rates.
What is outflow?
Outflow from your pipeline includes all Closed-Won and Closed-Lost opportunities.
Closed-Won opportunities are good for your business, but they are also bad for your current pipeline because that potential value has now exited the pipeline.
Closed-Lost opportunities should be taken out of your current pipeline even if they can be reworked and eventually won. The reason for this is that if you keep that opportunity in the pipeline and revisit it months or years later, you have skewed your opportunity age data used for historical data trending and forecasting. (See why accurate opportunity age is a key forecasting metric here.)
Analyzing inflow & outflow
When evaluating the efficiency of these opportunity sources, the Win Rate of opportunities from a given source is much more telling than simply the number of opportunities created from that source.
Take a look at the chart below, which shows how many opportunities a fictional company won by lead source last quarter. Lead sources include several marketing sources like organic searches and eBook blasts, several outbound sales team sources like prospecting from a list, referrals, and partners.
At first glance, it looks like the blog might create the most value because of the sheer number of opportunities it generated. However, the blue dots – which represent win rate by lead source – indicate that opportunities generated through Twitter were actually the most efficient sources because they produced a Win Rate of nearly 25%. The blog, meanwhile, only converted winning opportunities at an 11% clip.
So: although you should know the number of opportunities that different sources bring in to your sales pipeline, it is more important to understand the Win Rates of these sources. Implement new marketing and sales strategies accordingly.
What is net flow?
The formula for net flow is:
[# Created Opportunities] – [# Won Opportunities + # Lost Opportunities in the same time period]
Managing your company’s net flow will help you track the overall trajectory of how effectively your company pulls in or finds opportunities and converts them into customers.
For example, for the fictional company whose data is represented in the table below, net flow in October 2013 is: 359 – [186 + 166] = 7.
Ideally, you would like to see your net flow increase steadily over time. Unfortunately, that can’t always happen because it is difficult to increase both the quality and the quantity of created opportunities. If your net flow dips below 0 like it did for this company in March and August, it means there is a diminishing number of opportunities in your pipeline to work on. Your next step will be to find the root cause of this drop and work with leaders in marketing to get that net flow number up.
Which metrics do you find to be most useful when evaluating inflow and outflow of your sales pipeline? Share your thoughts below!