Effectively running a sales team requires decision making based both on fact and instinct. Sales pipeline and weighted sales pipeline value are often used to gauge the “Health” of a sales person’s pipeline and used as an indicator of how likely that sales person is to meet or exceed their sales goal.
The un-adjusted revenue and expected revenue by Practice Area by Sales Rep can easily be represented by the following pivot table:
If a sales person’s sales pipeline base revenue and expected revenue is much higher than expected - is that a positive indicator that the sales person will likely meet or exceed their sales goals? The initial fact and even instinctual answer is “Yes”, I think this sales person is doing fine. However, sales pipeline volume can often lead to a false positive, unless you also consider a more complex KPI which is Sales Pipeline Velocity.
Sales Pipeline Velocity measures the “speed of flow” of how fast sales pipeline is being converted into booked revenue. If velocity is ignored, every sales person’s sales pipeline is going to look better and better over time.
By measuring the “age” of sales opportunities, and their conversion to revenue over time, you can measure the relative speed of this sales person’s sales pipeline and relative performance.
In the example below, Oracle Fusion CRM shows this sales person has about $200K of sales pipeline that is 7 to 9 months old. There is about $1M of sales pipeline that is 6 months old and so on.
This person’s conversion is about 50% for month 6, 10% for month 7, and 20% for month 8. So as a sales manager we should evaluate if the sales opportunities being forecasted in month 6, 7, and 8 are still legitimate or if some of these should be disqualified as stalled.
Drilling deeper into the sales pipeline shows the sales stage over time, focus on the sales opportunities in month 7 are still in very early stages 01 – Qualification.
legitimate? Maybe this opportunity should be disqualified as stalled so the overall sales pipeline is more accurate to help provide guidance to the management team.
The critical take away point is to effectively manage sales pipeline you must measure the pipeline from many different aspects. Focus on the sales pipeline velocity in addition to sales pipeline volume.
All of the Key Performance Indicators shown were actual measures from BizTech’s Oracle Fusion CRM solution, we are happy to share our Customer Relationship Management (CRM) and Customer Experience (CX) knowledge with you, just contact us ltsao@biztech.com and happy selling!
