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Managing sales pipeline is a key function of a sales organization. If we consider the revenue is the key output, pipeline is a key input that should be closely monitored. The following article presents two angles:

  1. Pipeline creation: are we feeding the sales funnel with enough opportunities?
  2. Pipeline coverage: will the sales funnel generate enough outcome to support the revenue target?

In other words, if we zoom on the sales funnel, we analyze the input and the potential output.

Pipeline creation: a race against time

The objective is to ensure enough pipeline is created to support the revenue target. It just focuses on pipeline created “in the past” (based on the creation date), it does not focus on the pipeline conversion, win rate, or destruction.

Let’s see how to define the pipeline creation target vs actuals, and how to enrich the analysis to translate the diagnosis of the situation into actions.

Target

The first step is to convert an annual quota into a pipeline creation target. A simple way is to calculate a ratio (i.e., how much more pipeline do we need compared to the quota). This article does not focus on how to calculate such ratio, but in short, the ratio depends on the business, the revenue type (as shown in the example above), the sales team, the product, etc. It can be defined based on historical win rates.

Example of ratios used in the software industry:

  • New Business: 5x
  • Upsell: 3x
  • Renewal: 1x

The second step is to convert the annual pipeline creation target into a weekly pipeline creation target. If we consider the pipeline creation should be linear within a quarter or a year, this is a mathematical exercise:

  1. Calculation of the weekly pipeline creation target
  2. Calculation of the cumulative pipeline creation target: the quantity of pipeline which needs to be created increased every week (“race against time”).

If we start with a quarterly quota, the weekly pipeline creation target should look like the example below (not a pure straight line).

Actuals

Our CRM tool gives us the pipeline created by “creation date”, so we can add the actuals to the graph as shown in the example below (assumption the analysis is performed in August and a fiscal year starting in January).

Note: we do not consider if the pipeline created is still “active” at the date of the analysis. The objective here is to focus on the creation.

Additional levels of granularity

To translate such analysis into actions, we suggest to provide additional granularity:

  1. Matching the scope of each individual in the sales hierarchy (sales rep, sales manager, sales director, sales VP, etc.), so that individuals can visualize where they are vs their target.
  2. Providing enough data, so that each individual can diagnose the situation and define an action plan (per revenue type, per product, per source, etc.).

Note: the source of pipeline is an important point (sales, BDR, Marketing, Channel).

We illustrate using 2 examples, but the limits depend on the complexity of the sales organization and the granularity of data available.

Pipeline creation per sales team

In the example below we can see that actions should have been taken several weeks ago with Team 4 and a few weeks ago with Team 3…

Note: it is not uncommon to observe a pause in pipeline creation at the end of a quarter because the sales reps are busy closing opportunities.

Pipeline creation per revenue type

In the example below, we can see that New Business is a challenge compared to Upsell.

Note: we removed “Renewals” because the pipeline creation usually follows a different process as the sales opportunities should be automatically generated based on existing business.

Pipeline coverage: a bar to reach

The objective is to ensure the sales funnel matured enough opportunities to support the revenue target. This analysis focused on the opportunities with a close date contained within the current quarter + 3 quarters (rolling 4 quarters or R4Q).

Let’s see how to define the pipeline coverage target vs actuals, and how to enrich the analysis to translate the diagnosis of the situation into actions.

Target

We calculate the pipeline coverage based on the same ratios used for the Pipeline Creation target (for example, 5x for New Business, 3x for Upsell and 1x for Renewal).

As we are focused on future booking we need the quota corresponding for the next 4 quarters. If the quota corresponding to the next fiscal year is not available, we estimate it (alternatively, we assume they are similar to the current fiscal year).

The pipeline coverage target can been seen as a bar because if the quota is broken per revenue type, each sales rep should have a coverage target per type. In the example below, the quarterly quotas are different, so the corresponding coverage is different too.

Note: in this example, we do not modify the target due to bookings occurring in the current quarter.

Actuals

Actuals correspond to the active opportunities with a close date within the current quarter + 3. If we want to analyze the evolution of the coverage, it is prudent to take a weekly snapshot of the pipeline (close dates can be pushed). In the example below, we just started taking snapshots in June.

Note: an opportunity is excluded if it not active (won or lost) or if the close date is not within the rolling 4 quarters. Additionally, the y axis is in dollar, but we could also use the ratio vs quota.

Additional levels of granularity

The same principles mentioned for the pipeline creation apply.

Pipeline coverage per sales team

In the example below, Team 2 and 3 have not developed enough pipeline. In other words, if we take as an assumption the quota and the ratios have been defined accurately, their future bookings are at risk.

Pipeline coverage per revenue type

In the example below, we observe that “New Business” and “Upsell” are barely keeping their “head above the water”. We could analyze how to keep the pipeline coverage consistently above the target.

Note: the same remark applies to “Renewals”, which explain why it has been excluded from the analysis.