How Much Pipeline is Enough?

With the new selling year under way, we are all focused on the numbers. New goals and quotas are being assigned. New territories are being distributed. With all of this you may be looking at your pipeline and wondering “Is this enough? Do I have a chance to hit my numbers with this pipeline?” It’s a common question and the answer is really pretty simple, provided you have the data.

If you have pipeline reports from 2010, dig those out. Ideally you should have several reports to review. The goal is to get as much information as possible covering several reporting periods. To calculate what you need in pipeline, take a look at how many deals you closed from the population of all deals. Divide that number by the total number of opportunities to calculate the ratio. (If you’re a sales manager use the team totals.) If you closed one out of five opportunities, then your closing ratio is 20%. Now divide your goal by the closing ratio and you’ll have your pipeline number.

Here’s an example. Let’s say that your quarterly goal is $100,000. Here’s what your pipeline looked like at the beginning of Q3 and Q4:

Q3 Pipeline Report				Q4 Pipeline Report
Opportunity Name	Amount	Closed (Y/N)		Opportunity Name	Amount	Closed (Y/N)
Table, Inc.	$10,000	Y		Widgets R Us	$13,000	Y
Samco Services	$5,000	N		Chair, Inc.	$15,000	N
Chair, Inc.	$15,000	N		Corp Connect	$5,000	N
Servco	$20,000	N		Airplane, Inc.	$17,000	N
Typo Supreme	$7,500	Y		Converse	$12,500	Y
Airplane, Inc.	$17,000	N		The S Factor	$1,000	N
Car, Inc.	$10,000	N		eBook Sellers	$30,000	N
Industrial Svcs	$15,000	N		Allied	$25,000	N
Allied	$25,000	N		Printer, Inc.	$5,000	N
Printer, Inc.	$5,000	N		Discover Svcs	$15,000	N
Total Pipeline	$129,500			Total Pipeline	$138,500

Going in to each of these quarters you felt pretty good about your chances of hitting your goal. After all, with a goal of closing $100,000 in new business, you had more than enough opportunities. All of these deals felt pretty solid. Several of your Q3 deals simply pushed in to Q4. So why did you fall so short of hitting your goal? You didn’t have nearly enough pipeline coverage.

In this example you closed two out of ten opportunities in each quarter, so your closing ratio was 20%. Now divide your goal of $100,000 by 20% to get your pipeline requirement of $500,000. That’s well above the amount that you felt so good about going in to each quarter. Yikes! Now take a look at your current pipeline. Does it support your goal? If not, it’s time to start setting some appointments! (More about that in an upcoming post.)

It is also worth noting that you closed $17,500 in new business, representing 14% of the dollar value of your pipeline in Q3. In Q4 that value was 18%. So is the closing ratio 20%, 14% or 18%? Good question. I would suggest using the figure that is most consistent across reporting periods, so in this example I’d stick with 20%. Otherwise, use the smaller of the two figures to be conservative particularly if you don’t have a large sample size to work with (3-5 periods). In that case you would divide $100,000 by 14% to get a pipeline requirement of $714,000. Over time you’ll find that one of the ratios will be more consistent than the other.

When you find that you have a huge gap in your actual pipeline versus your pipeline goal you have two courses of action: first, start building new pipeline as quickly as possible; second, improve your closing ratio. Neither of these is simple, but both need to be addressed in order for you to achieve your goals.

Whether you are a sales leader or individual contributor, it is absolutely essential that you understand your closing ratio in order to build the pipeline necessary to achieve your goals. Otherwise you are just guessing.

If you enjoy the blog be sure to subscribe to get my updates. And, be sure to check out my book, Click and Sell. Three Unconventional Emails with Extraordinary Sales Results".

The Rizzuti Five

I don't know much about the advertising industry, but I do know that agencies have had to reinvent themselves many times over the past twenty or so years. That, or they are one of the many bankrupt ad agencies littering the landscape. One of the wily veterans of the industry who has found a way to reinvent himself over and over is John Rizzuti.

John sub-leased space to my partner and me when we started our first company, Launch Associates. His advertising agency was called Rizzuti.com at the time - a reinvention of his prior firm. I got to know John fairly well, and what I came to like about him most is that John is a survivor. He's an entrepreneur who has seen the best and worst of times in the ad business. And, he's a salesman's salesman. He can recite Alec Baldwin's famous scene in Glengarry Glen Ross by heart. And he believes in the message.

One day I was packing up after a long day of cold-calling prospects. I was just about to leave when John stopped-by to say good night. He asked me what was up and I told him that I was headed home. He looked at me and gave me a big grin, held out his hand as if to show all five fingers and said, "Make five more calls". At this point in the day I was totally exhausted. Making five more calls was the very last thing I wanted to do. And it was approaching six o'clock.

I just rolled my eyes and laughed and kept packing my stuff, letting John know that I was done for the day. "Done-zo" as my kids would say. I don't remember his exact response, but it was something about being dedicated. He knew that we were just starting out and that we needed every break we could get. He challenged me to make "just five more calls" even after I had packed up. He was basically calling me a sissy if I didn't.

So I put my stuff down, flipped my computer back on, and made five more calls. And then it hit me. It wasn't so much about making five more calls as it was about going the extra mile to be successful. John had learned the hard way that if you're going to succeed, you don't pack up your gear at 5:00 and call it a day. You make five more calls.

I've referred to the "Rizzuti Five" many times since then. I have challenged reps to make those five extra calls when they think that they're done for the day. Some have grasped the concept and gone one to do great things; others have just laughed it off and gone home. Back to being mediocre.

My challenge to you is to make the "Rizzuti Five" part of your weekly plan. Consider a day where you can do something extra to give you an edge. If your routine has you packing up at 5:00, go ahead and pack up. Then grab the phone and make another five calls. You'll be outside your comfort zone, but you'll find the process exhilarating and it will motivate you to do even more. And, when you're done, do the math. If you make the Rizzuti Five a weekly occurence over 50 weeks, that's 250 extra calls you've made in the year. That could be the difference between hitting your number or not.

I look back fondly at my experience with John and Rizzuti.com. I'm grateful to John for the generous use of his space and his friendship. But I'm more grateful for the Rizzuti Five.

Time for the Annual Sales Meeting

As the New Year approaches, many sales managers are prepping for their annual sales meetings to be held in January. These meetings can be one heck of a challenge for planners who are typically looking to accomplish the following things:

• Recognize top sellers
• Fire up the troops
• Get the reps ready to sell new products and services
• Update the reps on industry and competitive information
• Have fun and entertain the reps
• Provide important marketing updates
• Give the reps some executive visibility and updates on company direction
• And more . . . .

This can be a daunting challenge. Reps are one tough audience. Many are very tired and/or hung-over on day two and have a hard time paying attention. Key managers ask for limited mind-share during the meeting. New reps and seasoned reps are at the same meeting, making for challenging messaging, particularly as it relates to getting the reps up to speed on new products and services.

One of the most successful sales meetings I've been a part of felt like more of a trade show with conference sessions. Even though the company was fairly small, there were several meeting rooms made available and the reps had a schedule that included attending sessions in each of the rooms. After general sessions (how the company is doing, industry updates, etc.) the reps would then attend a breakout session. This way the seasoned reps could travel together as a group which meant that newer reps were also grouped together. This gave the presenters two very different audiences and they could tailor their message appropriately.

What have you seen that has worked for your organization? What is missing from my list above? What topics would you add? How many days make for a good annual sales meeting? What topics would you eliminate from the list?