Sales Pipeline Measurement Sets You On the Path of Sales Success

Article Date:

24th Apr 2009

Article Author:

Paul Gladen

In industries with dedicated B-to-B sales forces, for example software or capital equipment, sales pipeline measurement is serious business! Management is focused on measuring progress towards revenue targets, particularly when there are quarterly earnings expectations to be met, and sales professionals are focused on hitting their targets to achieve sales commission levels and bonuses. Management and sales stars have learned that sales success results from discipline, focus and measurement throughout the sales process.

Professional service firms, such as accounting, architecture and consulting, can learn a lot from the hard-won insights that other sectors have applied to the measurement and management of their sales pipelines.

Here are five key elements of sales pipeline measurement that should set you on the path to sales success.

1. Determine Your Measures

The first step is to decide what to measure. There is no single definitive or perfect set of measures. Businesses typically use a range of measures. In the figure below, you can see a number of commonly used measures and you can consider which ones could work best for you. These measures can be calculated and reported at the firm level, practice level, office level, individual partner level, or any other level that makes sense for your firm.

Measure	Description	Comments: Pros & Cons
Pipeline Value	$ value of all of the sales opportunities in your pipeline	Simple to calculate and understand Doesn't reflect the probability that opportunities will be converted and hence can be distorted by large buy unlikely opportunities.
Weighted Pipeline Value	Sum of sales opportunities where each opportunity is weighted by the probability of conversions (e.g. a $10k opportunity with a 50% chance of being sold has a weighted pipeline value of $10k x 0.5 = $5k)	Simple to calculate Can provide a more realistic assessment of likely future revenues Probabilities are highly subjective
Number of Opportunities	Raw number of opportunities in the pipeline	Simple but effective measure
Average Opportunity Value	Total pipeline value divided by number of opportunities	Simple to calculate and understand If the costs of sales conversion are high, firms should focus on raising the average opportunity value.
Sales Conversion Rates	Ratio of opportunities converted to number of opportunities pursued (e.g. 6 sales out of 10 opportunities = 60% conversion rate)	Low conversion rates may indicate poor sales capabilities or poor quality, initial opportunities If your sales pipeline has multiple stages, e.g. identified, qualified, proposed, closed—conversion rates can be calculated at each stage to gain better insights into the strengths and weaknesses of your sales conversion processes.
Lead Time	Length of time between initial opportunity and conversion (e.g. 90 days)	Lengthy lead times may indicate poor sales discipline or up-front qualification of opportunities
On-Sell/Cross-Sell Ratios	Measures of how many opportunities lead to or originate from prior client work as opposed to "green-field" opportunities	Follow on sales are typically much easier to convert than new client or new project opportunities hence targeting a significant "follow on" ration should improve sales conversion and cost of sales.

2. Set Targets

Once you have measures, you need to set targets. How big do you want (or need!) your pipeline to be? Think about how these measures interrelate.

If your revenue target is $10m and your conversion rate is 10% (hopefully not!) you would need $100m in new opportunities. Do you want to set a pipeline value target of $100m or instead set a pipeline value target of $20m and a conversion rate target of 50% to achieve your $10m revenue goal? And how do you want to achieve that $10m—10 x $1m projects or 100 x $100k projects?

3. Gather the Data

One of the often learned lessons of any kind of performance measurement is that it's a lot easier to decide on the measure than it is to actually measure it. In most firms, especially CPA firms, the challenge is often getting the partners and rainmakers to provide information on the opportunities they have, and hence to be able to measure the sales pipeline.

Here's one technique that regularly works to get the data coming in: Publish the metrics based on whatever data you have and when someone points out the numbers are wrong or missing enlist their help in getting you the right data.

4. Report the Metrics

There's no point in defining measures, setting targets, and gathering the data if it doesn't get reported. Here's a checklist for reporting your sales metrics:

Determine who should receive sales metric information—and whether different people should receive different information
Determine how often they should get it. Monthly? Weekly? Daily?
Determine how they should receive it. Delivered to their e-mail (and perhaps not looked at) or presented at a weekly sales pipeline meeting?
Determine the sales metrics report format. The simpler and clearer the information the more likely people will act on it.

5. Link to Accountabilities

All of this work will amount to nothing unless ultimately there is accountability for the firms results and hence accountability for the sales metrics that indicate progress towards revenue.

The buck needs to stop with someone for ensuring there are sufficient opportunities in the pipeline or for improving opportunity conversion rates. It is vital that firm leadership buys into the sales pipeline process and assigns accountability for sales results and the related sales metrics.

To make this stick, firm leaders may need to build sales metrics into the performance objectives and performance evaluation of practice leaders and individual partners.

Finally, remember that keeping score is something firms, especially CPA firms, intuitively understand. Use this fact to your advantage by using sales pipeline metrics to engage practice professionals in underlying sales pipeline activities.

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Paul Gladen

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Sales Pipeline Measurement Sets You On the Path of Sales Success

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