It's June and You are Behind the Number
As we hit the mid way point in the fiscal year this is typically the time when a VP of Sales wonders “OK, what do we need to do now?” You spent months planning and analyzing a GTM strategy, examining headcount, quotas, hiring plans, etc and yet… you are pacing behind the number. Also, just to make things more fun you are facing Q3 when annual attainment faces a huge uphill climb because quota increases (don’t forget about the Q4 bump as well).. Pressure is mounting and everyone is looking to you… so what do you do?
Everyone’s first reaction is to push more activity to build pipeline. Nothing saves the day than more deals. Then you play the card of rolling out sales enablement or demo certifications to improve sales efficiency. All sound moves BUT how do you determine where to focus the energy? Are the issues at the top of the funnel? Is it occurring mid-funnel? Or is there an issue closing deals across the org? Remember, every moment you spend in training is a time when your sellers could be selling.
Enter pipeline conversion analysis to save the day. Being able to study the lead to close process is critical but more importantly… you can assign a number to each step in the sales lifecycle. From there you can understand what to do to fix it, quickly. You can also measure what you planned for against what you actually did to make sure your plan is sound. Let’s use some generic examples which you can see below:
Step 1 is understanding the number of leads and how many are converting to MQLs. Are you using the right qualifiers to make an MQL? This is when your partnership with the VP of Marketing is critical. How do you align on the amount of leads and which ones are the top priority. In this example everything is ahead of the number so we can assume Marketing is doing their job.
Step 2 in the process is determining how many of those MQLs are taking an initial call and becoming a Stage 1 Opportunity. This metric is showcasing your relationship with the VP of Sales Development. How are the SDRs chasing the leads, getting them on the phone and then setting the initial appointment.
From here you can understand: do we have an issue with an SLA on your MQLs? Are the SDRs struggling to qualify the prospect? Are AEs being too stingy and rejecting too many leads? You can look at your conversion rates here to see if they are dipping and then see the downstream effect. In this example you can see those rates are far below what is budgeted. My instincts here would be to shadow/listen to some SDR qualification calls, measure demo request to appt times and shadow AE discovery calls to see if they are being too selective.
Step 3 is determining the conversion rates from a Stage 1 to a Stage 2 opportunity. This is when the prospect or project has been accepted into the pipeline and Sales has agreed to pursue this as a revenue opportunity. If you see it dipping or inconsistent there could be a couple culprits…. 1) AEs are struggling to understand the value of your product against the prospects' needs or 2) your SDRs are being too aggressive pursuing leads that are outside your ideal customer profile (ICP) just to meet their quota. In this example it appears that AEs are spitting on too many of the deals flipped over. I’m running dead lost analysis to validate this but I’m now starting to lean towards Discovery Enablement for the AEs.
Last Step is Stage 2 to Stage 6 “closed won”. The Hall of Fame Sales orgs have a winning percentage of 33% or greater. If you are at 29-32% that is OK but not great… Anything below 29% tells you that you have a selling problem and you need to launch enablement to reinforce your methodologies.
It also tells you that you need to get into the trenches, shadow calls, big deal reviews, etc. Nothing beats live interactions… You want to hear how the AEs are talking about deals (on the phone and amongst themselves). Do they sound like they know what they are doing or are they “story telling” when talking about deal?
Anything above 40% tells you that you have AEs who are cherry picking deals and are not being aggressive enough. This can lead to frustration from your marketing and SDR orgs which can affect culture internally. You have to walk that fine line of controlled aggressiveness when building the pipeline.
In this example I can see closing rates are down which confirms my suspicion of the problem… our AEs need more training.
Now there are several other ways to determine what is occurring within your pipeline. Running competitive/dead lost analysis, cohorting your pipeline to see trend lines, looking at ASP and is it increasing or decreasing? All are good strategies and should be done. BUT be careful to not overwhelm yourself with analysis (which can happen if you do all those at once).
This is why I love conversion analysis. Reading between the lines on the conversion percentages helps direct your energy and resources to the source of the real problem. You’ll fix your issues 99.9% of the time and get back on track.
If we reflect back on the “world is burning scenario” that I painted in the opening, you should feel some calm now after looking at your conversion analysis. My biggest fear as a VP was always the unknown of what is happening and what needs to be done. I can’t be on every call or every deal so I need to use my resources wisely to make everyone successful. Using this type of analysis allowed me to breathe and get everyone back on track.
