How Healthy is Your Sales Funnel?

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Complexity is on the increase in B2B Sales. According to research from Bain & Co, most enterprises have increasing sales expenses as a percentage of revenues, thanks to a net increase in complexity. Increased diversity of service offerings; an onus on the service provider to build a solution, rather than simply provide a product or service; and increased number of decision makers and influencers involved in a sales cycle all add up to make the sales cycle more complex.

The digital world is also leading to complexity in B2B sales. Less than 20 years ago, almost every service provider had a salesperson available on the other end of a phone line to take an order. Now we have a world in which websites and a whole host of MarTech providers have eliminated the need for order-taking ‘salespeople’.

The increase in MarTech pushes career salespeople firmly into the world of complex sales. The future of B2B sales is not an uncertain one – It is a complex one.

So, how does the increasing complexity of B2B Sales relate to Sales pipeline?

Pipelines suffer because of increased complexity. Opportunities can be derailed for an increasing number of reasons. We in the profession of B2B Sales require a greater number of deals in the funnel to ensure our target is hit.

We must ask ourselves the question: Is our pipeline coverage strong enough to meet our revenue goals?

Your experience and knowledge or the sales literature you have read may tell you that a 2x or 3x relationship exists between deals closed (at the bottom of funnel) and leads entering the mouth of the funnel, at the top. Traditionally, $300,000 in the pipeline at the top of funnel led to approximately $100,000 of closed business. You could rely on this. Your management told you this. Senior reps reinforced this. Maybe you too experienced this.

Times have changed. Look at your past 12 months: have you reliably hit your number in each quarter, without scrambling and without having to ‘push’ a sale faster than it deserved? Is it time to rework the maths? Is 3x still the multiplier? Is it 4x, 5x, or even 10x. Perhaps the top of funnel requires an increased focus rather than the bottom.

Let’s assume we arrive at the right ratio. What else must we consider, to ensure good pipeline coverage?

Most sales organisations work off and from revenue numbers only. The pipeline is measured generally as a total (quantitative) number – 800K, 1.2M, 1.5M, 2M etc. The number of transactions in the pipe are usually not called into question. Especially if you are a senior rep, your sales leadership will not speak about how ‘many’ or more appropriately, how ‘few’ deals you are working.

Measuring by revenue numbers only is a mistake. The measure must be Revenue and Number of Transactions (#oT).  #oT refers to the number of deals in the pipeline.

A pipeline containing a large revenue amount, with a low #oT count is risky. What happens when that ‘large opp’ slips? What happens when the decision maker for the other large opp stalls? We have nothing to fall back on to make up the lost revenue, and the pipeline crumbles.

Rather than focusing all effort on closing the biggest deal in the pipeline, we should consider building a funnel that has a balance of opps. Think redundancy. Think backup. Think replacement plan if it falls through. Build strength through the backup and contingency planning.

Another question we must ask: Are we investing too much time whale-hunting?

This question worries business owners and leaders: the consequences of an unanticipated loss, in a large contract, can mean business profitability is wiped out for the quarter (or longer), people are let go, and competitive advantage plummets. Savvy and experienced salespeople are also cautious of whale hunting.

Seasoned and successful sales professionals know the pipeline must include opportunities from all possible revenue streams. Selling one revenue stream exclusively because it is in demand or easy to sell at the present time builds weakness into the pipeline.

I managed a team of 44 sales reps nationally. We had five distinct revenue streams. I saw this as an ongoing challenge. Each salesperson seemed to have their own favourite revenue stream. The way we got around the challenge was measuring each account’s success by penetration: how many revenue streams have we sold into that account was a recurring question?

In your own business, if you are thinking long-term, you will ensure there is a full variety of opportunities in the funnel. When you have enough revenue in the pipeline, enough deals, and they are spread nicely across your organisation’s service offering … you give yourself better redundancy.

Make sure you are monitoring opportunity flow. Frequently, we add opportunities at the top of the funnel that stagnate over time. One of the biggest traps is assuming that a pipeline which ticks all the boxes and fulfils all the metrics is real and healthy. You must have a way to identify and clean out dead wood in a pipeline.

Most of us remove a deal from the pipeline when the customer buys from a competitor, or flat out says no – not interested. But when prospects express interest and then go quiet? We often keep these deals in the pipeline for months, even years.

It is worthwhile for salespeople to check in with these prospects occasionally and try to reignite the opportunity. However, it is incorrect to count these opps in the pipeline. To ensure a healthy pipeline, we must have a purge timeline. After a deal hits the 30, 60, 90-day mark with no activity, we should move the opp out of the pipeline and into a “deferred” bucket. Placing into “deferred” allows the rep to continue working it but doesn’t affect the overall accuracy of the sales pipeline.

If we are critical and completely honest with ourselves, rarely do we have a completely healthy pipeline. Such is the nature of Sales. The best response to realising our pipeline is a little weak is to get back to prospecting. We cannot control close ratios, or when a customer will be able to buy. We can, however, control how many potential opportunities we find. We can control our work rate, and our time spent on the road and on the phone.

To ensure a strong, healthy pipeline, focus on keeping it filled with fresh, net new opportunities. This is best done through relentless prospecting.

RK is the CEO & Co-Founder of Resonate.

RK is Resonate’s chief strategist, thought leader, and IT industry veteran. Our clients depend on RK to advise on their business strategy, channel strategy, and sales strategy. 

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