Prospecting, Funnel Metrics & GTR

In recent posts I have focused on messaging strategy and the 99 Questions Methodology to enable new customer prospecting efforts. In this post I’d like to discuss the topic of prospecting from a different perspective, and share with you a new partner relationship I’ve formed with Velu Pelani, CEO of GTR Consulting. GTR is a Chicago-based firm that specializes in Salesforce.com consulting. My sales operations background complements GTR’s extensive experience doing development and customizing Salesforce.com for clients. I want to share the story behind why I am partnering with GTR to illustrate an important sales management lesson.

We can all agree that prospecting is one of the most formidable job challenges for sales managers: coaching and motivating sales people to prospect is at best, a difficult responsibility. There always seems to be uncertainty about prospecting tactics (yes, we can stipulate that everyone hates cold calling), the amount of time dedicated to prospecting, how much prospecting is needed to make quota, and even where prospect “lists” will come from. Given this chaos, sales managers often ignore important prospecting fundamentals. Prerequisite steps are needed before kick-starting the process and subsequent pipeline management activities that take over a sales manager’s time and effort. Ignoring the fundamentals compounds this effort and creates problems in overseeing the pipeline, which I will illustrate in the story below.

Sales manager prospecting requirements came up when Velu and I reviewed a unique sales tool that extends Salesforce.com by aggregating the opportunity pipeline into a single graphical display. The tool allows sales managers (and their teams) to view and manipulate their pipeline much more efficiently than using reports or dashboards. It also identifies opportunities that don’t appear to fit in a particular sales stage for whatever reason (e.g., they age past certain point, etc.).

One of the tool’s strengths is its extensive capabilities to calculate an “ideal” pipeline. As we reviewed the product, I asked the following question: How does the tool determine the number of pipeline opportunities that should be ideally pursued at each stage in the sales cycle?  More important, on a broader level, how do tools like this address how many deals are needed above the funnel in order to make quota?

To be clear, the question isn’t whether the tool can calculate an ideal pipeline. The issue is, can sales managers really understand and apply this information in a meaningful way? To really leverage this or other tools, we need to apply a fundamental sales management practice known in the sales and marketing community as Funnel Metrics.

Funnel Metrics helps managers understand that from the very top of the sales funnel process (where leads are generated by marketing campaigns and/or where sales people cold call), there is a certain number of customer contacts you have to work with and move down the funnel so that you end up with the desired number of closed deals, resulting in your quota. When I consult with clients, I use a diagram that looks like this:

Funnel Metrics Diagram
Funnel Metrics Diagram

To determine your Funnel Metrics, first define the current or desired sales cycle stages you have in your sales process (six stages in the diagram). Then, take your total annual revenue number and divide it by the average revenue per deal to get the number of deals you need to win in a year.

Now put that number in the Close Box (in this case, 10). Work backwards from Close to figure out how many deals are needed at each stage, and how many are eliminated at each stage. For example, it takes 13 proposals to get to 10 wins, and 25 qualified deals to get 10 wins. You do this for each stage, finally getting to the Leads at the top of the Funnel. Each stage stands on its own.

You can calculate the Probability of winning a deal at each stage by dividing the number of deals at any stage into the number of Closed deals (e.g., 10 closes / 13 Proposals = 77% close rate.

Now you have a way to see where your overall pipeline is compared to the Funnel Metrics. It’s based on your actual experience, so no one can deny it (unless you are completely re-vamping your process, in which case you can create “ideal” Funnel Metrics to start). You can also compare individual rep’s pipelines against the Funnel Metrics see how they are stacking up. You can look at performance at each stage and determine how you need to coach each rep based on how their pipeline compares to the Funnel Metrics. Finally, you now know if there’s enough Leads to close the total deals needed to make quota. There is much more you can do with this as you might expect and I’m happy to share ideas with you.

Why is this important to Velu and his clients? While the concept of Funnel Metrics is not complex, Velu realized that neither he nor his client managers have a working knowledge of pipeline and funnel metrics practices inherent in the pipeline tool we reviewed. The value of these tools (like CRM itself) comes from knowing how to manage the process and the people in the first place. Tools support that knowledge, but they typically assume you already know what to do. I can say from personal experience that I didn’t understand Funnel Metrics when I first became a sales manager. (See my previous post about Sales MANagers versus Sales MANAGERS for more insight.)

As we pursue engagements with clients, GTR and I will work together to drive greater insights into client’s sales effectiveness by encouraging them to invest in their sales process and practices, and by working with the sales leaders to help them gain valuable insights into how they can improve sales team performance. This leads to better results from Salesforce.com and real efficiencies in managing the pipeline with pipeline tools found on the AppExchange. I am excited to be partnering with Velu and his team!

NOTE: If you would like a copy of my Funnel Metric Spreadsheet or would like to do a free 30 minute Funnel Metric exercise, please contact me by clicking here.

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