We saw a great blogpost by SBIGrowth.com about b2b pipeline health. Below is a summary of that article, and we’veadded to it based on our experience as b2b investors.
MonitoringPipeline Health. SBIstates that sales teams need to monitor “both the number of new opportunitiesentering the pipeline and the net new dollars those opportunities are addingeach month.” Absolutely true. Additionally it’s very important to make surethe leads that are filling the pipeline are primarily your ideal customerprofile (ICP). We’d also argue that ahealthy pipeline shows growth in the count of ICP leads, AND a reduction innon-ICP leads, even if that means a smaller overall pipeline. In that case, you’re adding high quality ICPleads that your team should focus on, and keeping out those non-ICP leads thatjust soak up sales team resources and time.
Achievethe 3x+ ratio. “Typically,the pipeline size needs to be three to four times greater than the sales goal.” We concur, although it’s probably closer to4x to 5x given we see the typical close rate hovering around 20%. SBI further states “If the pipeline sizedoesn’t support this ratio, it’s unlikely the rep will hit their numbers. Thereare essentially two ways for reps to address this challenge. They can increasethe size of the pipeline or improve their win rates or some combination of thetwo.”
Isthe pipeline shaped like a funnel? Thepipeline needs to look like it’s slimming as the leads progress through thestages. If it looks like a straighttube, then you’ve got bottlenecks in the pipeline. “The biggest issue I and my team see is bloatwith deals stuck in the middle stages. This is because opportunities are notactively managed, and reps are reluctant to give up on stuck deals. This meansthe sales team essentially has lost control of too many deals, and they do nothave clear next steps or a commitment from the customer to move to the nextstep. In these cases, I would recommendtraining the team to shift to a more disciplined sales process. Another issuecould be that deals aren’t properly qualified early in the sales process.Eventually, these deals stall out because of a lack of budget or seniorexecutive sponsorship.”
Furthermore, “the location of the bloat can tell you where the processneeds improvement. A bulge near the bottom of the pipeline means too many dealsare waiting to close. Maybe the deal advanced to that stage without being fullyqualified, or perhaps the customer’s budget or a decision maker changed. Thesales process needs to ensure that the rep actively works the deal to removeroadblocks.
While it’s crucial to consistently feed new opportunities into thepipeline, an excessive number of deals at the top but not at lower stages meansthe sales team may miss their quota in the short term. They may be adding toomany prospective deals based on optimism instead of qualification criteria.”
We’d also argue if the pipeline is allowed to look like a tube, then you’vegot a problem with sales leadership: it’s up to the VP of Sales to make sure AE’sare focused on the right leads, ejecting stale or dormant leads, not blowingresources including their own time unnecessarily, and ensuring the AE canactually close the leads at the bottom of the funnel or at least helping them.
Aredeals progressing at pace. Youmust compare “how long deals are currently moving through each stage to anaverage deal of that type. For example,how long has the deal been at the current stage compared to this average, andis the closing date appropriate for where the deal is in the sales process?” You want to see consistency in the pace ofICP leads. If you see inconsistency andit is an ICP lead, then you have a process or rep issue.
Monitoroverall pipeline but also pipeline by rep. We’d argue you should not just be looking at oneoverall pipeline, you should look at the overall pipeline AND an individualizedpipeline for each rep based on the leads they have. Compare those rep pipelines to each other,and if you see any issues in shape, deal speed, or close percentages, especiallycompared to your best reps, then you’ve got a rep issue.
The full article from SBI is well worth the read. You can find it at
https://sbigrowth.com/insights/blog/four-elements-to-gauge-the-health-of-your-sales-pipeline.
Thank you for your readership. Seemore blogs and SaaS data at blossomstreetventures.com. Email the author at sammy@blossomstreetventures.com orconnect on LI. No AI was involved in thewriting of this article.