In today’s hypercompetitive B2B world, every sales leader is challenged, or maybe I should say stressed-out, by four key questions:
- Is there adequate coverage in the sales pipeline to make the number?
- Do we have confidence in the quality of opportunities in the pipeline?
- Can we commit the number?
- Do we have the right cadence in our sales operations to ensure success?
On the surface these 4 Cs seem like very basic questions, however, seasoned sales leaders know that consistently understanding and answering them makes the difference between success and failure.
Consider the situation of a SaaS company that has raced to reach its first $25 million in revenue. Great. But just ask the CEO or the sales leader if they feel they can get to the next $25 million with the same ease they got to the first $25 million. The response will be a resounding “no.”
In my conversations with business leaders there is a consistent theme. While they may all feel individually confident of success, they are not so sure when it comes to their organization. Most believe the business has become far more complex, with more customers to serve, more products to sell, more competitors to deal with, and more employees to manage (including many more in sales).
Growth can be a double-edged sword. Once a company gets to a certain level, scaling up becomes far more difficult. It not only gets much harder to acquire the additional $1 of new revenue, but it also gets increasingly difficult to protect existing revenue. And there starts the quest for finding the delicate balance of acquiring new and protecting existing customers. Not an easy thing to achieve by any means, but critical to keeping the growth engine running.
From a pure revenue perspective, the solution to the increasing complexity challenge faced by today’s business leaders can be found in how a company can manage the 4 Cs.
Finding the right coverage in the sales pipeline is both an art and a science. Historical close rates are a good way to estimate the level of pipeline size needed to make the plan. However, relying solely on historical close rates is fraught with risk. There is more to closing a sales pipeline than fixating on a quantitatively derived close rate. We’ll look at other pipeline attributes needed to make the plan as we examine the rest of the framework.
- What has been the historical close rates both in terms of opportunity value and opportunity count? What is the win-rate?
- Are there certain trends that shows seasonality, deal size, customer segment, industry sector, geography, channel, rep tenure, etc.?
- How much of the pipeline has been sourced through sales rep efforts, marketing, and partners? What should the contribution be from these sources?
It’s one thing to build the pipeline, and another to ensure its quality. Many companies fall into the trap of focusing too much on building the pipeline without paying enough attention to institutionalizing a good mechanism to ensure the quality of the opportunities.
Understanding and determining pipeline quality requires relentless focus using two different lenses –
- Credibility of Opportunity – Marked by quality of opportunity, associated activities, age, number of times close date has been changed
- Accuracy of Opportunity Attributes – Amount, product(s) selected, sales stage and close date
- What is the lead qualification process? What is the adoption level?
- Does the sales process align with the sales methodology? What is the adoption level?
- Is the CRM system set up to support the sales process? What is the adoption level?
For a sales leader to become a credible forecaster of revenue requires building a reputation of someone who consistently calls the number right. Knowing pipeline coverage and establishing confidence in pipeline quality are critical steps in that direction. However, committing deals to set a consistently accurate forecast also requires a deep understanding of how each quota-carrying member of the sales team sells. Detecting those obscure signals about likelihood of a deal closing in the timeframe recorded by the rep is the art of calling the deal right.
- What is the selling style of each quota carrying rep? Who sandbags and who is overly optimistic?
- Do recorded activities by the reps support the committed forecast?
- What is the forecasting style of sales managers? What is their track record on delivering prior forecasts?
Last but not the least, a well-defined cadence of inspection, coaching and mentoring using a series of formal/informal meetings as well as sales management ridealongs with reps is critical for ensuring consistent performance.
- Is there an operating calendar for conducting pipeline, forecast and business reviews?
- Do sales managers hold weekly one-on-one meetings with sales reps? What is their agenda?
- What metrics are used during review and one-on-one meetings? How are actions coming out of these meetings completed and tracked?
Of course, there are other factors at play as well, but the 4 Cs are the foundation of sales performance. In the audit work we do, I often find at least two of the 4 Cs lacking. Where does your organization stand?
Javed Matin is an independent management consultant helping B2B companies accelerate revenue growth through sales and marketing optimization. Over the past twenty years, he has developed global sales operations programs, training and effectiveness audits across multiple industry sectors.