Managing New Business Opportunities
Very few businesses selling products in this category are lucky enough not to have to worry about where their next sales will come from.
For most companies finding and managing the steps required to turn prospective into real customers is vital for business growth.
Seems obvious? Maybe, but lots of small businesses make a very poor job of managing and increasing the value of their sales pipeline.
What is The Sales Pipeline?
The sales pipeline is a well-established concept that’s used to describe the flow of new sales orders into a business. It’s important to understand the ideas behind the sales pipeline concept if you want to start using it to manage the growth of your business. In this article we’ll explain how a well managed sales pipeline will:
- Provide you with the ability to assess the success of your marketing (i.e. bringing in new prospects for the sales pipeline)
- Enable you to monitor the effectiveness of your sales team (i.e. through the current quality/value of your prospects)
- Enable you to focus on high quality sales prospects (saving time and sales resources)
- Provide ways of spotting poor sales development activity (i.e. omissions and mistakes at any stage of the sales process)
A Sales Pipeline Has Measurable Monetary Value
The analogy of the sales pipeline is a very good one because it emphasizes the importance of having a constant “flow” of new sales prospects into a business.
But it’s not sufficient to be able to point to the existence of a sales pipeline. Your sales pipeline must also be able to pass the “quality test“.
A good way to test the quality of a sales pipeline is to measure its monetary value. This is the weighted value of the business you might expect to get from it at any particular instant in time. Yes, this does sound a little complicated, but I’ll explain what’s meant by this below.
Your sales pipeline is made up of a mix of sales opportunities varying from excellent (i.e. your sales prospect wants to buy from you and has a budget) to poor (i.e. they just want information from you and don’t know when they might want to buy).
If your pipeline contains a lot of very good sales prospects that have told you that they definitely want to buy your products its potential monetary value is high because its reasonable to assume that there’s a good chance these prospects will place orders soon.
On the other hand, if your sales pipeline is full of individuals and companies that are just seeking information about your products its monetary value is low (even though there might be lots of similar prospective customers each contributing incremental value).
The potential monetary value of your sales pipeline can also be low if its made up exclusively of new prospective customers that haven’t yet been qualified.
Looking at the situations I have described above, it’s not difficult to understand that two of the biggest challenges facing your business is how to increase the individual value (quality) of each sales prospect and how to maximize the overall potential value of the entire sales pipeline.
To deal with these challenges it’s vital to have processes and procedures in place for effective Sales Pipeline Management.
Sales Pipeline Management
The main tasks here , as outlined above, are to:
- Find new prospects with high value sales potential
- Filter the pipeline to eliminate less valuable (poor quality) prospects
It may seem a bit over the top to be getting rid of the poor quality prospects, but you need to make sure that they are no longer part of your sales development process. In most cases you’ll probably not get rid of them, but enter them into some form of marketing database. This database can be used for long-term business development and research (i.e. working out where your sales leads come from and why).
Sometimes it’s not always easy to know how to filter the prospects in your sales pipeline. There’s always a great temptation to leave them in, but don’t. Each opportunity in your sales pipeline is part of your active sales development process and uses up valuable sales time.
One way of filtering is to ask check questions for each stage of the sales development process. Here are some examples of questions for a sales development process made up of four key stages:
Stage 1 Initial Qualification
When a sales prospect first enters your sales pipeline find out whether the sales opportunity is real and current (i.e. they have money and are looking for a product like yours – this year) or non-existent and long-term (i.e. they are only looking for information or might purchase next year).
Only valid sales opportunities for the current financial year should be entered into the sales pipeline.
Stage 2 Product Presentation
When your sales prospect has learned more about your product ask questions to evaluate the chances of making a sale. For a variety of reasons (e.g. they prefer a competitor’s product) you may need to rate (use a % factor) the opportunity as low quality at this stage, although you may want to keep it in your sales pipeline.
Stage 3 Demonstration
After the sales prospect has seen your product in action look again at your chances of making a sale and re-evaluate the opportunity. If the opportunity is a lost cause remove it from the sales pipeline, but keep it in as a low quality opportunity if you think there is still a chance a sale may be made
Stage 4 Sales Contract
When a sales prospect has gone through all the previous stages and gives an indication that he or she wishes to purchase your product the value of the sales opportunity is very high (getting near 100%). The more prospects like this that you have in your sales pipeline the higher it’s overall quality and value will be.
In re-evaluating your sales opportunities at each stage you should factor them and use this factor to calculate the current monetary value. The sum of all these values will provide you with an overall value for your sales pipeline.
Your sales pipeline management process may be much more complicated than the example I have given. If it is, it’s even more important to ask key qualifying questions at each sales pipeline stage.
How the Value of a Sales Pipeline Changes
Each sales pipeline changes in quality as it’s taken through the sales development process. This will be reflected in the potential value it has to your business.
A very high quality prospect has a potential value very near to the amount of money your sales prospect might spend with you if he/she buys your product. A low quality prospect will either be one that is in the early stages of the sales development process or one that for some reason or other is falling by the wayside.
Regular calculations of the total potential value of your sales pipeline will provide a measure of how well your business is doing. The more sales activity there is in your business the more important it is to do evaluate the vale of your sales pipeline regularly.
The Sales Pipeline and Sales Forecasting
Your sales pipeline is an important part of your business sales forecasting, without which you can’t:
- Plan the growth of your business successfully
- Control and manage your business
- Persuade others to invest in your business
If you don’t already have a Sales Pipeline and a Sales Forecasting System take steps today to put them in place and use them to manage and grow your business.