October 12, 2021
Leading my sales team, the pipeline quickly became my best and worst friend. It was the starting point for answering my questions. What deals are progressing? What’s the next quarter looking like? How do we want to organize the team?
But the pipeline was also a huge liability. It set expectations for the team and leadership. Yet, the pipeline was opaque and volatile.
Now, we all wanted to outperform expectations and project success. For my sales team, failing to meet expectations resulted in low morale and declining effort. We constantly had to balance pipeline expectations with realistic goal setting. For sales leadership, failing to meet expectations starts a frustrating conversation around your process for goal setting, your communication skills, and ultimately your skills as a sales leader.
So how do you square pipeline expectations with the fact that most pipelines are opaque and volatile? What do you do when you look at your pipeline with your sales reps and find that it includes deals where we are not interacting with a decision-maker, where no timeline for a decision has been agreed upon with the buyer, where we are competing for deals we can’t win, or where we don’t know of any compelling reason for our buyer to change from their existing solution?
Speaking with experienced sales managers, they all seem to use a simple trick to solve for this. They discount their pipeline to create their forecast. Heck, this is even built into CRMs. One basic rule of thumb is to take out 30% of pipeline value for the given quarter when communicating goals. This greatly improves the chances of meeting expectations and keeps everyone happy. It doesn’t, however, solve for having an opaque and volatile pipeline.
The real challenge becomes “how do we reduce this volatility?” Or more simply, “how do we focus our efforts on the winnable deals?”
Winnable deals is a concept we’ve talked about before. In short, your pipeline will have less variability if you have a clear picture of what deals you can win look like and qualify for those deals. And exile from your pipeline those unwinnable deals.
As you get better at identifying and focusing on winnable deals, the amount you’ll have to discount your pipeline will go down and the volatility in your pipeline will come down.
Discounting your pipeline is a natural approach to solving a forecasting and expectation setting problem. But it doesn’t get at the root cause. The sooner and more frequently you can focus on winnable deals, the sooner you’ll reduce volatility and see high morale on your team, rooted in their feelings of success.