You probably think this is a trick question, the answer is obvious, isn’t it?
Be careful before you respond too quickly……
Now, I’ve got you worried and wondering, particularly long time readers.
Many of you would say, Quality. You would be partly right.
“Aha,” you think, “It’s both!” You would be partly right.
Now you are probably thoroughly confused.
Let me add to the confusion. I look at hundreds of pipelines every year. Based on the majority of those pipelines, one would think the obvious answer is “Quantity!” The mantra of too many managers is, “Fill your pipelines, you need at least 3 times coverage!”
But any self-respecting sales person should always be able to meet any management dictate for pipeline coverage. They just cast a wider net, abandoning their ICP and fill their pipelines with crap. But they get their managers off their backs.
Which brings us back to the starting point, Quantity or Quality? To which I respond with a resounding, “Yes, and……”
Yeah, I know you are getting frustrated and think I’m playing word games, so let’s dive in.
Quality is the number 1 most important thing about a pipeline. If you fill your pipeline with garbage, but have a full pipeline, everything goes wrong. You waste your time on bad deals, spending too little time on those that you can win. Your win rates plummet, your sales cycles skyrocket, you end up in a death spiral.
If anything, in tough times (or even all the time), you should tighten your qualification standards, letting only the very most qualified deals into your pipeline. An interesting thing happens when you improve the quality of the qualified deals in your pipeline. Your win rates go up, your average transaction values go up, and your average sales cycle begins to decline. Which means you have to have far less in your pipeline to make your numbers.
While quality is the number 1 criteria, we can’t ignore quantity. We have to have a sufficient number of high quality, qualified opportunities in our pipelines to achieve our numbers. But we can never relax our criteria for what makes it into our pipelines.
Too often, the quantity issue is one we address blindly. Too many managers use the 3 times coverage metric. Just last week, I was reviewing a pipeline, in one case, the sales person had a better than 50% win rate. She only needed to have 2 times coverage for her pipeline. Forcing her to have 3 times coverage would have diverted her from the highest priority deals. It could have actually reduced her productivity. On the other hand, one of her colleagues had a 25% win rate. If that person had filled his pipeline, meeting the manager dictate of “3X” he would never have made his number. He needed much more!
The “right quantity” is dependent on a whole number of things, and to determine the “right quantity,” we have to balance all these factors—but never reducing quality.
But, quantity and quality are never enough. Velocity is critical. We don’t have healthy pipelines if there is no movement in the pipeline! (One might, fairly, argue that’s also a quality issue.) Some years ago, I was doing a pipeline review. The sales person was proud, he said, “I have more than 3 times coverage in my pipeline.” Our initial pass showed reasonable quality—but with some concerns. At least 50% of the deal in his pipeline had deals that had not moved in 100 days (for a company where the average sales cycle was 90 days!). In reality, this was both a velocity and quality issue.
Some of you are trying to reach behind yourselves to pat yourselves on the back. You are used to reading my posts, or you had already said, pipeline health has to be measured by quality, quantity, velocity!
Not so fast! (You knew I had to be going down this path.)
There’s more to healthy pipelines than this.
Balance is important. Pipelines that have good quantity, quality, and velocity are important, but they must be balanced. If the bulk of our deals are clustered in the top or bottom of the pipeline we have revenue timing issues. If our pipeline is bottom heavy, and we aren’t finding and qualifying new opportunities, we will have very unhealthy pipelines.
Mix is important—at least if you are responsible for selling multiple product lines. Let’s imagine your company wants you to sell both product line A and the brand new product line, B. You are uncomfortable with product line B, you know you can fill your pipeline with product line A, creating a healthy pipeline and, ultimately, making your number all through product line A. But the corporate strategy is to sell all its offerings. So even while it’s easier to focus on just product line A, you are being irresponsible. You must be pursuing qualified opportunities for both product lines, so your healthy pipeline should have a healthy mix of these two product lines.
Mix is important in another sense. We want to retain and grow our current customers, but we also need to acquire new customers. If your “territory” includes both (that is you aren’t just pursuing new accounts, or aren’t just assigned to a current account), you have to have a good mix of current and new customers in your pipeline. Again, your pipeline has to be consistent with your company’s overall growth strategies.
There’s a lot to think about in building and maintaining a healthy pipeline. It’s never an issue of just quantity, or just quality. Too often, however, we see sales people and managers not understanding all the variables and how they interact. As a result, they have unhealthy pipelines, and will not achieve their goals.
Which causes one to ask, “How do we fix unhealthy pipelines?” Most would respond, “prospect more, find more qualified opportunities,” and you would proudly say, but they have to have to be quality opportunities, with the right mix, balance and velocity……”
To which I would respond, “Not so fast………”
But that’s the topic of another post. You can get a sneak peak at one of the answers by looking at this post.