What information can you extract from your sales forecast or sales pipeline? Does it help management understand which deals will close? Can management and the sales team rely on it? How confident does management feel when they discuss with senior management or the board about deals that are closing?
Having a dynamic method for scoring opportunities can help you identify your best deals so that you can be more confident about the outcome of your sales period. Many rely on static methods such as stage percentage or an sales rep close percentage as a means to numerically score each opportunity. I know from my previous experiences in running sales teams that these methods leave you open for error. The remainder of this piece will describe a dynamic method that better predicts which deals will close and prescribes a way to get a handle on the ones that are falling out of the pipeline.
So first, let's discuss the difference between a lead and an opportunity. Leads come in at the top of the funnel and are worked through different phases. Usually they start off as marketing qualified leads (MQL) then, based on product fit, progress forward to sales qualified leads (SQL) and eventually become sales accepted leads (SAL). Once the sales rep accepts the lead and has engaged the prospect with the possibility of closing business within the sales period, it becomes a sales opportunity. Grading leads is important in order to find the hot ones to go after, but is a very different process than grading sales opportunities. For this blog, we are focused on how to grade sales opportunities.
Sales opportunities should be graded for proper health in three distinct areas: progress, momentum and alerts. During the sales process, based on how well the opportunity is worked, you can gain or lose progress and momentum. Alerts are advanced notifications you look for in order to see which deals are advancing and which are falling out of the pipeline, the notifications cause the health to go up or down. Opportunity scoring provides insights on better forecasting for management, as well as feedback on better opportunity management for the sales reps.
Progress Health is comprised of sales stages, milestones and deal attributes. Stages are major events that occur during the sales process and are aligned with the critical points of selling a product. Some generic examples are qualification, defining, negotiations, and pending. The milestones are the sub events that occur between stages. So usually you have to answer four or five questions and complete certain tasks to advance an opportunity to the next stage, those are milestones. Attributes are important pieces of information that occur within a stage, such as pain assessment or opportunity demographics. The health of a sales opportunity gets better as you gather more information within the attributes and the opportunity moves along further within the sales process.
Momentum Health is based on the timing and importance of events that occur within the progress of a sales opportunity. For example, communication with the prospect is always valuable, and sales opportunity is considered healthy if the communication is with a C-level sponsor and buyer of the product being sold. The momentum health score would go up on events such as:
- Prospect communicated last week that we provide value and would be solving a problem, so they are bringing in all sponsors required to move the deal forward
- Positive communication was in a phone call from the sponsor
- The sponsor is a Vice President and has authority to approve this purchase
- We have another meeting scheduled within the next seven days
- The sales rep provides qualitative updates that confirm the calls have gone well
Likewise, you can have negative momentum that adversely impacts the opportunity. Examples of these include:
- There is significant pushback from prospect
- Meetings with the prospect have not gone well
- There have been delays by the prospect in their decision making progress
- The prospect has just had a recent change in leadership
Alert Health is based on additional factors that impact whether or not deals are moving forward or falling out of the pipeline. Examples of alerts to look for in the sales opportunity include:
- The opportunity is scheduled to close this month, but the next meeting is not scheduled or is past due
- The close dates have been moved back multiple times
- We have been on a stage or milestone for too long
- There are crucial tasks that are overdue
- There has been no activity in the last two weeks
In order to have a dynamic understanding of a opportunity’s health the data must be both timely and accurate. The process for evaluating opportunities needs to be simple enough that it is easily followed and also robust enough that it presents valuable insight into your pipeline. A strong process, when paired with predictive and prescriptive tools, can ensure that opportunities remain healthy and provide management with the ability to have better sales pipeline forecasting.