Dimensions of a good sales pipeline analysis
Advancing and stratifying your acquisition sales pipeline analysis with additional dimensions beyond just deal count
I have recently also been having conversations with sales leaders at startups. Acquisition pipeline analysis is top of mind at the moment and one common challenge I have noticed is knowing where to start. The usual approach is to gauge success with simple “have 3x pipeline” rules of thumb. While these rules are a decent starting point, much more can be done to truly understand productivity and find the right levers for more output.
The fundamentals are straight forward. Effective pipeline analysis involves developing a strategy by looking at conversion rates at each stage of your funnel.
Here is how you do that:
Build out your funnel with 4-7 stages that are relevant to your business or function. These stages typically align with what is in the CRM, but can also be different to suit the analysis needs better. Examples of stages include contact creation, calls, demos, proposals and so on.
Gather data on the number of deals that have progressed through each stage.
Calculate conversion rates from each stage to the next, along with your aggregate conversion.
Typically now, you start with your funnel end target and you work back what, given the calculated conversion rates, the implied intermediate stage targets are.
Now analyze the data. Compare implied stage targets with actual performance, identify both strengths and weaknesses in the conversion rates, and pinpoint areas where you can make changes.
Implement your strategies!
These are the basics, but let’s explore more ways for a better pipeline funnel analysis:
Duration and $ velocity
The time component and $ value component are often overlooked components in a pipeline analysis.
Expand your analysis by including timestamps and deal values alongside step 2. This allows you to calculate the time it takes to move through each stage (known as duration) and the rate at which $ flows (known as velocity).
What I have observed, especially for early stages in the funnel, is that time to touch is extremely important. Customers are interested in the moment and if response time is too slow, customers will drop out of the funnel quickly.
Duration insights can uncover the components of the overall sales cycle length. Reviewing why certain stages have a higher duration, can allow you figure out how to improve overall sales cycle length.
$ velocity measure the financial throughput per unit of time. Reviewing velocity will allow you to find ways to focus on deals that yield more $ per unit of time. The flip side, deals that have low $ value and take a lot of time, are worth finding and strategically addressing to improve the overall funnel throughput.
Assess quality of stage completion:
While keeping your overall funnel fairly simple is practical, it might not provide a complete picture.
It is important to find ways to assess the quality of stages. For example, if one of the stages is the number of calls logged, consider measuring the ratio of customer accepted calls to calls made. This will give you a quality indication to the stage and can supplement understanding conversion rates.
Try to also understand what success means to your customers vs. your sales reps. Completing a task (like sending a proposal) does not necessarily equate to progress from the customer perspective (e.g. customer may have not even opened or reviewed the proposal), and hence progress in the pipeline.
Segmented throughput analysis
Go beyond just counting number of deals and segment your analysis by duration and velocity. This allows you to evaluate actual throughput.
Throughput analysis helps you identify customer cohorts or deal types that close fast and move more $ through the funnel per unit of time. Those are the productivity maximizing strategies you want to find.
Typically, assessing duration and velocity by stage, will give you insight into critical flow points. Flow points are stages or moments in your sales cycle, where once completed, conversion rates or duration tend to improve drastically. Improvements at those flow points can, hence, have an outsized, leveraged effect on aggregate output.
Compounding effect
This is a big one. Recognize that the pipeline funnel operates with compounding effects.
Rather than aiming for a substantial improvement at a specific stage, aim to make small enhancements across all stages instead. The effect of compounding can ultimately yield the same end result.
For example, aiming for a 20% improvement in a given stage is a tall order, although sometimes definitely required. Instead, improving each stage by 5% is more manageable and can yield the same 20% output improvement at the end of the funnel. That is compounded leverage.
Conduct leak and loss analysis
Analyze leaks and losses in your pipeline in addition to the path to winning.
Pipeline leakage can bring quick wins. Leakage refers to the pipeline loss as pipeline moves through the stages of a sales cycle. Leakage can result from various factors such as disqualification, lack of capacity, inefficiencies or competitive pressures. Unintended small leaks may be a quick wins given the compounding effect and can lead to substantial improvements.
Implementing a 3rd party review system to review leaks and losses can bring lost pipeline back into the funnel. Many times, deals are prematurely closed for reasons unrelated to true disqualification, and they might be recoverable.
Incorporating many of the above elements into pipeline funnel analysis can not only offer deeper insights into true performance, but can deliver much more actionable insights to sales teams and enable strategic improvements.