Foresight 20/20: Structuring your pipeline for success
by Mike Anello and Kane Hochster
Special thanks to Mark Roberge, former Hubspot CRO, and Larry D’Angelo, former LogMeIn, CSO for their input on this post.
Bottom Line: By flipping from a seller-driven to a buyer-driven sales process, sales leaders can create a cleaner and more efficient pipeline leading to better forecasting.
Results: LogMeIn (NASDAQ:LOGM) has beat the high-end of its revenue guidance in 26 of 28 quarters by leveraging this approach (the remaining two quarters fell in line with its forecast).
One of the evolving themes of pipeline management is the migration from seller-driven pipeline stages to buyer actions. As part of a survey we ran, we asked sales execs to choose which stages of those listed in the table below most closely resembled stages in their pipeline (there was no limit to how many stages each respondent could choose). Take a quick look and decide which of these would be part of your pipeline.
As you can see, almost all the execs chose the top two stages while about half chose options three and four.
The challenge with the top five choices is subjectivity. Which of these could a rep definitively defend versus making a judgement call about customer behavior? Take a minute to read through these one more time and decide which ones fall into a definitive bucket versus open to some opinion sneaking in.
Numbers two, three and five come with hard evidence to support moving a prospect from one stage to the next.
The trouble with one and four is that these introduce some qualitative aspects into the picture.
While this does not appear to be a big deal at face value, the issues can compound as you scale your team and introduce additional layers of management.
By allowing opinions to drive the progression through your funnel, a sales leader creates a subjective funnel that relies on 100% consistent training across reps and ongoing maintenance to ensure proper upkeep. Even the best sales leader cannot deliver on this.
This issue typically unveils itself like this:
A rep finds herself a little light on the later stages of her pipeline in a given week. If she’s only relying on “determining the prospect has a large enough budget” or “buy-in from the key decision maker” she may feel some pressure to move a deal to the next stage slightly earlier in the process. This provides her with a prospect to discuss at the next weekly all-hands sales meeting on Thursday. The detriment here is this slowly compounds overtime, which typically results in sales leaders losing confidence in their pipeline.
This issue becomes exacerbated when it comes time for the head of sales to provide weekly or monthly forecasts to the rest of the executive team. The process is usually performed in two ways. The first is when a sales leader makes a blanket haircut to the stages near closing in her pipeline (e.g. 85% of deals in final negotiations, 60% in commitment, 30% in post-demo, etc.). The second involves performing an individual rep roll-up based on the sales leader’s previous experiences with each rep’s forecast pipeline. While both of these approaches may appear to counterbalance the issue of rep judgement, it really only masks at best, but may actually compound the original issue of seller-driven stages.
The sooner a sales team can remove as much individual judgement from its pipeline management and instill definitive gates into each stage, the more quickly the team can drive a more predictable sales motion. We would argue that a properly executed plan with buyer-driven stages produces a much more objective pipeline. As a means of implementing this, managers should regularly choose random deals in each rep's pipeline to review and ensure the rep is properly moving these deals through each stage.
Larry D’Angelo at LogMeIn (NASDAQ:LOGM) has taken this one step further by integrating these requirements directly into his Salesforce.com instance. In order for his reps to move a prospect to the next stage, there are defined fields that must be completed or have manager approval in order to trigger the next stage. While this may be overkill for some teams, the results speak volumes. Since going public in 2009, LogMeIn has reported revenue that beat the high-end of its guidance to the Street in 26 of the last 28 quarters, with the two remaining quarters falling squarely in line with its forecast.
Buyer-Driven Example — Accounting Software for Consulting Firms
For this example we’ll assume the process is led by an inside sales team. The typical ASP is $30,000 with an average sales cycle of 45 days.
Needs Assessment / Discovery Call— Prospect accepts the invite (prospects can enter directly into pre-demo if the rep cold called, connected and received this info)
Pre-Demo — Prospect has confirmed needs and pain outlined in needs assessment or accepted calendar invite for a demo (typically via email)
Post-Demo — Prospect attended the demo
KDM Pre-Demo — Prospect has agreed to bring in other key decision makers (KDMs) into the discussion if necessary and they have accepted the calendar invite for a call or demo
KDM Post-Demo — Additional members of the decision making unit attended the demo
Quote Received — Customer confirms receipt of quote (can be triggered through confirmation email or follow up questions to quote)
Negotiations — Sales rep received requested changes to quote
Commitment — KDMs and budget authority have confirmed they will buy the solution and a date for purchase has been set
*Note some of these stages can happen at the same time, the key is have the verifiable evidence for each step.
We fully recognize this type of regimented approach will not work for all sales teams, and each team’s sales motion is unique to that company. However, we do believe that most inside sales motions can adapt this approach and believe these teams will create a more predictable, repeatable sales motion. A strength of this system is that it forces reps to ask the hard questions and receive tangible confirmation from prospects. This may feel a bit difficult at first blush, but if this leads to a smaller, but cleaner pipeline, where each of your reps can focus more time on the higher probability to close prospects, what do you believe the end results will be?
Survey "Seasoned vs. Scaling Sales Executives - What are the biggest potential blind spots" was conducted by Mike Anello and Kane Hochster in conjunction with Mark Roberge and research at Harvard Business School in 2016.