Pipelines are an interesting thing. They are supposed to provide valuable insight for BOTH management and sales people. Their purpose is to provide visibility into the health of the selling process, letting the sales organization know how close or far they are from making quota.
Pipelines however, are more than a key indicator. They dictate behavior. If a pipeline is weak in the early stages it’s time to get prospecting. If the pipeline is showing long sales cycles, it’s time to evaluate the sales process. If the win/loss ratio is shrinking, it might be time to look at the team or the product. The pipeline triggers action and it’s critical it triggers the right action.
When pipelines aren’t accurate, they trigger the wrong action(s) and that can be devastating.
One of the biggest inaccuracies of a pipeline is the ratio of open opportunities vs active opportunities. Open opportunities are when the customer or prospect says yes, we are interested in pursuing a solution, but there is little active effort involved. The customer or prospect realizes they have a problem and are interested but not enough to participate in the sale now. Open opportunities lack specific actions or tasks. Open opportunities lack prospect or customer involvement. Open opportunities are real because the customer has expressed interest and therefore should be nurtured, but if your not careful they can artificially inflate your pipeline.
The only way a deal moves forward is if both the customer or prospect AND the sales person are working toward a close. I’ve talked about this on this blog a lot. Every deal MUST have an associated task, requiring some work to be completed to get closer to the sale. If not, it’s not an active opportunity. It’s an open opportunity.
Active opportunities are opportunities where everyone involved is actively working to get to an agreeable close. The customer or prospect is putting in the research, evaluating, assessing, and decision making time. The sales team is putting in the problem solving, delivery, information sharing and objection responding time. Active opportunities are just that, they are active, everyone is working towards the close.
What does your pipeline look like. Is your pipeline littered with both active and open opportunities? Can you distinguish them with a click of a button? Do you know how much of the pipeline is active opportunities vs open opportunities?
To determine your open to active opportunity ratio do some digging.
- Have your front-line managers go through EVERY opportunity scheduled to close in the next 90 to 120 days with the sales reps. Determine if they all have active tasks and next steps associated with them. An active task is NOT A PHONE CALL OR FOLLOW UP CALL. An active task is a specific action on the part of the sales person or the buyer that has a deliverable and gets the sale closer to close.
- For opportunities that don’t have an active task, give them one. Make the rep identify what the sale needs to move forward and commit the action to the opportunity. If it can’t be done, kill it or call it open, but not active.
- Separate the active from the open and assess your pipeline from that point of view.
How many active opportunities do you have? How many open do you have? Has the pipeline gotten smaller? Where do the active opportunities sit in the pipeline? Are they in the later stages or the earlier stages? Once the pipeline has been normalized for open and active opportunities you’ll have better visibility into the value of your pipeline.