It’s the first week of April and the first week of Q2. Most of us have put Q1 behind us, good or bad and we’re squarely focused on making our number for Q2. We’re building our plans; we’re making our calls, we’re busy little beavers, determined and destined to make up for lost ground, or get closer to President’s Club or maintain our good steady pace.
It’s what we do as salespeople. We sell with an eye towards the end of the month, and the end of the quarter all with the determination to crush quota.
Unfortunately, too many of us go into the quarter blind. Our fortunes are already set, and we don’t even know it. The sales gods, and the most sophisticated sales reps already know if they’re gonna make their number or not. But, the rest of us, we’re lost little chickens hawks, tons of bravado, but little bite.
Here’s the deal. I’m gonna make it simple.
Unless your sales cycle is less than 45 days long, 90% of your business for the quarter is already baked before the quarter starts. That’s right if you don’t have enough deals in your pipeline when the quarter starts, there is nothing you can do. You might as well start focusing on Q3, cause you’re done for Q2. (Ok, not done, you still have to close what you do have in the pipeline, so don’t screw that up.) But, for the most part, you’re toast.
Do you know where you sit? Do you even have an idea or are you just winging it?
There is a way to know. There is a formula, and for those of you sophisticated sales reps, you already know, but for the rest of you, well, you’re blind as a bat. Therefore you’re going to want to pay very close attention to the remainder of this post. I’m offering an easy way to evaluate your probability of success of quota attainment at the beginning of the quarter as opposed to the end of the quarter.
Here it goes;
Take your total Q2 pipeline; please make sure it’s accurate. Your Q2 pipeline is all the deals you’ve scheduled to close in Q2. Then multiply the pipeline by your average close rate. Your average close rate is the percentage of deals you close win. Then subtract that number from your quota.Once you’ve done that, add any deals you’ve closed already, which may be none, considering it’s the first week. The number that spits out the end is your LTG or left-to-get. Your LTG is how much your pipeline is short for that period, and as I said, if your average sales cycle is more than 45 days, you’re in deep shit.
If it’s a positive number, that means you have more pipeline coverage than you need and that’s a good thing. Congrats!! Well done.
For example, let’s say your quota is 275,000 for the quarter and you have a pipeline of 685,000. Let’s also say you’re a damn good rep and close 30% of your deals, so your close rate is 30%. It’s the beginning of the month, so you’ve only closed one small deal for $12,000. In this scenario, are you going to make quota?
685,000 x .30 – 275,000 + 12,000 = -57,500
In this equation, the pipeline isn’t big enough for this rep to make quota. She doesn’t have the coverage. She’s going to have to either; find 172,500 in additional pipeline of which she’ll close 57,500 (30%), or increase her close rate by 9% to 39%. Without something happening, If she delivers on her averages, she’s not going to make her quarter.
The pipeline is my favorite part of sales because it tells a compelling story if you let it.
Here’s your chance. Take a minute and go to your pipeline and run this calculation. Do you have enough pipe to get you to the end of the quarter in good shape? If not, what can you do NOW to mitigate the loss? What conversations do you need to have with your SDR’s, your sales manager, marketing, etc.? Don’t wait for a second longer. If you know you’re not going to make it, call it out now and start fixing it, don’t wait.
If you have the coverage, to make your number congrats. But don’t get too comfortable. Run the numbers for next quarter, Q3. How’s the coverage look? What’s your gap to goal or left to get? Use that as a prospecting goal to make sure you have enough in the pipeline by the end of June. You’ll be happy you did.
Managers, I hope you’re paying attention too. This is exactly how you should be managing your quarterly numbers, at the rep level and the team level. Don’t get caught on your heels. There’s not need for it. If you don’t have these figures, if you don’t have your average deal close rate, then start calculating it now. It’s too important not to know.
It often amazes me how often people are surprised at the end of the quarter that they didn’t hit their numbers. The numbers are right in front of their face if they choose to look at them or believe them.
Good luck in Q2.