The CEO’s Guide to Predictable Sales: Managing Your Pipeline for Success
I just ran across this drawing I did of the sales pipeline. I learned of it while in a meeting with the CEO of Sterling Software over thirty-five years ago.
In a quarterly review of my group of businesses, my CEO was grilling one of my General Managers on his sales forecast. The GM defended his inability to forecast sales by explaining the complexity of his company’s sales pipeline. My CEO interrupted him. This is a nice way of putting it. He really just shut him down. The CEO then proceeded to explain, using a simple metaphor, how a sales pipeline works. (To add cred to this explanation, my CEO came up through sales.)
Here’s what he said.
Your sales pipeline is just that; it is a pipe. As an example, if you keep putting ping pong balls into one end of the pipe on a regular basis, the balls will continue to be pushed through the pipe and finally drop out of the pipe at the other end at the same rate you are adding them.
When he explained this metaphor, I was astonished by its simplicity and truth. It was a business lesson I never forgot. I have shared it hundreds of times with salespeople I managed and entrepreneurs I invested in.
A few more thoughts on the sales pipeline
The length of the pipe varies depending on how long, historically, it takes to close a deal from first call to close. This must be established in every company.
The salesperson’s job is to put qualified deals into one end of the sales pipeline. He is to do this on a regular basis. If the salesperson fails to add qualified prospects to the pipeline on a consistent basis, there will be gaps in the pipe. This will lead to irregularity in the number of deals exiting the pipeline on a consistent basis—and this results in poor sales forecasting.
The key to success for a salesperson is managing their pipeline to forecast accurately.
This means that the salesperson must not only regularly and consistently add new prospects to the pipeline opening but also manage the flow within the pipeline and, finally, close deals.
Managing deal flow keeps the prospects in the pipe moving forward. If deal flow is mismanaged, the prospects do not move forward; the pipe becomes clogged. At this point, it is a waste of time to add new prospects to the pipe. And the company’s lead gen machine is wasting money as newly generated qualified leads are never contacted.
The final result is that sales slow to a crawl, thus missing sales targets. It also causes inconsistent and inaccurate sales forecasting, which is the downfall of most salespeople and businesses. It is the downfall of the salesperson because good forecasting is the result of executing a disciplined sales process. Poor sales forecasting is the downfall of a business because the CEO either adds overhead too slowly or too quickly. This causes the economic model of the business to save too much cash or spend too much cash, which results in missed business growth in both cases.
There are only two causes of inaccurate sales forecasting:
Qualified prospects are not being added to the sales pipeline on a consistent basis.
The prospects in the pipeline are not being moved along and managed to a close.
This analysis is explained from a CEO’s perspective. My goal here is to establish a simple metaphor and common language between the CEO and his sales team. The principle of the Sales Pipeline is truth. Sales are numbers. Numbers come from activity. And activity once corralled into a process, results in sales.
I hope you found this diagram useful for your business. It was useful for me. If you are an inexperienced salesperson, my hope is it helps you to better understand your job and design a process that makes you a lot of money.
Good selling!
How do you currently ensure consistency in your sales process? Comment on LinkedIn