Problems in the Pipeline: Why the Difference Between Pipeline & Forecast Matters

Repeated studies have shown that salespeople spend well over half their time on non-revenue generating activities. That’s an astounding figure, and it has led to the increased adoption of automated solutions to free salespeople from manual and repetitive non-selling tasks. The idea is simple: more time spent on selling activities equals more sales, right?

Not so fast!

As experienced revenue team professionals know, it’s the right activities that engage the right contacts at the right accounts at the right times that add the most value. 

Many companies solve for determining all those “rights” listed above by setting their sights on working their Opportunity pipeline. The effectiveness of that approach, however, is dependent on the pipeline being problem-free and a sales organization that is disciplined on their approach to moving opportunities through their stage. 

Unfortunately, there is a problem lurking in many organizations’ pipelines, and the following three factors contribute to it:

1. The stage in the deal cycle and number of days in stage,
2. The level of engagement the sales team has with contacts  at the account, and 
3. The proximity of the close date in relation to the stage the deal is at

One of the first indicators you have an Opportunity pipeline problem is a recurring miss of your forecast.

The difference between Pipeline and Forecast

Many, if not most, organizations don’t recognize the difference between their pipeline and forecast. To them, it’s one and the same, and it is often the root of several significant problems. 

To develop a predictable revenue framework, it’s essential to consider both pipeline and forecast independently of one another, and to have pipeline numbers influence your forecasted throughput. 

Definitions of a sales pipeline differ from source to source, but I’ve found it’s helpful to view your sales pipeline as a sum value of your Opportunities for a given time period, one that encompasses all deal opportunities from those newly identified and created to those that are ready to close.

Conversely, your forecast should be a smaller subset of your pipeline that represents the sum value of what you expect to close within a specified time period (month, quarter, half year, etc.). Typically a forecast will be composed of “Committed” deals that the sales person has a strong belief will close at one end of the spectrum, to “Best Case” deals that have the least chance of closing in the sales person’s judgment. 

Predictability and an accurate sales forecast are key data points in an organization’s decision-making process, impacting business planning, risk management and budgeting. Your forecast becomes your “number,” your quota, and your ability to hit that number is important. In fact, many sales managers are judged on how well they can predict what will close and when.

Making your number quarter after quarter allows the company to operate, invest and grow with confidence. It allows for greater investments in marketing and demand generation campaigns, increased headcounts and technology tools that will serve to further the company’s growth.

Missing your number, on the other hand, causes problems that affect the entire company, not the least of which is an awful lot of finger pointing and growing distrust. 

Fixing your forecast means fixing the pipeline

Spend enough time in Sales and Revenue Operations, and you’ll see a familiar sight: the pushing of close dates of Opportunities to the end of the quarter and then, at the end of the quarter, pushed to the next quarter. 

Continually pushing out Opportunities can be symptomatic of “zombie” opps that are polluting your pipeline; dying at the end of one quarter only to rise from the dead the next. They tend to be accounts with little to no real engagement from the Sales team, and not only do they threaten the accuracy of your forecast, they also tend to divert salespeoples’ attention away from the Accounts and Opportunities that have a real shot at progressing and closing. 

A useful, free tool on AppExchange is the Salesforce-native Opportunity Push Counter, which tracks how many times an Opportunity has been pushed from month to month. If a deal has been pushed multiple times, it’s probably not a real deal and requires additional inspection from sales management. 

Now, what if a deal’s been pushed four, five, six, ten times? Well, that’s symptomatic of a problem. It’s reflective of poor rep behavior that needs to be changed through effective managerial coaching. Without corrective action, your chief revenue officer (CRO) will never be able to look at your team’s numbers with any degree of confidence. 

Work on deals that are engaged and have traction

Account engagement is an important factor to use in prioritizing which Opportunities to invest in heavily pursuing. Working with Contacts who are heavily engaged furthers the traction a rep has in the Account, and has proven to guide to effectively move prospects through the customer journey to closed/won. Things to measure include number of emails exchanged, number of meetings, ratio of sent and received emails and whether the sales person engaged with more than one person. Another great indicator of forward progression on a deal is whether there is a future meeting on the calendar. 

It’s important to stay disciplined, and the best way to set that up is to ensure your data is clean, accurate and realistic. Below are two common challenges and the tried-and-true fixes to get your Opportunity pipeline – and forecast – correct and working for you.

Opportunity with a low engagement score but a fast approaching close date: A situation like this is indicative of a problematic Opportunity pipeline that is likely poisoning the forecast. Time to get real and push to the right time frame. If it’s a recurring push, consider taking a step back in your sales cycle and removing its designation as a real Opportunity. Perhaps it should be “closed lost” so that the rep can be freed to pursue deals that have traction.

Account in Stage 1 of Sales cycle with a fast approaching close date: By nature, salespeople are eternally optimistic. However, it’s critical to be realistic in setting an expected close date. Ensure you have a timeline that is consistent with historical customer journey data from similar deals in the past. You want to make sure the close dates align with the behavior of closed/won deals at your organization based on the stage it is in. 

An open eye to an Opportunity’s’s “glide slope”

An analogy I like to use in fixing problems in an Opportunity pipeline is that of an airplane (your Opportunity) gliding in to land on the runway (your closed/won). Pilots land planes based on a glide slope; at a given distance from the landing strip (close/won) they know they need to be at a specific altitude (stage) and at the right speed (engagement). 

For example, you might have a promising Opportunity, but at a very early stage in your Sales cycle. It’s at high altitude, but your expected close date has been set too early, and its “runway” is right beneath it. That plane is not ready to land; it’s too high up. You need to push out your runway, your expected close date.

Conversely, you might have an Opportunity very late in your sales cycle, in close proximity to the runway. But, its engagement is low; it’s at low altitude and not enough speed to carry it to the runway so it is going to come up short. It needs something to give it a little boost in altitude – it needs those activities and future meetings that drive engagement or the close date is unrealistic.

Summary

Hitting predictable revenue targets often comes down to a healthy Opportunity pipeline. However, don’t confuse a healthy pipeline with a large pipeline (although, all things being equal, a larger pipeline is better than a small pipeline!). A well-disciplined sales team should be able to close a greater percentage of their pipeline, thus easing the pressure on your demand generation team to increase the number of leads they generate.

Apply a discerning eye to your pipeline to ensure there’s a relationship between sales cycle stage, Account engagement and anticipated close date. Then, create your forecast out of the Opportunity pipeline that falls within the date range you’re evaluating. Doing so will mean you’ll need to close a smaller percentage of your pipeline to hit your number, allowing your Sales professionals to concentrate their efforts on those Accounts and Opportunities that are most valuable.