Median-performing sales organizations have a forecast accuracy of only 61%. Without fail, forecast accuracy shrivels even further each year-end as the pressure of making the annual number intensifies. If your organization performs like your peers, how will you overcome the likelihood of delivering half of what was committed in your 4th Quarter forecast?
The probability of ‘making your number’ is directly correlated to the health of your pipeline. Bob Apollo, a sales effectiveness thought leader in the UK offered some insight last week in his blog post The 3 Critical B2B Sales Pipeline Metrics. As Bob noted, a “pipeline doctor” would gauge the fitness of a pipeline by looking at 3 key metrics
Of these 3, velocity is the most often overlooked and under-measured. Most sales leaders do not need to glance at the CRM dashboard to know the value of their pipeline. And the plethora of sales skills workshops is evidence of the never-ending focus on improving the win rate. But what about velocity?
The TAS Group’s recent white paper Thirteen Truths of Pipeline Management notes that “pipeline velocity is more important than pipeline volume.” Millions of dollars that slowly trickle through the funnel could be far less valuable than a smaller volume that reliably converts into signed orders in a short period of time. Can you trust your forecast if you do not know your average sales velocity?
The simplest way to measure sales velocity is the look at the number of days from the time the opportunity enters the pipeline until the order is closed. On average, a world-class B2B sales process for a solution sale will consume less than 4 months (117 days), because it is tightly aligned with the way the customer buys. The average sales cycle length for bottom quartile performers is almost six weeks longer (156 days). That is the difference between making your number in December and seeing deals slide into mid-February. A more comprehensive and accurate calculation of sales process velocity also takes into account the size of the deal and the average win rate. In any case, the plain fact is that confidence in your forecast must take sales velocity into account.
Key Take-Away: If the end of 2011 is still in question, the answer lies in the sales process. A customer-centric, stage-gated, predictable sales process will be better adopted by your sales force and ensure that 2012 ends with more certainty of success.
Call to Action: Invest an hour with Matt Sharrers on November 10th to learn more about sales velocity and the other levers that will produce reliable forecasts on a consistent basis. Click on the “Sign up Now!” button below and take control of your sales process.