We recently calculated the value of lost opportunities for one of our B2B clients and found that it was staggeringly high. More than 20% of the annual quota for each sales rep was completely missing from the pipeline.
The client discovered that their Win-Loss Ratio was 73% – an absurdly high ratio, and a sure sign that reps were not entering deals into the CRM pipeline until they were nearly certain to close. When compared with the median win ratio in the industry of 52%, it became clear that millions of dollars of potential orders were simply not on the radar screen.
For most sales leaders, a 20% increase in opportunities can mean the difference between cashing a large annual bonus check and updating a resume. What would it mean to you if you could cure opportunity-blindness in your organization? The first step is a quick assessment. In addition to your Win-Loss Ratio, you should look at 3 key metrics:
- Pipeline to Quota Ratio: Compare your results to the median for your peer group. If your reps are trying to achieve quota with lower than average pipelines, they are only entering deals that are sure to close. The lead generation system is weak and the lead management/nurturing process has sprung a leak. What about those other opportunities? Your reps may not be losing many deals; they are simply not competing often enough.
- Sales Cycle Length: Are your sales cycles abnormally brief? If it looks like your customers are making complex purchase decisions in 30 to 45 days, then something is wrong. These deals are appearing in the CRM system way too late for your managers to do any effective coaching or strategic planning. The only thing they can do at this late stage is approve discounts.
- Time in Phase: This pinpoints the location of the Sales Cycle symptom. Measure how long deals stay in the early phases of your sales process. Skipping quickly throught the first two or three steps is a sure sign that your sales process is out of sync with your customer’s buying process.
In our experience with world-class sales teams, pipelines are generally more than 3.6 times quota. These reps don’t win every deal, but they compete more frequently and their skills are sharper. They even learn from losing! Their Win-Loss percentages are not as dazzling as their opportunity-blind peers, but they deliver significantly more top line revenue. Fixing this problem for one of our clients has already increased the top line by more than 12% in less than a year.
Key Take-Aways: Simply requiring your reps to add more junk to the funnel is not the same as increasing the number of genuine opportunities. That’s where coaching, qualifying and job aids come in. But visibility is essential. We don’t recommend filling the funnel without the foundation of a strong sales methodology.
Let me know your ideas on how to diagnose this condition in your organization. If you are not sure if your team suffers from opportunity-blindness, let me hear from you. We can help gather and interpret the benchmark metrics to find out. Now is the time to set priorities for 2012 and advance your sales process to the next level.