The Deal Pipeline Redemption

As a rule of thumb, the longer it takes business development and salespeople to report on a deal pipeline, the worse that pipeline actually is.  A well-managed deal pipeline can be summarized quickly and easily, for better or worse.  The key to managing a deal pipeline is to characterize the stages that need to be completed to close a deal, establish meaningful exit criteria for each stage, and measure data over time to refine estimates for velocity and success at each stage.  Everyone being honest helps, too, and is usually appreciated.

Examples of deal pipeline stages could be "met customer representative", "signed NDA", "identified proposal", "made proposal", "won proposal", and "signed contract".  The stages of a deal may vary slightly from deal to deal, like a game of Chutes and Ladders. Some deals may require a formal process like responding to an RFI or winning an RFP or RFQ, while others may skip those stages entirely. Stages should be ordered in the most likely order of occurrence so that stages that have been successfully skipped by completing a later stage are unlikely to come up out of order.

Stages should be unambiguous and lend themselves to specific exit criteria.  Signing an NDA may not prove much, but it shows some level of interest following the first meeting.  If a company won’t sign an NDA, odds are they are not interested in making a deal.  Identifying a proposal doesn’t have to be as formal as receiving an RFI or RFP, though concrete events like those are more meaningful than anecdotes like “we discussed the possibility of a hackathon and person X was intrigued”, a synopsis that claims an unidentifiable amount of customer interest in doing something with an unquantifiable business value. Establishing exit criteria not only increases the honesty of deal pipeline reports by reducing ambiguity, it also focuses the effort on the next logical step to get to an actual agreement.

Once the right stages are in place, it is important to track how long deals should take to move forward so that the pipeline isn’t clogged with stalled deals that are unlikely to generate revenue. It is also important to track where deals failed in the pipeline. Knowing what percentage of deals failed and where helps to determine which stages are problematic, so that more effort can be put into those areas to increase the success rate at that stage as well as increasing the overall success rate for closing deals. Once you know the success at each stage, it becomes possible to accurately value the deal pipeline based on the estimated value of the deal, the current stage the deal is on, and the likelihood of success in subsequent stages in order to close the deal.

Revenue projection is an important goal of tracking data and maintaining an accurate deal pipeline, and may be the main focus of executive management, but the ability to jumpstart or abandon stalled deals and the ability to refine the approach to stages where deals fail more than expected will help the business development and sales team focus activity where needed to maximize performance.

Tips and Techniques:

• Identify the stages that need to be completed in order to successfully close a deal.

• Identify unambiguous exit criteria for completing each stage and moving to the next stage.

• Track average time and failure rate for each stage of the deal pipeline.

• When deals stay in one stage longer than expected, apply more pressure to get those “stuck” deals moving forward or move on to other deals that are more likely to come to fruition.

• When more than the expected rate of deals are failing at a given stage, analyze those failures to identify any patterns in customer objections, then work with executive management to address those objections so that you can increase deal conversion rate and resulting revenue.

• Always stress the importance of honesty in deal status reporting as even getting to “no” has business value as it helps to identify patterns in customer objections that should be addressed, such as the lack of key features that result in losing deals to competitors.