By Andy Smith,
Senior Vice President, Sales & Marketing,
AXIOM Sales Force Development
I was recently working with a salesperson in Delaware and, as I stood there glancing over his shoulder at the long list of opportunities he had built up in his sales pipeline, I noticed every one of his win probability percentages was listed at 10 percent. Naturally, such low projections stuck out like a sore thumb.
I mean, were these all bad deals? Was he that unsure of himself, or was he sandbagging? So, being the busybody that I am, I asked, “Why is everything at 10 percent?”
He replied, “That’s just what I default to; I want to fly under the radar. I know what they really are, though.” Good for him. Not so good for his manager who has to produce a semi-accurate forecast each month.
I share this with you because it’s important to point out that your credibility, and many budget-driven decisions, hinge on whether or not you have a grasp of your sales forecast and can answer these three fundamental questions when reviewing your seller’s opportunities.
1. How likely am I to win the deal in comparison to any alternatives the customer may have?
2. How much is the deal worth? Not just to our company and me but also the customer?
3. When will the deal close?
From my experience, most sales opportunity reviews between a manager and a salesperson come down to educated guesses to these three questions. And that’s a problem because the quality of your pipeline review is only as good as your ability to assess the individual opportunities.
Let’s look at the issues that come with not being able to answer them:
How likely are we to win the deal? There are three perspectives at work here: There’s the salesperson, who is either really optimistic or prefers to sandbag, there’s the sales manager, who is usually a lot more optimistic, and there’s the customer’s perspective. The customer’s perspective is the most important, yet very few organizations base win probability on the customer’s assessment. It’s the most important yet the least considered.
How much is the deal worth? You have to ask yourself, what bad thing could happen to the customer if they don’t take the deal? If you can’t answer that, then you’re not in a position to know how important or big the deal is for them – or yourself.
When will the deal close? The number of deals that actually close on the day they are projected to close is very low. Many pipelines I see have all opportunities closing on the last day of the next quarter. To me, that is a key indicator that the salesperson is likely guessing at a closing day.
Here’s the key to a perfect opportunity review by removing the guesswork from the three critical questions:
1. Define your win probability based on the quality of the information that verifies where the customer is in their buying process. Are they ready to make a move like you are or are you at the closing table and they’re just getting started?
2. Calculate how much the deal is worth to you, of course, in specific terms (round numbers are a red flag). More importantly, know how much it will cost the customer if they do nothing.
3. Find the compelling reason the customer needs to act that justifies the projected close date. When does the customer need the benefit of what you are selling? A client who has a compelling reason to act will help you predict a closing date. Without any compelling reason to act, the opportunity has a very low likelihood of closing on the date forecasted.