We have a list of companies we’ve called on, which we call our prospect pipeline. It helps us keep track of how things are going in marketing and sales, sort of. But I don’t know how to predict what those accounts we’re reaching out to are going to turn into. So I have no way to translate what we have in our pipeline into specific numbers for potential revenue. It would help a lot if I knew how to do that. Can you help?
THOUGHTS OF THE DAY: Use the pipeline to track individual account progress through a series of stages that start with initial form of contact and potentially end with the account closed and implemented. Identify attributes of your best clients and use them to search for other great prospects to put into your pipeline. Track account progress through the pipeline, moving from one stage to the next. Use probabilities at every stage, based on history, to determine the likely value of closes coming up.
It’s great that you already have compiled a list of companies you’re calling on and that you’re keeping track of whether or not they turn into business. Now define the stages that all, or most, of your prospects go through on their way to becoming clients. The most common stages might include ways you approach them, being in contact with decision-makers and influencers, determining what needs they have, offering a confirming proposal, negotiating terms and closing the deal.
Build an avatar, a detailed description, based on profiling your best clients. Consider how your clients were before you started doing business with them: what they looked like, what they thought or said, how they behaved. Once it’s written down, use the avatar to identify more likely targets and to test targets as they progress through your pipeline. Think about where they shop, what they read, how they get their information. This will help you with the early stages of the pipeline, where you’re trying to get in touch with a big volume of potential likely prospects.
Once you have the pipeline set up, keep track of the dates when prospects move from one stage to the next. Use this data to calculate the minimum, average and maximum amount of time that prospects require to move forward. And calculate conversion ratios: how many prospects it takes in one stage to get one prospect to move to the next stage.
Work backward from close to initial outreach. Calculate the quantity of prospects needed at each stage in order to get one sale. Track results for a period of time until you get your next 10 sales. How many proposals were written in that period? How many companies engaged with you in defining their needs? How many decision-makers and influencers did you talk to, regardless of whether they opened up about needs? How many introductory calls, emails and letters did you use to get in touch with all of those folks you wanted to talk to? How many names on a list did you start with, regardless of whether all those names were valid or not?
Set a probability for each stage of the pipeline and multiply the value of each prospect by that probability. As prospects progress through the pipeline, add together the probabilities for every completed stage. That’s your probable value of the prospect. Add up all the probable values and that’s what your pipeline is worth. Compare that probable value to your goals for sales for the upcoming months to determine if you have enough prospects in your pipeline or if you need more.
BOOK RECOMMENDATION: “Beyond the Marketing Funnel: Playing Digital Mousetrap To 10X Your Business,” by Mick Olinick.
Andi Gray is president of Strategy Leaders Inc., StrategyLeaders.com, a business-consulting firm that teaches companies how to double revenue and triple profits in repetitive growth cycles. Have a question for AskAndi? Wondering how Strategy Leaders can help your business thrive? Call or email for a free consultation and diagnostics: 877-238-3535, AskAndi@StrategyLeaders.com. Check out our library of business advice articles: AskAndi.com.