Is Your Revenue Pipeline Management Systematic or Black Magic?By Theresa Lina Stevens | Posted 2004-05-26 Email Print
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If you really want to make your business finances flow, you need to actively track your prospects and proposals.
I find that technology services companies are very systematic about tracking active prospect and proposal activity and using that as a basis to project revenues. In fact, sometimes, they are downright scientific, even applying probability percentages to each opportunity. But everything leading up to that point is black magic. There is no systematic way for planning, monitoring and managing the early portions of the pipeline.
The team just seems to count on having opportunities magically appear, but it has no idea how many it really needs or what the entire pipeline needs to look like in order to make plans. And some aspects of the probability percentages are downright flawed. The result is that there are very few controls in place to reduce your risk of missing the revenue targets. Usually by the time you realize you have a problem, it's too late to fix it.
Throughout my 20 years in this industry, rarely have I seen a company or business unit specify a list of targets or a game plan and set of projections for turning targets into suspects or suspects into prospects. Yet, these early portions of the pipeline are where most opportunities stagnate and are often the biggest contributors to inaccurate or missed forecasts.
As the CEO, board member or key investor, here is what the person in charge of operations and/or business development should be able to tell you by month for the year, right now. A one-page spreadsheet, plus a list of targets, will cover all of it. (The terminology I use is explained in this previous column.)
1) How many deals of what size(s) do we need to close this year? What does the timing need to be to meet our revenue targets?
2) Based on our typical close rate and time frame, how many high-probability proposals do we need in the pipeline at any given time to close the right number and size of deals?
3) Based on our rate and time frame for earning the right to propose, how many hot prospects do we need to have in the pipeline?
4) Based on our history, how many suspects (those who have expressed a need) do we need to be pursuing in order to convert enough of them to prospects?
5) Based on our history and market conditions, how many qualified targets do we need to actively pursue and nurture in order to find enough suspects?
6) Who are those targets, by name? What do you know about each so far? Are we actively pursuing them?
7) How are our actual rates and time frames comparing with the assumptions in your plan?
8) What is our status vs. plan for each pipeline category and where are we weak? What's being done to bolster those areas?
Her ability to readily answer these questions will tell you whether she has a handle on what it will take to meet the revenue goal for this year, whether she is adequately managing your pipeline risks, and whether she will have enough lead time to address weaknesses in the pipeline before they impact revenues.
If that person does not have a ready answer to these questions, I'll provide a simple framework in the next three articles that they can use for planning, monitoring and management.
Theresa Lina Stevens specializes in market dominance strategy and marketing for IT and professional services companies. She is CEO of Lina Group Inc., which helps clients gain and sustain a unique and high-profit, high-growth market position through a proprietary approach called the Apollo Method for Market Dominance. You can reach her at firstname.lastname@example.org.