Growing the sales pipeline and generating revenue is the number one priority for most leaders of small and medium sized consulting businesses.
However many firms fall short of their revenue targets and most experience erratic, unpredictable performance with peaks and troughs over the years. While there are of course many contributing factors to sales performance, one of the least difficult to fix is the way in which you manage your pipeline.
There are three questions we are frequently asked by our clients in order to help them put a plan in place:
1. How do we measure the pipeline and reliably forecast sales?
If you are going to drive up sales you need an effective way of measuring progress from current state and beyond. In order to do this you want to do the following:
- Create a simple database of TRUE sales opportunities
There has to be a line drawn between a marketing lead and a real sales opportunity. Only the latter should be included in your forecast.
- Categorise each opportunity with a success probability
Within your database, all opportunities should be categorised using four simple definitions that can be shared and understood throughout the whole organisation. These should be as follows: 0% (Prospect: a piece of work that you’re aware of); 35% (Good prospect: in discussion with client); 65% (Hot prospect: approval pending); 100% (Booked: project approved).
- Regularly assess the overall health of the pipeline
The simplest way of doing this is to create a ‘stacked bar graph’ of the revenue per month of booked projects and discounted opportunities, for example:
A healthy business will see a declining stream of booked revenue, but a bow-wave of discounted opportunities. Over time you will quickly get a ‘feel’ for what looks good and what does not.
2. What stretch targets should we be setting our principals and partners?
Within a typical small or medium-sized consulting business, the stretch revenue target of a principal or senior manager could be anywhere between £1m and £3m depending on the size of support team and blended day rate for the services you offer. In a business where:
- A partner’s role is client (not project) management and sales conversion
- The business turns over £5m to £10m
- A typical ‘good sized’ project is £350k, but £1m projects are achieved
- A strong client base exists
- The business has a market presence and reputation in their specific field, with some sales leads coming into the company
then the target should be £2m. Adjust up or down depending on where your business sits against these factors.
In order to hit the target they will need to convert to ‘booked revenue’ £200k every month (that’s £50k a week!). At the same time they will need to get verbal commitment for £300k every month (£75k a week), as well as adding a further £600k of good prospects to the pipeline (£150k a week).
This sounds like a difficult task, but it can be made much easier if you create discipline through a constant drumbeat of sales pipeline management activity.
3. How do we manage them towards achieving their targets?
There are three main drivers to making this happen:
- Getting them to set sales meetings: record and measure the level of ‘front-end pro-activity’ in your selling teams in terms of meetings set and held. Measuring it will provide the necessary ‘encouragement’ needed to make it happen.
- Keeping the pipeline moving: ensure that prospects are adequately ‘worked’. You can only get converted orders from existing Hot and Good prospects, so it is important to also measure the value of new Good prospects added to the pipeline each month, as well as the value of projects moved into the status of ‘Hot’.
- Setting regular sales pipeline management meetings: Holding all this data is one step forward, but to gain real benefit it needs to be monitored and managed. To do these we suggest the Managing Director or Partner runs a regular meeting with consultants holding sales responsibility to demonstrate that sales are important to the business.
All our recommendations may not be entirely new to you as we are presenting only the basic principles of sales pipeline management. That said it is surprising how many firms do not practice these important steps. This approach will not guarantee you any sales growth as this depends on a range of additional factors, however at the very least it should help to ensure that you do not lose revenue that you could be winning.
If you would like further information, we have an extended article on this topic which features more detail and examples of how to record, measure and monitor your sales pipeline.