Getting ahead of next quarter
I would venture to guess most non-transactional businesses are running forecasts on a quarterly basis. With all eyes on the current quarter, are we setting ourselves up for failure next quarter?
This article is about having a view into Next Quarter pipeline coverage and whether we’re setting ourselves up for success or failure.
Why Next Quarter?
RevOps and Marketing will benefit from looking ahead to see if there needs to be any additional focus on pipeline building this quarter to impact next quarter (or further out if you have even longer cycle times). If it appears that you will be falling short of plan, it’s better to know as early as possible so you can take action to reverse the trend.
Note: Even if you have a 6-9 month average cycle time, you are still closing deals under 6 months. I like to look at this as a distribution curve vs just the average.
Tracking Next Quarter
This works best if you have historical data so if you aren’t snapshotting your pipeline data, start now! If you know from history that you need to carry 3.5x coverage into a quarter to hit your plan, you can calculate how much walk-in pipeline you should have. Walk-in Pipeline is the defined pipeline amount on a set day/week in the quarter. You can use Day 1, Week 1 or if you’re on the Kellblog, week 3. How much pipeline do we need in our example if we need to sell $20M? Get out your algebra brain for this simple one:
Pipeline / Target = Coverage
Pipeline = Coverage * Target
Pipeline = 3.5x * $20M
Pipeline = $70M
So we need to have $70M in our walk-in pipeline.
We currently show $35M in pipeline (or 1.75x coverage). Should we be concerned? This is where the historical data comes in to play. You can see how historical periods have trended as you would expect CQ (current quarter) deals to push, new deals to be created and all of the other pipeline changes that will impact next quarter. You may end up with a chart similar to this:
Comparing this year (orange) to last year (blue), our coverage is trending below where we want it to be but we’re in line. Throughout the quarter you’ll continue to see changes to the makeup as deals push and new opps are created.
What about the quality?
If we know whether or not we’ll have enough pipeline, how do we know if it’s of good quality? There are 2 main ways I like to look at it. First is the Pipeline X-ray.
1) The pipeline x-ray allows you to see not only how the pipeline looks by stage but the intersection of age and stage. Early stage deals that have been stuck for 180 days+ are good candidates to purge/scrub. Do you have some extreme deals skewing your overall pipeline number? If those push, lose or shrink, your pipeline coverage can disappear dramatically and quickly.
2) The other way I like to cut it is by looking at the makeup of the underlying deals. This will vary based on your business but consider things like:
Number of Opportunities
Average deal size
Average age
Average stage
What % of the deals are in a specific segment (if you have a new segment you’re selling into with lower conversion rates, you want to know that)
What % of deals are in later stages
Compare the makeup of the pipeline this year vs what it looked like a year ago. Other factors can come in to play, of course. If you’ve changed your pricing, you may see ASPs adjust accordingly. If your hiring focused on a different segment of the market, you may see shifts. Take that into account when looking at the deltas.
Now What?
By seeing how well we’re trending toward having enough pipeline and the quality of it, now what? Take corrective action if either is lagging.
Low pipeline trend could trigger ideas such as:
Create incentives for BDRs to drive up additional pipeline through SPIFs.
Create offers from a marketing standpoint or add small regional events to create pipeline.
Sales blitz days to create sales generated pipeline
Get ahead of the pipe creation side of it as quickly as possible.
Pipeline health could trigger actions such as:
Deal reviews with key opportunities and get executives tied to each deal.
Focus on actions needed today to improve the conversion of existing deals.
Win rooms - have reps bring opportunities to peers and sales leaders to brainstorm how to progress deals forward.
Wrapping it up
As important as this quarter is, next quarter is on a steady march toward becoming this quarter. By being aware of the makeup of next quarter as early as possible, you can take action today to make a difference and continue to hit your growth targets.