Only 57% of sales reps make quota on average, according to Miller Heiman Group’s CSO Insights 2016 Sales Performance Optimization Study. And that number isn’t expected to improve much this year as the most recent Sales Manager Enablement Report shows. There are tons of reasons for this –reps not spending time on the right deals, not qualifying out early, or not having enough in their pipeline. But it’s also comes down directly to sales managers and their two most common approaches to pipelines: filling the pipeline to 3X or 5X quota, or boosting close rates.
The Issue with 3X or 5X Quotas
Many times, I see companies work towards getting their sales pipelines to be 3X or 5X their quotas. Whereas I understand the logic in this, it only makes sense if the deals they add to the pipeline are truly deals that can close in that fiscal year. And the only way you can know that is to ask the tough questions early on to try to understand the compelling reason your customer would want to purchase in your fiscal year.
Often, sales cycles can spill over to the next year. So why, if you find a deal today, do you put it in your pipeline to close in the same fiscal year, knowing there are many hurdles you and your customer have to clear? And why, when this edict comes down from the top, does the pipeline miraculously become 3X or 5X quota and the close dates are in this fiscal year? How could any sales rep know that so quickly?
The Good Thing about Close Rates
I once heard a story that a manager asked his sales team to increase their pipeline by X and – I know it’s hard to believe, but over the weekend − voila! The pipeline was such. Now, my big issue is this: Does having enough in your pipeline take into account the quality of a deal? Can it close in that fiscal year? How do you know? Wouldn’t it be better to work on increasing your close rates?
If you increase your close rates, you may not have to fill your pipeline by 3X or 5X. Do you talk to your customer(s) and constantly confirm key data to understand where your customer(s) are spending their time, money and resources? Or, do you “challenge” them and point out something they did not know, convincing them that your offering is a better place to put their time, money and resources? If not, then what good are those deals doing in your pipeline?
Still Filling the Pipeline?
How can you close a deal based on your timeframes? How can you pull rabbits out of your hat and forecast deals, in your fiscal year, with little to no clue as to what the customer is trying to achieve and by what date?
If you can spend more time learning about your customers and fill your pipeline based on what they are trying to do, or you convince them your solution is a better thing to do, then will this not increase your close rates and ultimately make you more money? And, shouldn’t you be concentrating on increasing close rates versus filling pipeline with deals – just any deals?
What does your company do? Ask you to fill your pipeline 3X or 5X your quota? Or work diligently to increase your close rates? I’d love your feedback.
Janice Mars, Principal and Founder of SalesLatitude, is a sales performance improvement consultant and change agent focused on growing top performers to impact bottom line growth. With more than 30 years of experience as a senior business and sales executive, she helps companies build successful sales teams by maximizing their time and resources, selling from the buyer’s point of view, and strengthening the effectiveness of leadership. View my LinkedIn profile | Twitter