Sam JacobsAs the CRO of The Muse, I oversee all sales, marketing and success functions. All three of those areas play a crucial role in revenue, and for a company to grow it needs to invest in all of them.
In recent conversations with peers who have struggled with hitting their 2016 revenue goals I’ve noticed a broader trend that most sales leaders don’t pay enough attention to demand (pipeline) generation when examining how they will hit their revenue goals.
Why This Is Important
Pipeline generation is a leading indicator of revenue
It gives you early indicators of problems so you can do something about it. Revenue tends to be pre-determined based on your pipeline. You need enough of a forecast. So you can see where it’s weak so you know it’s looking weak before it gets there.
Executives and board members hate being surprised
Knowing performance levels will be poor is better communicated today than the last week in your fiscal quarter. It forces the conversation around whether expectations are reasonable and gets everyone on the same page on priorities.
It could be more important than hiring
The conventional approach for hitting revenue goals is through hiring. They start with the revenue target and then make assumptions about rep performance in order to set their hiring plans for sales. But the real gating factor is just not number of new hires but your ability to increase your pipeline of sales opportunities to convert into revenue. Improving your demand generation strategy can be sometimes more impactful than hiring to grow top line revenue.
Practical Approach
1) Start with a revenue goal
This sounds obvious. It should be at least. We need a goal and a growth target that we can work backwards from. You may need to modify it later if the execution path looks impossible or too easy. And it needs to be right for your business. That said, the goal informs how much you’ll invest and where you expect to end up. And if you’re at any kind of professionally managed company with a Board of Directors, you’ll be obligated to have a plan regardless.
2) Based on the revenue goal and close ratios, how many leads/opportunities do we need to generate to hit revenue growth goals?
For example, if you need to double revenue in the new year, you may need to simply double your lead growth. The point we are making here is simply that doubling your AE headcount is (usually) not the way you’ll double revenue. You need to make sure you can generate sufficient demand in order to hit your goals and demand comes from leads turning into opportunities.
3) Understand your marketing investment
You need to have baseline expectations around how the dollars will convert into leads and how those leads will convert into revenue. Marketing is a big driver of your sales funnel so it’s important to know the ROI on your investment and how that impacts your team. Track your funnel from Leads -> MQLs -> SALs or Opportunities -> Closed Won business. You are targeting 5% win rates on MQLs and 25% win rates on opportunities.
4) Where will leads come from?
For example, you may assume based on historical data that 20% of the leads will be generated by AE’s, 50% by outbound SDR’s, and 30% marketing. You need to understand where leads have come from and where you’d like it to come from so that marketing, sales development and sales are aligned on the overall strategy for pipeline generation.
5) What’s the strategy for how to get leads within each of these categories?
For example, X leads by the SDR team may determine how many SDR’s you need to hire. Beyond that, you’ll likely need to understand lead targets by vertical you sell to. Cutting your lead goals a few different ways will help you understand your go-to-market strategy, what your marketing initiatives must be. And how you’ll hit your number.
6) What do you expect close rates to be and sales process length?
Again, you are shooting for 25% win rates on opportunities. And you need to understand not just sales cycle but lead conversion cycle. Spend today might not equal dollars until a few months, sometimes a year. So if you have a Q2 goal, it’s time to get moving.
Monitoring
To provide transparency and accountability of our internal teams, we’ve committed to a daily cadence of looking at our pipeline generation. Internally at The Muse, we have two tools to monitor our daily progress.
1) Daily automated email
We have an an automated daily email that shows:
- Dollar value of new pipeline we created
- Where it was routed (who took those leads)
- How many opps was created
2) CRM dashboard
We created a pipeline dashboard that uses a weighted pipeline value. By over-weighting your pipeline by later stage deals, it drives your forecast towards the deals close to the finish line. And lessens the false positives of the top of the funnel deals. Amongst other items, we show:
- 30-day outlook on pipeline growth
- New pipeline value created that day
- What the biggest deals are in the current pipeline
Final Thoughts
You don’t need to wait for a dedicated sales operations hire or expensive analytics tools to implement a pipeline generation strategy. It starts by creating a culture where the sales team focuses on pipeline generation instead of just revenue growth.
For analytics, you can start by having someone on the team manually send out a daily email. Reporting about opportunities were generated. Overtime, you can evolve it to add automation and detailed analysis but it has to start somewhere. Best of luck in 2017!
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