4 Changes in Your Pipeline That Can Sink Your Sales Forecast
You’re no stranger to pipeline movements if you regularly put together a forecast. However, not all changes are equal. If you don’t know what to look for, you may have to tell executives that the actual result is far lower than what you originally expected. No one wants to be in that situation. Learn about the four changes that spell trouble for your sales forecast.
1. Substituting New Deals for Old Deals
Your sales team has put a lot of effort and resources into older deals. They’re familiar with the decision-makers involved, their needs, the expected time to close, and countless other details discovered as they moved through the funnel.
They’re close to making a decision and entering into a critical point in the sales cycle. The sales reps should be focusing on what they need to do to turn the last few nos into yeses.
Deals take a certain amount of time to go through the sales process. If a sales rep replaced $100k of their pipeline with week-old deals in place of well-developed deals, you end up with more risk in your sales forecast.
When they turn their attention to developing new deals that are still far from a purchase, they have to start from scratch. The old deal doesn’t get the attention and care it needs at this stage and can fall through if you’re not prepared for this situation.
2. Moving Multiple Deals Out for One Big Deal
The saying “don’t put all your eggs in one basket” applies to all kinds of situations, including this one. The temptation of one big deal is hard to resist. Your sales team can focus their efforts on getting this opportunity to the finish line, and it could be more than all the smaller deals combined.
The risk with this pipeline movement is obvious. All it takes is this deal to go south to leave your sales forecast in shambles. Instead of having many wins, you end up with one giant loss. Deal diversity is a strong indicator of your pipeline health, as you’re not left in the dust if something goes wrong.
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You’ll also run into situations where a salesperson tries to use one big deal to cover over cracks in their pipeline. They set five deals to “lost” and replace them with one big deal, which may indicate desperation on their part.
Focus on developing a healthy mix in your pipeline. Not only do you minimize the impacts of any one deal falling through, this versatility serves your sales process well in the long run. You end up with a strong sales team that doesn’t depend on any one person to be available for particular types of deals. While everyone naturally has strengths and weaknesses, you’re not in big trouble when the large contract salesperson heads off on vacation or gets sick. The rest of the team knows enough to step in and finish the job.
3. Swapping Upsells for New Business
You should have account managers focused on growing the accounts, and highly paid salespeople focused on hunting the new fish.
The trust barrier you have to overcome with new prospects is significant. Your relationship develops slowly throughout qualification, nurturing and the eventual close. You have to pour a lot of resources into making this happen, and even when your sales team does everything right, you have no guarantee that the new business will pan out.
Upsells, on the other hand, are a low-risk way to increase the size of an already won deal.
The problem with your sales reps holding onto accounts they sold in the last quarter and including upsells instead of new business is that you’re taking them away from their primary role. At face value, you might be forecasting a lot of revenue but your net new bookings number will be at risk. So not only do you not get the upsell revenue, but you also don’t get enough new customers on board.
4. Poor Sales Reps Creating Lots of New Pipeline
Poor sales reps can cause a lot of forecast chaos, from mismanaged deals to a mindset of quantity over quality. When they get backed into a corner on their quota, some inexperienced or underperforming sales reps try to compensate by creating lots of new pipeline. Of course, now they have the problem of trying to develop more deals than they can handle. They might make their quota by brute-forcing successful wins out of this mess, but your sales forecast takes a dive when all the extra deals fall through.
The other problem you run into with poor sales reps is inaccurate information on the projected deal size. They may not be able to figure out realistic goals for each opportunity, or they could simply be trying to cover their own bad habits. Either way, you can’t gain clarity on what’s actually moving through your pipeline until you identify this behavior.
These changes in the pipeline represent four of the worst situations you can run into as a VP of Sales. Take the time to monitor these actions to discover whether you’re going to have major fluctuations in your pipeline. It’s bad enough when your sales forecast starts sinking. The only thing worse is not having clarity on why that’s happening so you can correct it before it gets worse.