Re-Qualify and Reclassify Every Deal

In Part 1 of this series, Here’s why your Sales Team Stinks at Forecasting Revenue, we reviewed the facts about just how bad we are at forecasting, thought through “why we stink,” and outlined three steps to redeeming ourselves as sales professionals and leaders. In order to help companies dramatically improve forecasting, we must:

1. Review and re-define the qualification criteria and sales pipeline stage definitions that are at the heart of weak pipelines and poor forecast accuracy. (Covered in Part 2 of this series)
2. Re-qualify every deal, reclassify the deals based on the new sales stage definitions, and clean out the rubbish…and methodically apply these criteria in real time, forever. (Covered in this post, Part 3)
3. Create a new sales culture and cadence that focuses the majority of discussions around building strong pipeline, rather than forecast.

In this post, Part 3, we re-qualify every deal, reclassify the deals based on the new sales stage definitions, and clean out the rubbish…and methodically apply these criteria in real time, forever. I’ll walk you through the steps needed to implement the new stages, discuss how to avoid two major implementation pitfalls, and review why It will totally be worth it!!

Clear out your sales rubbish by re-qualifying and reclassifying all deals

Cleaning out pipelines is just like cleaning out your garage. Take everything out and put back only what you

should keep. Anything put back into the garage should be organized well and should be kept organized. Here are the implementation steps:

1. Move ALL of the deals in the pipeline to stage 1. This is to be sure undertake a full review of every deal, and rebuild the pipeline based on our new stage definitions (from Part 2 of this series).
2. Review each deal. Remember that each stage definition is based on customer-verifiable criteria. Therefore, the sales person will likely need to connect with the customers to ensure that the new stage definitions are verified to be 100% true.
3. Apply the new sales stage definitions to each opportunity and update the opportunity’s Stage (1, 2, 3, etc.) in your Customer Relationship Management (CRM) software or pipeline spreadsheet. Be strict in making sure ALL criteria are met for the stage and all previous stages. If the sales person’s information does not meet all the criteria, then chose the lowest stage that all criteria are met.

Implementation Pitfalls

As straight forward as the steps sound, the leadership team must be ready to manage 2 predictable pitfalls from the sales professional during implementation.

First, Sales Teams have invested a lot of time and energy into getting deals to later stages of the pipeline. The difficultly in implementing customer-verifiable sales stages is that most sales teams are forced to admit that qualified deals are…well…no longer qualified to be in that sales stage. And, watching all the deals in the pipeline slip drastically back to early stages is unnerving for salespeople.

If we are honest, customers change their priorities, budgets, and their minds all the time. Right? But, Sales People almost never move a deal that was in stage 4 back to stage 2, do they?

When deals move backward to earlier stages, the sales person will feel the anxiety of his/her perceived pipeline strength diminishing. We need to help them get over that initial resistance. Even in Step 1 above, moving all the opportunities to stage 1 typically takes some coaxing from leadership. Once the Manager and Sales Person agree that all the opportunities are in the correct stage, a newfound confidence will arise. I promise!

And the second predictable pitfall? In Steps 2-4 above, managers and sales leaders must continuously reinforce that the sales person be self-discipled about stage accuracy. For example, once a customer can no longer can verify the timeline to sign a contract, the deal should be moved back to a lesser stage that meets all the verifiable criteria.

Sales leadership and salespeople must be resolute in applying the new definitions of the stages. Definitions must be strictly applied to the pipeline. If most or all of the pipeline returns to Stage 1, so be it.

It’ll be Totally Worth It!!

Once the sales teams are honest with themselves, and all deals are in the correct stage, we get our first accurate assessment for the health and maturity of our pipeline (possible for the first time, ever!). A hygienic pipeline based on customer-verifiable outcomes yields four important outcomes:

1. The noise that normally clutters pipeline is gone. Gone! Now, we can clearly see where to focus our sales energy!
2. Sales teams now have a clear path for all the customer-verifiable activities that must occur before a deal can reach the next step and before a deal will close.
3. Sales leaders can now use the customer-verifiable criteria to continuously qualify deals and coach teams. And, by influencing deals in stages 1-3 of the pipeline, managers and leadership can impact those deals during the early phases and systematically build stronger deals at all stages of maturity.
4. By the time deals get to stages 4 and 5, the deals are strong and are whose closed dates are much more predicable. We have customer-verifiable substance behind any forecast that is created, based on deals in a strong pipeline. Hallelujah!

In Part 4 of this series, we will review how we can leverage these four It’ll totally be Worth It outcomes to create a culture of strong pipeline generation. Once we can build strong pipelines full of very well-qualified deals, the forecast discussions will be simple, shorter, and will yield amazing accuracy.

Matt Oess is a Strategy, Sales & Marketing partner in TechCXO’s Atlanta office.   See Matt’s full bio or contact him: matt.oess@techcxo.com.

In Part 1 of this series, “Here’s why your sales team stinks at forecasting revenue”, we reviewed the facts about just how bad we are at forecasting. We self-diagnosed “why we stink”. And, we outlined three steps to redeeming ourselves as sales professionals and leaders. In order to help companies dramatically improve forecasting, we must:

1. Review and re-define the qualification criteria and sales pipeline stage definitions that are at the heart of weak pipelines and poor forecast accuracy (in this post, Part 2)
2. Re-qualify every deal, reclassify the deals based on the new sales stage definitions, and clean out the rubbish…and methodically apply these criteria in real time, forever (part 3 of this series).
3. Create a new sales culture and cadence that focuses the majority of discussions around building strong pipeline, rather than forecast (part 4 of this series).

The Old Way Leads to Misery

So, new pipeline stage qualification criteria… What’s wrong with the current stage definitions? In a word, everything. Nearly 100% of sales teams define their sales stages in terms of their own selling activities.

Here’s a typical example: “Stage 2 – We had a Discovery meeting”, “Stage 3- We did an Assessment, “Stage 4 – We did a Demo of our software”, “Stage 5 – We delivered a Proposal”, and “Stage 6 – We are Negotiating”. We need look no further than the sales stage definitions in Salesforce.com or some other CRM to validate this point.

The flaw in this approach is made obvious by the following example (using the Stage definitions above). Suppose we conduct a demonstration of our solution (Stage 4) and deliver a proposal (Stage 5) to a customer. Most sales organizations assume that when the customer “loves” the demo and asks for a proposal/pricing, the deal is now in the negotiating (Stage 6) and becomes available to consider when compiling the forecast.

In some cases, this is true. The customer buys in the next 30 days, as expected, and everyone is happy. But, what if you believe you are at Stage 6, but the customer only needed the pricing to establish next year’s budget? Or, maybe the customer just needed pricing to justify a business case that must now be reviewed against 17 other projects… all seeking new budget. (Or, maybe the customer just asked for the proposal to get the Sales team out of his/her office.) These deals tend to linger at an advanced stage in the pipeline for a LONG time. And, those are the kinds of deals that ultimately make up the deals that are available to support a sales person or manager’s forecast. Clearly, these pipeline stage definitions are disconnected from the customer’s processes.

What if a customer needed pricing to justify a business case?  What if the customer just asked for a proposal to get the sales team out of his/her office?

So, one might deduce that the correct stage definitions are not selling activities, but buying activities. Good point! A few good sales training companies and consultants have started moving in this direction over the past 5 years. For example: “Stage 1 – Customer has a Stated Problem”, “Stage 2 – Customer has identified possible solutions/vendors”, “Stage 3 – Customer is considering Proposals from Short-listed Vendor Candidates”, etc. These stages are certainly more connected with the buyer’s process than our previous sales stages. While buying activities are superior to selling activities for stage definitions, there is something even better!

A Much Better Way

At TechCXO, we believe strongly that the best stage definitions for pipeline and opportunity management are based on a concept we call Rising Level of Customer Commitment. It measures how committed the customer is to 1) making a purchase, 2) your solution, and 3) your company. And, as you will see, these stages can actually be verified by the customer. Perfect!! As you will see, the customer’s growing level of commitment is a fantastic indicator for deal progress and the a great forecasting barometer for the likelihood of the customer completing a purchase.

Can your pipeline define a “Rising Level of Customer Commitment”?

Here are some example pipeline stage definitions that you can use as the basis for your new stage descriptions, based on customer-verifiable activities (credit: Brad Milner and Rick Nichols, TechCXO). Notice how each successive stage describes an increased level of commitment to your company and solution.

Stage 1 – The customer has not yet engaged in an opportunity that we have identified.
Stage 2 – We have a scheduled meeting on the customer’s or prospect’s calendar in the next 30 days.
Stage 3 – Out Customer contact has fully verified 1) a need for our product or solution, 2) budget availability, 3) timeline for purchase, and 4) the decision-making authority or process.
Stage 4 – All decision-makers have verified the criteria in stage 3 and have also verified that we can meet their requirements.
Stage 5 – All decision-makers have told us “you won this business”.
Stage 6 – Closed won. Contract signed.

Try it Yourself

These definitions might need to be tweaked to fit the buying process of your particular customer segments or industry. But, by changing the focus of the stage definitions from our own selling activities to customer-verifiable buyer commitment, we remove much of the risk that exists when we try to predict when the customer will ultimately say “yes” and purchase. The removal of this risk is unbelievable benefit of this methodology and can’t be overemphasized.

So, if we just change the definitions of the pipeline stages and reclassify the stage each deal in the pipeline, things get better, right? The answer is… absolutely! Implementation of these simple definitions will help with better insights into deals, help you ask better questions, and should create better dialogue between Salespeople and Sales Leaders. Feel free to give these stage definitions a try, and reach out to one of us at TechCXO if you have questions.

That said, we aren’t done. While new definitions are definitely necessary to improve our pipeline health and forecast predictability, they are not sufficient for maximum Sales performance. It turns out that we need a new pipeline management process to go with our new sales stage definitions. In Part 3 of this series, we’ll walk through the steps on implementing the new stages and investigate the challenges.

Matt Oess TechCXO

Matt Oess is a TechCXO on demand sales executive in its Atlanta office.  You can reach him at: matt.oess@techcxo.com.  See his full bio and other articles here.

According to a CSO Insights 2016 study of 1,200 sales organizations, on average, a sales person who forecasts a deal to close will win that deal only 45.8% of the time.  In contrast, the odds of winning at roulette on a “pass” bet are 49.29%!

So, sales teams stand a better chance of winning at roulette than they do at closing a forecasted deal. If that isn’t scary enough, when I ask clients and prospects to estimate their close rates (without looking at their data), they believe their win rate on forecasted deals to be 60%, or greater.

So, how can we improve the forecast accuracy of sales teams?

Believe it or not, the answer doesn’t lie in increased focus on forecasting or a different set of forecasting rules. The answer lies in the sales pipeline of opportunities that underpin the forecast.

To gather the insights required to solve forecast accuracy, we must first be honest with ourselves about the forecast and pipeline.

Here are some underlying truths about forecast and the underlying pipeline:
1. The preponderance of deals in most sales opportunity pipelines are truly unqualified.
2. Because sales pipelines are full of weak, semi-qualified deals, a sales person who is under pressure to forecast “the number” must choose from deals that are not truly in the late stages of closing.
3. Managers who are also under pressure from their senior leaders to produce numbers have little choice but to direct the sales person’s time and energy on pulling in and delivering these weakly-forecasted opportunities.
And so, the majority of sales teams stink at forecasting.

It’s time for we, the sales profession (sales people, management and leadership) to regain control of the process that has lead to such disastrous forecast accuracy. We owe it to ourselves to do 3 things.

Firstly, we have to review and re-define the qualification criteria and sales pipeline stage definitions that are at the heart of weak pipelines and poor forecast accuracy. (Part 2 of this series)

Secondly, we must take stock of our teams’ pipelines. We must re-qualify every deal, reclassify the deal based on the new sales stage definitions, and clean out the rubbish. (In part 3 of this series, we will investigate how to do this)

And thirdly, we must completely flip-flop our sales cultures and conversations from an almost pure focus on forecast to near-complete focus on building a strong pipeline of well-qualified opportunities. (Part 4 of this series)

Let’s face it, our credibility and reputation as sales leadership professionals is at stake, here! A 45.8% close rate on forecasted deals is terrible and we owe it to ourselves to be honest with ourselves and fix forecast accuracy once and for all.

Parts 2, 3, and 4 of this series are intended to do just that! Stay tuned.

Question: Did the 45.8% close rate of forecasted deals surprise any of you? I know it surprised me. I would love your thoughts.

Matt Oess is a Strategy, Sales & Marketing partner in TechCXO’s Atlanta office.   See Matt’s full bio or contact him: matt.oess@techcxo.com.