A cornerstone of the CRO (Chief Revenue Officer) role is making sales. At the heart of this lies your ability to understand the value of your pipeline so that you can manage sales and forecast to your business and colleagues. Knowing which deals are going to happen and how to move deals forward is one of the dark arts (critical skill set) of sales leadership.
Forecasting and pipeline management has been the Achilles heel of many people in this position. Multiple people estimating when other people in another company will make a business decision, which in turn you have to assess and provide to yet another set of people in a single view of what will and won’t happen, with a high degree of accuracy? What could possibly go wrong?
That said, many people have been successful at this activity, and you can too. In order to illustrate and highlight the challenges, I have used a report by Ebsta on the pipeline they have within their software platform. By using a real example of existing pipelines and the current forecasting challenges faced by companies I can provide a more realistic insight.
Ebsta have carried out a study of all of the combined pipelines in their software, which shows some changing trends as a result of the macro economic environment, the full report can be found here.
The foundation of this report is 3.2 million sales opportunities, $37 billion of total pipeline across 364 companies. It is based on 2022 data, so if anything the issues identified might be even more pronounced.
This blog is for CROs, Sales leaders and CEOs about what you can do when you see these signs, what I would do based on my experiences and what really matters. This post is a little longer than normal, as there is so much to discuss, I’ll try not to make this a habit.
Context
To keep things simple the context I am going to use is the basic calculation for a sales leader to manage their business. This will provide some backdrop to how some of the data can be applied.
Number of Opportunities created x Close rate x Ave deal size
Therefore if you have a total of 10 deals each worth $10,000 in your pipeline with a conversion rate of 50% you can expect $50,000 of closed won business from your pipeline of $100,000.
The velocity (cycle time or days to closed won) is a key indicator of when you might close these deals and is used in conjunction with the formula above to manage the timing of pipeline expectations. I also find that it is a simple guideline for how many sales cycles I can fit into a year, a useful insight.
Pipeline Trends
Ebsta showed that In 2021 there was a strong increase in pipeline as we saw a return to normal conditions post Covid, this was mainly supported by an increase in sales deal size. They also saw a dramatic drop off of pipeline in the final quarter of 2021, a massive – 47%, and we saw no recovery in 2022. This was due mainly to a reduction in deal size, of – 32% Year on Year (YoY), with the number of opportunities decreasing by only – 3% YoY. Conversion rates reduced by -15% and sales cycles lengthened by 32%, and slipped deals increased by 21%.
These numbers alone seem like massive changes. However when you put them all together as in the example below based on the formula above, the overall effect can really be seen. I have put slipped deals and delays in sales velocity together.
| Example | Reduction | New Reality | |
| Opps created | 100 | 3% | 97 |
| Close Rate | 33% | 15% | 28% |
| Ave Deal size | $50,000 | 32% | $34,000 |
| Total | $1,650,000 | $925,089 | |
| Yield reduction | 43.93% | ||
| Velocity – days | 90 | 32% | |
| Slipped deals | 21% | ||
| 53% | 137.7 | ||
| Sales cycles in year | 4.1 | 2.7 | |
| Extension of cycles | 34.64% |
In this example the yield is reduced by – 43.93% from the original pipeline. This is significant and I’m not sure that the report really brings this out. Those numbers really multiply up across the formula. No wonder the number of salespeople to hit quota in this report was just 29%.
Add to that the -53% change in sales velocity, reducing the number of sales cycles available in a year. My assessment would be that your yield from this reduced pipeline will be even less than $925,089 to as low as $434,787 as the deals that would normally close in the time frame will not be likely to do so.
Whilst these numbers are for illustrative purposes they paint a stark picture for companies and their sales capabilities. However, there is a lot of good news about people who are bucking the trend.
Sales / Opportunity Management
As companies try to gain some consistency across their sales pipeline we have seen the adoption of sales methodologies increase from 11% to 21%. MEDDPICC, my preference being MEDDIC (Ebsta have embedded the former into their software) is by far the most common and accounts for 61%, This is for good reason as it is easy to understand, has a clear connection to winning deals and is supported by materials and skills in the market.
Interestingly, top performers are 100% more likely to use a sales methodology according to Ebsta. Is this surprising? Not really but a useful reference point for lower performers to understand the value of knowing how to navigate a deal effectively. Top performers have a lot of good habits, they are 407% more likely to update their deals weekly, 31% less likely to let deals slip, 53% more likely to have enough relationships with stakeholders. How many of us have heard a salesperson say “I don’t have time for admin”, the data above should put an end to that debate. There does seem to be a correlation between being professional and consistent in your approach and success.
Relationships and Engagement
This is Ebsta’s strength and it is a central part of the MEDDIC methodology, arguably sales in general. As a graduate of the original IBM sales school system, I cannot encourage this part of the sales engagement strongly enough. High value and frequent engagements with customers and prospects allow you to gain more insight into their requirements, more depth to the relationships and importantly keeps the channel of communication open for when changes in their organisation happen or competitors start to deliver value.
Ebsta has an index based on AI from 1-100, and they demonstrate high engagement, which they rate as greater than 81, has a 633% increase on sales velocity over good engagement (61-80) with a 340% win rate. This really stands out as a critical activity.
It seems pretty straight forward, right? So why do only 21% of deals ever reach high engagement, and only 35% of opportunities reach a good level? This means the majority of deals are not getting the engagement they need to convert at a higher rate and higher velocity. It also means that 44% of deals, almost half, have low engagement.
To really ram this point home Ebsta identified that deals that slipped back from a great relationship to good, saw a reduction in win rate of – 47% and sales cycles were delayed by – 81%. Once again top performers have 79% of their engagements fall into the great relationship category.
Companies also need to take some responsibility here, having decent collateral, engaging discussion points and a solid process behind the MEDDIC methodology are critical to having value to deliver to customers and prospects. I am a huge fan of executive support on deals, a really easy way to support the salesperson and provide contacts with deeper engagement.
Deal qualification
This is one of my personal focus areas. The approach in this report is MEDDPICC, which is useful as it is a consistent method to review. I think MEDDPICC and its variants are really opportunity assessment criteria not sales methodologies, but perfect for this analysis and integral to a successful sales process. The numbers from Ebsta really support the idea that a consistent method well executed makes a huge difference. (who knew…..?…….Me, I knew)
However despite 61% of companies implementing MEDDPICC only 15% of opportunities are fully qualified. The impact was spectacular when execution levels were high with win rates improving by 311% and high performers were 437% more likely to complete the qualification. With this level of insight I would be unable to support any approach from a rep that didn’t want to participate in this activity. Training your people to know how to do this is your responsibility, don’t expect them to just know what to do.
Metrics, Decision Criteria and Paper Process steps were the least populated but conversely they had the biggest impact. When completed they increased win rate by 206%. For reps that had as few as 2 elements completed by the end of stage 2 this increased win rates by 71%. Although this feels like an incredible insight, I can’t say I am surprised based on my own experiences as a rep and a sales leader. The frustration as ever was from the perspective of a sales leader in getting people to participate.
Time / Deal Slippage – this is about how long it takes to close a deal, and a common reason why reps don’t meet their targets. The assumption for most people is that “I’ll get it but it’s just delayed”, In my experience this is rarely the case. A genuine slipped deal closes shortly afterwards. What is typically happening is that it’s not slipping, you’ve lost it, but you have yet to work out that this is the case. The Ebsta benchmark seems to support this view.
Deals that extend beyond the typical sales cycle have reduced close rates by as much as 60% for one month and as much as 90% for 2 months. The inverse is that deal close was 165% when in the “golden period” for deal cycles. Deal velocity is often overlooked but if you are clear what your golden period will be it is a key insight and forecasting factor. Deals that are twice the cycle time than normal are only 3% likely to close. Read that again, 3%, this means all that trash in your pipeline is dead. Time to clear them out and put them back into a lead nurturing program.
In addition Ebsta found that deals were typically managed incorrectly with many deals (68%) below the golden period. There seems to be no change in the ongoing curse of deal management which is that 89% of deals are set to the end of the calendar month. This is a measure of how poorly reps understand the conditions for a good deal and how to manage a pipeline. This is supported by the fact that 17% of deals had their close date changed more than 3 times by more than a week.
What would I do?
The answer does not seem complicated if you focus on the cohort of reps that are being successful.
1. Standardise the sales engagement
I’d start with implementing a sales process that suits your business and combine it with an opportunity assessment method like MEDDIC / MEDDPICC and train your team to effectively use it, making it the centrepiece of all discussions. Unless you embed these initiatives into the culture of your sales team, they will see it as “admin”, and that is the death knell.
If everyone knows the entry and exit criteria of deal stages, you can create a consistent foundation for forecasting. Once this is in place your depth of engagement improves by ensuring that the MEDDIC stages and sales stages are aligned. Having a process is not enough, people need to understand how to operate within them and have you as the CRO, consistently apply them. A really simple action I have taken is to really focus on a couple of aspects, so every time a deal appears in front of me, everyone knows what I am going to ask. I focus heavily on Identify Pain, Metric and Champion elements.
2. Qualification improvement
The second step would be making sure you are qualifying the correct deals into the sale process. My concern with only a 3% reduction in deals created and 32% reduction in deal size, when accompanied by a 15% reduction in close rates is hiding a more important issue. When I see this combination I tend to think that sales people are qualifying for too many deals.
Pick the most critical steps in MEDDIC and make them part of the qualification process. I would choose, Identify Pain, Champion and Metric (as above – no surprises here) as the guiding principles of a good sales deal. Do I know what the actual problem is? Is there someone in a position of power that is supportive and invested in solving the problem? And do they know what will improve in their business as a result of success? In my experience it is too easy to take an unqualified deal into the sales pipeline.
As a useful cross reference check the conversion from SDR / BDR to sales, this will typically be the conversion from MQL to SQL as well as SQL to Opportunity created ratios. If there are near 100%, then the gate is too open. Invest some time in following through from start to finish some deals, connecting qualification depth to close, and make the relevant adjustments. You want your reps working on the deals with the highest propensity to close, which fit your ICP (Ideal Customer Profile). Anything else is a waste of their time.
3. Key Deal Reviews & MEDDIC
Next I would put in place Key Deal Reviews in small groups, focussing on the main deals for each rep, including the rep’s managers. Use the MEDDIC / MEDDPICC or whatever version you implement, don’t think too hard these methods really work.
The Key Deal Review acts as an excellent coaching point for MEDDIC and your approach in general. The questions you ask your team, the suggestions you have for them to follow up and how you position the approach are all critical to success. If you get this right or at least part right you will improve your team and your numbers.
My experience is that leadership is about the right behaviour and you are setting the tone here not just with the rep but with the managers too. You are responsible for setting the standards for this part of the organisation as the CRO, and by not doing so you are condoning poor behaviour and low standards.
4. Executive Engagement
Finally, I would put together an Executive engagement program for a small number of your top team. It would be worth taking some time to ensure that there is a consistent approach and set of skills, and that the executives understand their role in the sales process. Once this is in place you can release them onto the reps. A little care can be taken to align the right executive with the right deal.
The sales people will not want to do it, and will think of this as you checking up on them. Spend some time explaining the value to them of improved sales conversion with deeper MEDDIC insight and deeper relationship building with customers. Often a new face will bring out other requirements or information from the prospect or customer.
Don’t let this just be a call or a quick chat, have it as an integral part of the sales process. Create some leverage with the customer by telling them that you don’t move forward past this stage until the economic buyer and an executive at your company have spoken. This increases the value to the customer and makes another qualification point. I appreciate that some companies are too big but get something from the engagement you didn’t already have. What you are saying to the client is that your time is as precious as their time.
If you can deliver this effectively your customers will feel special and your leaders will feel engaged in these deals. You will find new ideas emerging from your team and the insight from these calls will go back into the department. The side effect is that some of the issues you face with other departments will be resolved because their leaders have now seen the effect on business.
5. Top Performer Focus
What do these top performers do well that we can reference and what lies underneath these actions. The data from Ebsta seems to support this view.
- They have a consistent method
- They qualify effectively
- They build relationships and consensus with stakeholders
Your ability to communicate with the rest of the team about how these great habits and approaches make a difference will define your success in this tough market. Communicate with your reps about what your top performers do well, support them with the appropriate training and coaching to build their skills.
If they don’t respond then you don’t have a complicated decision to make about them. Target the lowest performers first and if you see no change in intent and behaviour move them on. Some people will try and not get there and they deserve a bit more time. The mid performers are the most likely to become top performers, your focus should be on those that are trying to change.
The other effect of publicly sharing the insights you have gathered from your top performers is to show them your support and give them confidence. It is all too easy to focus on the negative but there is some excellent news here and your best people need to know you notice, appreciate what they do and encourage others to be like them. They are already leaders, you are shining a light on them and showing how you want others to behave.
This is so much more effective than telling reps what to do, showing them a colleague who is already being successful doing it is a much more effective way.
The NOT so secret CRO 
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