Sales revenue is the lifeblood of all commercial organisations.
On an annual basis, long debates and negotiations take place before the annual sales revenue budget is finalised.
Once the revenue number is finalised and signed-off it is over to the Sales Management to make it happen. Sales management need to dissect the revenue monthly numbers and translate the revenue targets into numbers and value of sales that need to be closed each month.
Many organisations have contracted recurring revenue, e.g. monthly maintenance fees. This should be subtracted from the monthly revenue target to identify the net new sales revenue which the sales organisation needs to close each month.
As all sales organisations will tell you, sales do not just happen and close on their own. The prospect goes through a buying process, particularly in the Business-to-Business (B2B) environment, that involves a number of steps or stages from need identification, through to brand/supplier awareness, consideration and preference to purchase intention and actual purchase.
The sales pipeline or funnel is characterised by having a series of stages or steps in the sales process that seeks to match and respond to the needs at each stage of the buying process and can include initial lead qualification, need identification and assessment, proposal development, negotiation and closure. Typically the stages are characterised by the numbers in the pipeline being reduced as it goes through each stage (pipeline stage leakage) and hence the funnel shape.
In order to scope the work to be done to achieve the monthly sales revenue plan, sales management must work back through the pipeline stages to identify how many leads, prospects, proposals etc. must be achieved each month if the sales revenue numbers are to be achieved in subsequent months.
The elapsed time that the buying process taken and hence the time it takes to process a sale through the pipeline sages varies by industry and in some cases can be in excess of six or twelve months. In the case of a six month pipeline duration the outcome in month six is limited by the number of new leads entering the pipeline in the first month.
A tool such as the Excel-based Sales Pipeline Planner and Calculator available from the Business Tools Store takes care of the calculations for each stage of the pipeline for each month and identifies the numbers required at each stage to achieve the sales revenue budget in subsequent months.
Having identified the number of new leads required each month to support the sales revenue plan it is now the turn of Marketing to provide Sales with a steady stream of the required number of leads.
Increasingly Marketing is becoming required to justify budgets and demonstrate ROI and the expenditure should be tied to the specific target number of leads to be generated.
There are many options/channels that Marketing can choose when developing a lead generation program from traditional advertising, tradeshows and telemarketing to more recent options such as email and web marketing, webinars and social media.
A lead generation budget/plan should be drawn up that assigns a budget to each channel to be used and identifies the number of leads to be generated as a result. This allows the cost per lead to be calculated and compared across the different channels.
This approach can be taken to a more granular level by assigning budgets and number of leads to be generated to individual programs/campaigns within each channel, i.e. if one is using email marketing or telemarketing assigning a budget and leads target to individual campaigns or similarly breaking the tradeshow budget and target number of leads down to individual tradeshows.
Once the leads begin to flow a crucial step in a joined up process is to manage the leads and nurture them through the different pipeline stages to a successful conversion into orders and ultimately sales revenue.
Typically in the initial stages of the selling process very limited information is available of their precise requirements and there is a low probability of successfully converting the lead into a sale; perhaps only as few as one in ten of initial leads identified are successfully converted. As the prospect goes through the buying process this probability increases.
The sales pipeline should match the buying process and each stage should be focused on moving the prospect successfully through the corresponding buying stage. By using the probabilities assigned to each stage a net pipeline value can be calculated for sales forecasting purposes.
A sales pipeline management system should track the status of all active leads and should also provide lead source analysis so that the most successful sources in terms of generating leads, conversions and revenue can be identified
There are many tools available to manage prospects through the sales pipeline, including sophisticated CRM and sales automation systems.
For organisations for which such systems are not appropriate, simpler Excel-based tools that are easy to deploy and use are available.