Are You in Sales?
Legal, accounting and other professionals are expected to win work these days. You may have the luxury of a dedicated BD team that brings home the bacon so you just have to churn out billable hours. But today’s well-rounded professional contributes to the firm’s growth and BD effort by bringing in new clients.
Of course, turning lawyers and accountants into sales people is unthinkable! But to enhance the BD capability in your firm, your people do need to think like a sales people in some ways. It’s pretty much everyone’s job to sell in a company. There are always opportunities to open doors, create interest, pass on a lead and create a need for what you firm does.
If you’re going to develop a better work-winning mindset, you must start thinking like a sales person. One of the critical aspects of sales that professionals need to adopt is KPIs – key performance indicators. In sales, these tell you how you’re doing against revenue targets. Let’s explore one of the most powerful metrics in your BD effort.
The Best KPI to Measure Sales Performance
Imagine you only have one metric or KPI to measure your BD performance. Which of these might you choose?
- The average deal size of new business wins (the bigger, the better)
- The length of sales cycle – how long it takes you to turn prospects into clients (the shorter, the better)
- The % of your team hitting their new business targets (the higher, the better)
- The number of prospects in your pipeline (the higher the better)
- How full your pipeline is compared to your revenue target (the more, the better)
Turns out this last KPI is the most powerful. It has a name – Sales Pipeline Conversion (SPC). It’s sometimes known as the Sales Pipeline to Quota or Sales Pipeline Coverage. It describes how full your pipeline is relative to your target (quota) for a given period. Put another way, it’s the amount of potential business you’re sitting on compared to how much business you want to win by a certain time.
This is figure is a great indicator of how people are performing. It’s also a valuable early warning sign (a canary in a coal mine) that growth is threatened and things need changing. Knowing your SPC ratios tells you which people and teams will realistically hit their targets for any given period.
Let’s illustrate with an example. To generate 100K of new business, assuming you close or convert 20% (1 in 5) of your opportunities, you’ll need a potential £500K of opportunity in your pipeline. If you increase your closing rate, then you can decrease your pipeline size. SPC ratio = 5;1. In other words, your pipeline needs to be worth 5x your target. Get the idea?
What Does an Ideal Sales Pipeline Look Like for You?
The average (and suggested minimum) for most industries is 3:1. So you should be building a pipeline worth 3x your target to stay health and ahead of the game. Even better is 5:1. This assumes that 4 in 5 of your prospects won’t end up doing business with you.
So, let’s say your target is £100K of new business in a year. Your conversion success is running at 1 in 5 or 20%. If your pipeline is showing only £300K of potential business, then most won’t close, which means your sales pipeline is too small. Some examples:
- A £1m new business target requires a pipeline of opportunities worth £5m if your team close at 20%
- A £1m target needs a £4m pipeline if you convert at 25%
- To hit £100K of new business with a 10% closing rate, you need a pipeline worth £1m.
You’ve got to know your individual closing rates AND those of your team if you’re managing an office or department. Tradition suggests you need a 3:1 SPC ratio but this will probably be higher in a professional firm with less sales experience and a lower conversion ratio. You can figure this out by looking at performance and win/loss ratios over recent months.
What Kind of Things Affect Your SPC Ratio?
By now you can see that the following factors will influence your SPC ratio:
- The quality of the opportunities in your pipeline. The more qualified and better fit they are, the more likely you’ll convert them.
- The degree to which you keep relationships going. If you let opportunities lie dormant or don’t stay front of mind, deals will die or go dead.
- The complexity of the opportunities you’re looking at. Complicated deals require more buy-in and longer sales cycles. That means a lower win rate.
- Factors outside your control. They make no decision or defer a decision. They prefer inhouse options or prefer or stay with incumbent. They make budget or personnel changes.
- Factors within your control. You mess up. You get complacent. You quote wrongly. You don’t research enough, You don’t prospect enough or fill your pipeline with weak leads. Your marketing is weak. Your closing ratio is poor. If you can’t convert even the good leads, you’ve got to compensate with a huge pipeline to hit your targets.
If you have an average closing or win rate, and a decent pipeline, you should be able to maintain a 5:1 SPC ratio. This will all but guarantee you hit or even exceed your revenue targets for new business. Add cross sales to the mix, and you should be way ahead of quota.
How to Improve Your Sales Pipeline Conversion
There are four dynamics to your SPC – quality of leads, quantity of leads, speed of close and rate of close. Ask yourself is you can improve with any of these:
- Quantity of leads. The obvious way to win more business is to increase your opportunities. That means beefing up your anaemic pipeline by prospecting. Outbound strategies such as cold calling, referrals, cold emails, LinkedIn outreach and networking are good. Inbound marketing such as website content, social media and thought leadership are also good. The more you have to go at, the more will probably convert.
- Quality of leads. What is the size of each opportunity? How likely is each deal to close? Is there potential for cross-selling or upselling that you could leverage? Better quality leads usually mean a better closing rate and a higher deal size.
- Speed of close. How long does it take an opportunity to move through your pipeline? Are there any changes you can make to shorten the sales cycle? Are deals getting backed up or neglected? Keeping on top of things more and providing value throughout the process can help your speed to close.
- Rate of close. What are your selling and pitching skills like? Are you good at building the relationship, uncovering needs, presenting solutions and converting the sale? Work on your strategies, scripts and skills to close more deals.
If you want to hit and smash your targets, work on any of these four BD factors. In doing so, you’ll favourably influence the most important KPI in your work winning life – your Sales Pipeline Conversion ratio. For a few suggestions on improving these skills in your firm, let’s have chat…