Very few people directly involved in sales have never experienced disappointment in discovering that their next big deal ended up as a lemon. All that time and effort resulting in a fruitless pursuit of a failed opportunity.
Not wishing to getting caught up in sales jargon, “opportunity” is a term sales people use to describe a potential match between prospective customer and the products or services being offered by the company. An “opportunity” can apply to both existing and new customers.
Many surveys and studies around sales performance have been conducted, including a large technology company that discovered as little as 30% of the leads pursued by their sales force were genuine opportunities.
The same survey concluded that only one out of five opportunities advance to the last stages and to the proposal stage.
Sales, however you look at it, is a numbers game and the figures never lie.. By understanding the numbers that apply to you and your industry, your chances of success can be increased.
And being able to recognising genuine sales opportunities quickly, rather than getting caught up in half-baked fantasies that do nothing more than drain your resources you’ll achieve greater success.
Sharon is on the sales team of a financial institution, specialising in corporate loans, keeping in regular contact with all the clients in her territory.
At one of her regular client meetings, the CFO is telling Sharon about the company’s long term objectives, which includes launching a new product on the market. During the conversation, Sharon learns the company is looking to build a new factory to meet the demand, and is keen to get financed for that project.
After further discussion, Sharon recognises an opportunity to sell her client a loan to finance their new endeavor, and earn herself commissions for the sale. It’s a win for her client, a win for her company, and a win for Sharon.
When she gets back to her office, the sales manager asks: “What’s next in the pipeline?”
A few important terms:
Pipeline generation– many times you will hear sales people and management talking about the pipeline generation. The pipeline is the sum of all opportunities that a sales person has found and is working on.
Timeframe and Stage– are two important characteristics of sales opportunities in a pipeline:
- Timeframe in which the sales person believes she will win the opportunity.
This is the date by which the client signs the contract. It is important to keep the opportunity current, and to help the client reach a decision as soon as possible, before the lead goes cold. While timeframe is difficult to predict, it is a responsibility of a sales person to keep negotiations moving towards a certain conclusion.
- Stage– Every sale follows predictable steps or stages before reaching a conclusion, and it is important to be clear at what stage you are at in the process of pursuing each opportunity.
In Sharon’s case above, before the contract could be signed, her client needed to assess the budget, review repayment plan, and clarify the terms of the commercial loan agreement. Often these steps would be different stages of the sales process.
Each stage represents a different possibility of winning a deal. And as the opportunity advances to next stage, theoretically the more chances are, to close the deal. Each stage is characterised by specific factors.
Although there are common practices and terminologies around the various stages, the pipeline generations for each company often reflect different characteristics:
- Early stages: the sales person recognises some initial trigger or hint of a sales opportunity, but has insufficient data to make an informed decision.
- Qualification stage: the sales person gathers information, having initial client meetings, to establish whether there is a real opportunity and when this can be closed. In this stage a sales person needs to establish whether or not the client has the necessary budget, willingness to buy, and who are the main stakeholders and decision makers that need to become involved to close the deal.
- Winning stage: this is where the game begins. Having qualified the client and validated the opportunity, the sales person leads the client through the decision making process, overcoming any obstacles such as precieved competition or price issues.
- At any stage a deal can collapse, especially as you get closer to finalising the paperwork, reading the fineprint, and clarifying terms and conditions of the service and the financial agreements.
- Final stage: Though a sale is never a sale until the money is in the bank, hopefully this stage is more of a formality. All obstacles have been removed, leaving a clear path to have all legal documents signed by the customer.
The Accounting Game
Sales pipelines are important for the sales person, the sales management team, the leadership of the firm including the CEO and also the accounting department to forecast future revenues.
Of course the financial team also has its own tools. They adjust their budgets, based on current factors and “predict” future revenues by looking at historical performances, though these can quickly become outdated.
Companies that have a strong sales presence, with an experienced sales team pooling a comprehensive knowledge of their territories and clients, add relevant data that may not be reflected in the balance sheet.
Skilled sales people develop strong business relationships and know their clients very well. They learn to accurately predict their clients needs, and what revenues they can expect.
So the combination of the accounting and sales pipeline data leads to more accurate revenue forecasting.Which is why, in most of the cases, sales pipelines are considered as the golden source of forecasting revenues for a company, particularly in the case of well established public companies.
And these forecasts set the expectation for the business viability and success in the market, and are frequently announced in the press, which are then reflected in the stock market.
The Value Of Recognised Sales Opportunities
Knowing both potential sales and their time frames in the pipeline can be critical for the success of companies in predicting future growth and forecasting revenues, such as:
- Expectations of increased annual revenues
- Having the necessary resources to meet the forecasted business requirements and fulfil the predicted sales orders.
The accuracy in company forecasting is very important, knowing that major problems can occur if either the revenue targets or the sales orders are not met. Companies cannot totally rely on data gathered and submitted by the sales team. The company must ensure such claims are validated, so that the closure ratio of opportunities is high.
This juggling act can be likened to the chicken and the egg scenario. Without a reliable sales forecast and finely balanced financial forecast a company can quickly collapse.
Such pressure applied to a sales team to expand their pipeline of opportunities can create false data, and the inclusion of sales opportunities that are not well qualified. And this is where a problem might start, when you have sales people that claim there are opportunities for business where in reality there is not!
The Common Mistake – Is The Opportunity Well Qualified?
Communication by all parties is crucial in validating the potential of opportunities. What a sales person sees as an opportunity may not meet a client’s expectations. Nor may the opportunity meet the approval of the sales management or financial team.
If only 30% of perceived opportunities come to fulfillment and only 20% of those reach the point of closure, then what factors need to be considered?
Prospecting a company to find out whether there is an opportunity is different to having a qualified opportunity. It is simply a numbers game, and there is nothing wrong with speaking to anyone and everyone, but that doesn’t make them all sales opportunities.
Prospecting doesn’t necessarily infer that having a meeting will generate an opportunity at that particular time. You can always leave the door open to revisit the prospect, establishing if there really an opportunity to sell a product to this account.
How Do You Recognise Sales Opportunities?
It is not the objective of this article to provide and analyse the factors required to justify whether an opportunity advances. The scope is to highlight necessary factors to recognise the existence of a sales opportunity:
- Budget and Financing
Just because a client may want or need the service or product being offered, many opportunities are lost through a deficient budget and lack of finance.
- You can have a fantastic product, offer great service, have many compelling reasons for the client to buy, but they just don’t have the funds to complete the deal. All because there is no budget for this specific project.
- A firm has so many projects in place that budget is normally allocated and forecasted and to buy something that is not forecasted needs a different approval process.
- Many deals are stuck because the business doesn’t have budget to buy.
One of the very first stages in the sales process is to establish the client’s budget.
- The Decision Makers
Always ensure you are talking to the right people. Seek confirmation that all stakeholders are in included in the conversation.
- Are you talking to a potential business user who will be using your product?
- Does the end user need approval from the Purchasing Officer, who may need approval from the Finance Officer?
- Help the client see the benefits and the advantages. and establish your product/service is better than their current one.
Before Sharon tells the story of how she learned these lessons:
- The client agrees with Sharon and give her confidence that he wants to buy. Although there is a clear advantage, however, when the order form goes to his manager, it is rejected
- His manager stops the process based on the fact that in the current year there is another priority for the department.
Unfortunately for Sharon (and this happens often with larger orders) she didn’t involve the right people in the decision-making process, and lost the sale.
- The service/product end-user saw all the benefits from their perspective, but they are not the (manager) decision-maker.
- And the (manager)decision-maker saw the benefits from their perspective, but they don’t have a handle on the financials and budgetting of the company.
- And the finance department only saw drawbacks in spending money that is not within their budget, because they didn’t understand the benefits that the end user saw.
Back to the chicken and the egg.
Everyone involved had their own view in the buying process of the specific product.
Without understanding the dynamics involved when approaching the client, a sales person is unable to quickly assess the validity of a prospective opportunity without first meeting all stakeholders who are party to the buying process.
- The Compelling Event
Imagine an icecream salesman standing on the beachfront on a cold, windy, winter day. No matter how many people are at the beach that day, he has little chance of making a sale.
Yet the same icecream salesman can be in the same location on a beautiful hot sunny day, and have a huge queue of customers waiting for their icecream
What was different? There is the urgency or reason for the client to buy. Some call it the existence of a compelling event. It is not necessary that there is a must-need event for the customer.
Or the situation where you have a burst waterpipe and water is flooding your house in the middle of the night, and you have an urgent need for a plumber to rescue you.
The skilled salesperson will help the client identify that they need to have the product/service by a certain date. And help the client understand the clear benefit and his return on investment if he buys a product.
As a sales person you may have proved to the client that he will make money or reduce costs, or save resources, etc. Rarely will a client buy just because your product looks good. It needs to be evident that there are benefits for him.
The Drawbacks Of Unqualified Opportunities
- Wasted Time.
Working on an unqualified opportunity takes up valuable time. Not only the sales person’s time, but also the time his team is working on the opportunity. Time that could be spent in more profitable actions. Working on unqualified opportunities takes time away from that spent on potential sales.
- Wasted Resources
Working on unqualified opportunities takes away resources for the company allocated to help the sales person. Resources used in a fruitless project means those resources cannot be utilised on a worthwhile project. The sales person is responsible to use company resouces wisely and efficiently, not squandering them.
Human beings prefer to take the path of least resistence. And succesful sales people understand that the easiest path to a sale is through qualified opportunities. You can spend the same amount of time, or even more time, chasing an unqualified lead which goes nowhere.
The quicker you can qualify your prospects, and work with the clients who are going to buy, the happier you will be, the happier your qualified clients will be, and the happier your company will be.
Pareto’s principle states that 80% of your time will be spent on bringing in 20% of your income. By qualifying your prospects, focusing on the numbers, imagine how you life would change by focusing on bringing in the 80% of your income and reducing unproductive time, effort and resources.