ENTERPRISE SALES PROCESS & FORECASTING DONE RIGHT — ADDENDUM
By: Brett Queener
Tags: Startup, Pipeline, Sales Operations, Sales, Forecasting

Pipeline Slippage: How to Factor this in Your Analysis and Efforts

Many people reached out to really bare their soul around those darn deals that always slip and how best to decide what is truly “Lost to No Decision” versus still alive. Instead of calling them dead, why not just push the close dates farther out in the pipeline as that 1) sure feels better psychically and 2) makes your close rates (as I previously defined them) look better to your board as they are excluded from your denominator. As Chuck put it best, especially for new category creation companies:

“You’ll see deals sit around and move from quarter to quarter in best case. Yes — one should be rigorous about closing them out, but hope (or fear) keep them lingering. And as we know hope (or fear) is not a strategy.”

Here is how I would address slippage:

Understand it — Go look at your deals that seem to consistently slip and ensure that all the deals have been properly codified against the new more rigorous buyer-oriented stages. I tend to see slippage more often in companies that have poorly defined their sales stages and processes because they mistake the actions that their sales team are doing for confirmation of buyer intent and commitment. You should also be rigorous in defining what “Closed-Lost to Decision” means to your company and avoid just pushing the ‘dead” forward quarter after quarter unless you for some reason want an improperly inflated future pipeline. If you have confirmed from a buyer that they are not moving forward with anything (which includes not replacing what they have if you are a swap-out sale), mark it as “Closed-Lost to Decision” and be consistent with the close date you use (either the date you have this information or when it was targeted to close — one could argue that neither of these approaches is precise but whatever path you choose, just be consistent in your approach). For those prospects that just go silent and never respond to tell you if they picked someone or did nothing or fell off a cliff or joined a monastery and took a vow of silence, I don’t know what to tell you — make your best judgment.

Address it — As I have previously discussed, you need to dig into what is driving a lower conversion rate from the VOC Negotiations phase (Commit Forecast Pipeline Category) to signed in-hand contracts and properly prioritize removing the friction and obstacles to the final stages of the buying cycle. For example, I met with a portfolio company this week with this problem. It is a pre-Series A company that sells to large enterprises who, regardless of the company’s size, has a hard time buying products that have not yet solved for GDPR, SOC2, Info Security, etc. My guidance was, other than “fake it until you make it”, was that they had to properly commit to solving for those requirements in their roadmap over the next 12–18 months. For other companies that do not have clear compelling events (i.e. replacing an existing solution whose renewal date is X), I spend time with their sales enablement and product marketing teams to improve sales’ ability to create artificial compelling events often tied to the buyer’s fear of missing out on all the amazing kudos and fame they will get from deploying your solution :)

Account for it — if, despite all your efforts in the two points above, you continue to have significant slippage then I recommend that companies start to calculate an additional form of the close rate calculation that incorporates slippage as follows:

Close Rate = Closed Won / (Closed Won + Closed Lost to Competition + Closed Lost to Decision + Deals that Slipped out of the period).

The difference between this close rate and my original definition will allow you to understand the scope of how big your slippage problem actually is. It will also allow you to understand, especially if slippage is a consistent problem, how much pipeline coverage you would actually need entering a quarter to hit your targets. For example, if your slippage adjusted close rate = 25%, then you would need 4X coverage rather than the traditional 3X coverage most companies shoot for.

That being said, in general, I do not hold marketing and the demand generation engines accountable for adjusting the amount of pipeline they need to create to cover this slippage — in my mind that is on sales to go and clean up. There is one exception — for certain companies, their buyer persona (who looks very much like power and the ultimate decision maker) simply doesn’t have the power to jam deals through procurement and legal. Therefore, instead of shaving your head with a cheese grater and dipping it into ghost pepper oil or questioning the meaning of life and your small infinitesimal role within it (because that is what it feels like when your two big deals that were supposed to close just didn’t because the CXRO or EVP actually have no juice), just recognize that 1/4 of your deals will always slip and as such, you need more pipeline coverage as a company.