The traditional sales manager role is responsible for mentoring and coaching their team members through exercises such as; role-playing, critiquing sales calls, and individual meetings focused on improving instinct and interpersonal skills.
Today’s sales managers combine the traditional approach of sales management with a data driven approach. Data helps provide greater transparency between Sales Managers and Sales reps for several reasons:
- Data is objective so sales reps can’t argue with it or hide from it.
- Analyzing data allows managers to provide individual feedback as opposed to a lump sum of broad feedback.
- Analytics allow reps to focus their time on what’s working well and provide managers insight into areas of improvement.
Below is the first of three data driven exercises that can help improve the efforts and productivity of your sales team.
How Much Pipeline Do You Need To Generate In Order To Hit Your Quota?
The rule of thumb is to have 3.5 to 5 times the amount of pipeline to hit your actual quota. Let’s take it a step further and determine exactly how much a seller needs in their pipeline to hit their quota. Every individual seller is different, and the 3.5-5X doesn’t apply to everyone. Some reps might only need 2.5X, while others might need 6X. If a rep’s pipeline is already at where they need to be to hit quota, then it might be better to have them focus primarily on moving deals forward in the pipeline towards close, rather than generating more pipeline (although it never hurts to grow pipeline)!
To determine a good pipeline figure you will need to do the following:
- Determine your AE’s win rate % (Closed Won / Closed Won + Closed Lost).
- Look at how much they have in their pipeline at the beginning of the month.
Lets look at an example:
If their quota is $500K and they have a 20% win rate percentage, that means they need $2.5M in their pipeline to hit quota. If they only have $2M, as a sales manager you know they need to focus their efforts at the beginning of the month on generating more pipeline. Maybe this means their SDR needs to complete more activities (book meetings, demos, etc) or the AE needs to figure out how to move some opportunities that are set to close the following month, forward into the current month. Combining this exercise with the first exercise from Part 1 will let you know how much activity is needed from an AE’s SDR in order for them to generate the remaining pipeline they need to hit quota.
Of course, if they have a healthy pipeline based on their win rate percentage, they can focus their efforts on either generating more pipeline for the following months, or closing deals in the current month.
You can take this a step further and calculate their average contract value to determine the number of deals they need to close. In addition, you can also determine how early these opportunities need to be in their pipeline in order to hit quota.
Stayed tuned for Part 3 of this series to see why Lead Source metrics are just as important to your reps as they are to your marketing team.