I propose to collate our experience as a company, this time on Sales Pipeline management.

To sustain and grow any business, we must generate revenues in excess of what was generated the previous year.

It works best to follow the famous PDCA cycle (Plan-Do-Check-Act) to achieve sustained growth.

The following are the essentials of business forecasting PDCA cycle.

1. Forecast the revenue for the year.
2. Identify the practical difficulties in achieving the revenue
3. Have a plan (or keep working on a plan) to minimise such difficulties
4. Set the revenue target for the year based on the forecast
5. Track progress against forecast
6. Adjust forecast based on the progress
7. Achieve the target, exceed the target or get as close as possible to the target (as the case may be)

First thing first, the exercise of forecasting is an intimidating thought to start with. But one MUST go ahead and do the forecasting. The exercise is worth it for any business.

Sales Management Essentials

Revenue forecasting for a business typically starts around February of every year (if the financial year cycle is from April to March).

We prepare a business forecasting sheet which is nothing but a detailed listing of potential sales for the year.

We collect potential sales for the year with the following attributes

1. Region from which the sale is expected
2. Name of the potential customer (if this is not known, a virtual name such as BANK1, BANK2 is used)
3. Name of the project
4. Deal category (product / solution. There can be more categories).
5. Approximate deal value
6. Weight percentage
7. Weighted value
8. Quarter in which the sale is expected to happen
9. Customer is known or unknown
10. Stage of the deal (Projected, Identified, Proposed, Negotiated, Won/Lost,OnHold, Gone Cold)

Accuracy of the forecast data is very essential as all investment and expense decisions for the year solely depends on your forecast. However, getting the pipeline forecast accurate is quite tricky.

To achieve accuracy, we split the forecasting exercise into two phases (1) The initial Sales Forecasting exercise (2) Ongoing Monitoring.

Sales Forecasting

As first step of initial forecasting, individual sales leads are collected from all those who are involved in sales. The lead generators provide the 10 attributes for each lead they bring.

We consolidate these leads in a common location. we use a simple spread sheet based tool for this & this file is currently the bible of our business. Enterprises use lead management tools, but small companies may not be able to afford it. A home grown, excel tool works effectively for small businesses.

Having collected all the leads, we conduct one to one session with the lead generator(s) on each lead item they have brought (or they believe they could bring). This session resembles an interrogation session as the strength of the lead is assessed with no room for emotions.

Here I must share a few points to remember which will define how you decide the strength of each lead item.

1. How much information is available with the lead generator on the lead, influences the strength of the lead. Here the word “strength” means whether the lead has a reasonable potential to convert into a sale or not. So let the lead generator talk as much as he can on his own about the particular lead and independently make up your mind on the strength of the lead.
2. The distance a lead has to travel before it materialises influences the strength of the lead. If a lead generator says that a deal is 3 quarters away, it usually doesn’t qualify beyond 10% probability. Also, in our experience, a lot of external dependencies affect the time taken for a lead to move from “Identified” stage to “Won” stage. If your sales staff calls a lead as “Identified” and can be won shortly, view this with suspicion.
3. Value of the lead needs to be accurate. The accuracy of the value can be achieved only by experience. However while arriving at the value the following needs to be considered.
   1. Is the lead a first time customer. If so, you need to give the first deal at a low price in order to gain entry into the customer place and achieve repeat business.
   2. Is the sale a 1^st time same. If so, your product pricing itself will fluctuate greatly as there isn’t a market yet and hence the market has not valued such a product before.
   3. How big or small is the potential customer. A big potential customer has better ability to pay, but also negotiates well as he knows that you need future business. A small customer has a small purse and hence he will expect your pricing to be low or he may not buy.
   4. Is the region in which the lead exists a green field market or a market with many competitors. The challenges differ between green field market and a well evolved market. Nevertheless challenges do exist.
   5. If yours is a first time sale, you may have to use some innovative ways of establishing your product such as partnering with your potential customer to enhance your product and also to get reference site. This often means a low price or no price. You must think this through.
   6. By closely monitoring the budget sheets, we realised that our pessimistic estimates turned out to be reality. This is debatable, but we have decided to pick up the pessimistic value of a lead for our budget estimation and tried to maximise the actual revenue.
   7. It is better not to add / remove buffer from the estimated value of the lead. Instead, we take the weighted value of all the leads to arrive at the total revenue budget of the year.
4. The weighted value of a lead is arrived at by giving the probability of sale (in other word, how confident are we that we will win this deal. While we take inputs from sales team about their comfort on winning the deal, we make up our mind on the strength of a lead by discussing the lead with the “deal closer”. The person who has demonstrated the solution to the customer and the one who negotiated the deal. At the time of forecasting, no “deal closer” is available at least for the deals that are far in the pipeline.
5. To tackle this, we follow a gut feel probability to verify and ensure that we are not too off track in our perception. It is as follows.
   1. “Projected” leads – any probability, provided the lead is more than 6 months away.
   2. If a lead is “Projected” and is less than 6 months away then the probability is < 10%
   3. “Identified” leads – <= 10%
   4. “ Proposed” leads <= 50%
   5. “Negotiated” leads <= 90%
   6. “OnHold”<= 30%
   7. “Unknown” items (where the customer is yet to be identified) may have upto 50% probability provided the lead has 9 months to materialise. Need a lot of debating before agreeing this item.
6. We track closure of leads by quarter. So each lead item has a quarter of closure. This helps us identify a pattern of closure by quarter (which can be specific to industry). But it helps us improve our forecasting skills continuously.
7. In almost all deals we have done, there is a period between “Proposed” state and “Won” state of the deal. This has been the wait period during which, we as vendor are in a difficult position to influence the speed of the closure. Please note that we could influence the out come, but the time taken is difficult to influence. This has to be factored in while deciding the quarter of closure. Providing a time buffer to accommodate this phase is good especially if this is a new customer for you. For repeat businesses however the closure happens much faster (one more reason why bird in hand is worth two in the bush).

Deliberation of Forecast

Each pipe line item which is gathered from the sales team gets deliberated in detail to meet the criteria mentioned above. We took around half person day per pipe line item.

This provided us with a clean list of pipeline items with their names, potential sales value, weighted value, probability, quarter of realisation etc. There were a few dilemmas though.

It was easy to forecast the first quarter revenue as we knew the potential customers we are talking to, what do they want, how much is their budget etc. The information on revenue potential for quarter 2 and quarter 3 became weaker and less accurate, quarter 4 was a total unknown.

One way to tackle this is, to deliberate the pipeline for quarter 1 and and 2 in as much detail as possible and finalise quarter 1 and 2. Look for similarities between quarter 3 pipeline items and quarter 2 pipeline items and apply same logic from quarter 2 to arrive at quarter 3 budget. Quarter 4 budget can just be taken as quarter 3 budget + 10% to 20%. The idea is, as time passes, we will pick up cases for Q3 and Q4 pipeline items.

Another problem we faced was, some of the pipeline items keep changing their attributes on a daily basis. This gets tricky especially when the value associated with the item is significant. The best way to deal with this during the process is to give the most pessimistic probability, and give the guaranteed value of the project if the deal is won.

The list containing the consolidated pipelines identified and deliberated as above, is the revenue budget for the year and becomes the baseline must win revenue for the year.

It is better to use a nice excel tool which could automatically provide the following, by taking all the attributes of each sales item defined above.

1. Target sales by quarter (as per the baseline)
2. Change in target sales by quarter as on current date and time
3. Baseline Vs Current comparison for each quarter
4. Ability to drill down each quarter to know the items within
5. Ability to leave snapshot of performance at the end of each month

We have done it in such a way that at the end of each month, the pipeline position at the end of that month is available for future reference. So at the end of the year, we know exactly how we progressed month on month during the year.

Monitoring Progress

This pipeline tool is the single most important utility in our organisation. All sales people and management team closely monitors this tool regularly.

One member of the management team, is responsible to maintain the status of each pipeline item on a daily basis. Thus any movement of each pipeline item (value, probability, quarter, status etc) is immediately updated. Any major shift in any attribute which has the potential to disturb sales performance is reported to the rest of the management team, consequences of the shift are discussed and action taken immediately.

Our management tracks our progress against our baseline every month. Our quarterly performance against the corresponding quarterly baseline targets is as important as our performance of the year. The reason why the quarterly performance is given importance is because, if a pipeline item which was targeted for a quarter slips to the next quarter, the reason for slippage can be identified, and a preventive measure can be put in place to ensure that the quarter 4 items don’t slip to the next year.

The monthly review of the pipeline also helps us identify, which customer pays us quicker, which product has potential to sell and generate revenue quickly etc. Thus we are able to prioritise our customer focus as a byproduct of this exercise.

It also throws up our vulnerabilities such as high exposure to one potential project / customer, seasonal slow downs(E.g. sales in ME during Ramadan is difficult).

Besides, we get to know, the consequence of reduction of price or reduction in project value, on the overall revenue of the year, enabling us to better identify the most competitive price for our customers.

Conclusion

We follow the pipeline management process more seriously this year compared to the previvous year. One important benefit we derive now is that, last year, when the results came out, we believed that we did the best we could. This year, we know what best we could achieve and we are now working to better that best.

We are just beginning to learn pipeline management. But the learning so far has definitely helped us.

Please share your critical comments with us and help us improve.

The past few months have been spent acquiring customers as part of the job. I must say that there has been some learning so far during this on going process.
In this blog, I try to consolidate them in this blog for my own benefit and for those who believe there is one for them as well.
Here we go.

1. We need something so that we can sell. Sure, it is obvious. However the characteristics of that “something” defines the entire business. Google sells internet search and hence it is a multi-billion $ company. So it is very important to know what is the best “something” that you can sell and what is its long term potential. After all you want to be as successful as you can and want to and the product you sell should not become the limiting factor.

2. The most powerful means of customer acquisition is reference based acquisition. When a potential customer has heard about your company or your product from a counterpart in his business domain, that opinion, is pretty much unshakable in his mind. If he heard “they are a good company and they provide good service…”, then the customer becomes a pipeline item for you with a 90% strength. If he has heard “….they are….ok…not bad”, then the customer is your pipeline item with 50% strength. If he heard anything lesser, you can forget about that customer and move on.

3. No one sells a product or a service in isolation. “Customer acquisition” can (and must) be rephrased as “relationship acquisition and nurturing”. Each time you go to sell a product or service to a customer, the customer is looking to find out, if a good relationship can be established and nurtured for long. This process happens so much deep within the customer’s mind that it is never spoken about.
If we can make the customer realise that the relationship can be established and nurtured, the battle is half won. Besides, this will definitely result in the customer saying “they are a good company and they provide good service…” to your next potential customer (remember the pipeline with 90% strength?).

4. The first call and the first meeting with the customer is key. During this interaction, the customer is sizing you up. He wants to know how stable, reliable, capable, efficient and trustworthy is your entity (“entity” here includes company, product, service, the BD executive). Hence it is important to put up a good show. So try to look like a responsible company with a decent size and capability.
Trying to get technical or even into the details of features can frustrate the customer in the first meeting or call.
Instead, gauging the background reason why they are looking for a product or solution, the pains they are trying to solve and addressing those pains/ passing such information back to your company helps in making the right pitch in future.

5. Letting the customer talk and listening is always beneficial than talking a lot during a sales pitch. In banking industry at least, pain of one bank is usually a good representation of the pain of the banking industry itself. So the ideas for solution best comes from a talking customer. We have developed not less than 4 products in the last 6 months just by listening to a talking customer. All such products have been acknowledged by many other banks as “we need it”. I guess that this concept can apply to industries other than banking as well.

6. It is important to meet some one as close in the hierarchy to the decision maker early on. The farther we are to the decision maker, the farther we are from the deal and less probable is the deal. This is because, the decision maker and those closer to them in hierarchy are sure about the priority order of their various requirements. So you will quickly know if your product / service / solution is within their immediate priority list. If yes, you have a pitch. If no, you can save your time.

7. Though the deal is signed by one or two top decision makers, no product / service / solution is bought without the end user, supervisor, implementation manager and the decision maker are all DELIGHTED about your offering. I call all of them as decision sponsors. So you must convince them all.

8. The decision sponsors negotiate with you on technical matters, implementation matters, support matters, price matters, training matters etc. They do ask tough questions and be critical as well many a times. It is easy to hate them. But remember this most important point. They are your internal SPONSORS. They HAVE to go and convince their bosses why they must buy your product/service/solution and not your competitors. You must make them WANT to do so. If you have a weak internal sponsor you WILL loose that deal. Period.

9. One more point about negotiation. No one who earns his money hard will part with it easily. So you must hard earn your money. Hence do not be surprised or disheartened that you are being hard negotiated. But they will return favour by giving you consistent good references, becoming a flagship customer in your elite list of customer, heap praise about you with anyone they meet.

10. Customer acquisition is about two things, relationship and patience. We spoke about relationship at length. Now, patience. You call a customer asking for a demo slot. He asks you to call next week end. You call next weekend, he says call the next week again. You call and he is out of station for two more weeks. You call after two weeks, he gives you a demo slot two weeks from then.
The whole experience can be frustrating. But if you are confident that the customer needs a solution which you offer and it is in his priority list, then keep your patience intact. Your customer is chasing his business, which is always his top most priority.

11. If a particular behaviour of your customer confuses you, go talk to the procurement manager at your office. He will know exactly when he will behave the way your customer has behaved with you. In fact it makes a lot of sense to have your procurement head involved in preparing a sales pitch for all your key prospects. They will ask you such questions which you will otherwise face only at the customer’s place. Do a mock negotiation with your procurement head before you go for a final customer negotiation. You sure will benefit from it.

13. Look good always. Be well groomed at all times. If I want to buy anything that is significant in value to me, I will buy it from someone who looks responsible and capable. If someone is not responsible enough to look well groomed always, I will judge him as not responsible enough to give me something of good value to me. Will you judge him differently?

14. My boss once told me that customer’s get influenced a lot by the passion with which we sell . I have seen that happen myself. So have genuine passion and energy for what you sell. If the product or service you sell, does not make you passionate, change the product or change the company you work for towards a company you like more.
Someone told me this story. I am not sure if this is true. But I believe it anyway. Anil Ambani went for an important negotiation session. He was an obese man then. The customer asked him, if you cannot take care of your weight, how can you handle such a big deal? Anil Ambani promised to trim down in 3 months. He stuck to his deadline and picked up the order. That shows his passion for what he was selling.
Additional information. Anil Ambani runs in the Mumbai marathon’s every year.

Customer Acquisition is all about people skills. You don’t need an MBA in marketing. If you have it, it is an added advantage.

Happy “Relationship acquiring and nurturing”

India today, is a land of opportunities like the US of mid 30s they say. In this blog, I try to take a practical look at what is the scene of entrepreneurship in India.
I am privileged to attend networking meetings consistently in the last 5 years. It is amazing to see the trend of Entrepreneurship change in this short span. Majority of the people attending such networking sessions used to be IT based startups during the first two or three years. I now find that the attendance has consistently increased and more significantly, newer areas have been mushrooming such as EWaste recycling, Signage solutions to name a few.

I recently met someone who had attempted to start on his own, struggled for more than a year and was forced to withdraw amidst mounting debts, family responsibilities and harsh market conditions. I am sure there are many such, who must be feeling defeated, though I believe they are among a brave few. I tell you why…
A start up (what ever field it may be in) faces the following challenges (not in the least bit exhaustive).
1. Extremely low availability of cash, unless funded by an Angel investor who is a close relative, friend or an associate, who usually takes away lions share of equity, eroding the passion away from the entrepreneur.
2. Good partners who will walk the distance. Distance often means, indefinite duration of time with unpredictable and unimaginable challenges. The trick is, you start with partners believing they will go with you through the most difficult of times. Time decides the tensile strength here. If the strength isn’t good enough, all partners pay dearly.
3. Un-trusting customers. Your idea may be great. The proof of concept may be great and attractive. But customer wants stability of their vendor. As a start up, there is not much you can do to prove your stability sufficiently for him to place his cash on the table.
4. Difficulty in retaining good staff against MNCs who can afford big packages, AC work environment, Gym, regular outings etc.
5. Unpaying customers. When you are a start up, one of the main reasons a customer is interested in you is that you are willing to do the job at a throw away price. Many start ups I know have folded up due to poor collections. Often startups end up being treated like use and throw coffee cups by unprofessional customers.
While most of the above can and to some extent, should be addressed by the entrepreneurs by themselves, the first point (about cash) requires a wider infrastructural support. Availability of cash at disposal or not should not determine if someone can dream of a venture. As a beginner you are bound to make mistakes. If you want to learn from mistakes and go ahead, you need the monetary support to “go ahead” rather than bundle up after the learning.
I understand that in the US, venture funds, universities incubate startups for more than 18 months by taking minority stakes and even letting go the entrepreneur if the start up fails. The argument is, if one start up out of 6 grows to its potential, the investment in all the 6 startups can be recovered and more. Music to my ears.
Indian venture funds are interested in mid size companies which have stood the test of time and are looking to grow further. Even that market is crowded with many companies looking for takers.
Infrastructure to incubate startups is hardly available in India. A few top business schools do this with reasonable success. But the number of start ups craving for cash, far out number what is available.
While entrepreneurship is a word which creates a lot of awe, many capable men and women are discouraged to take this path for one more reasons.
The Security, Comfort, luxury and social respect of working as a senior staff in an MNC.
When your name is followed by a “VP – Marketing” or “CTO” at an MNC supported by a salary which can compete with your counterpart in US or Europe, quitting that to call yourself a Director of x company with no salary for unimaginable number of months (may be years) is a choice which makes a stupid out of you instantly, until you prove the world wrong at the end of it all.
But in spite of all this, there is a definite surge in the number of people taking this path.
It is only a decade since India has seen the power of entrepreneurship. It is just a matter of time before infrastructure support is sufficiently available for more people to try their entrepreneurship skills without having to worry about their kids school fees. When this happens, we will see another wave of prosperity in the country. Successful start ups of yester years have already started venture capitals of their own. They are bound to take a hard look at start ups soon.
If anyone thinks, India lacks entrepreneurial skills, take this. My milk man sells vegetables during the day, cleans cars in the evening and does gardening over weekends. This is enterprise purely driven by need.
My friend lives in an apartment in Bangalore. His gardener started as a watchman there. He has now formed a “company” which handles all domestic requirements (cleaning&washing, car cleaning, plumbing, electric work, gardening and so on..) of 4 such apartments in his colony.
We may well see these people growing into billionaires one day and sow the seeds for many more after them.