Let’s talk about your plan to CRUSH QUOTA using a simple funnel formula to help you build pipeline and revenue. If you prefer to listen rather than read, listen to the audio clip below.
Why do you need a formula?
Reps are almost always too optimistic about the ratio of their activity to opportunities on their path to close.
Take matters into your own hands using this formula that I learned about from Chris Bennett.
The funnel formula has 4 variables:
1. The number of opportunities on the go.
2. The average $ value of each opportunity.
3. Historic closing rate / if you are not sure, use 25%.
4. Average sales cycle time. Example: The # of opportunities x average $ deal size x average closing rate% divided by average time to close.
Look at a formula for a sales pro with a goal of $99,999 in gross profit.
100 deals x $10,000 = $1,000,000 x 25% = $250,000 divided by a 3-month sales cycle. This results in…
= $83,333 per month in sales x 10% GP
= $8,333 per month x 12 months
= $99,999 per year in GP.
Using this easy to follow formula, the sales pro made their plan. The beauty of this formula is that it keeps you grounded in the reality of what your pipeline really looks like and it helps keep you focused on the activities that will lead to you achieving your sales results. Don’t forget that you will regularly update your numbers during the month to stay on track.
Now, what would happen if you increased the top 3 variables - the # of opportunities x average $ deal size x average closing rate% - by just 10% and reduced sales cycle time by 10%?
Here is what happens:
110 deals x $11,000 = $1,210,000 x 27.5% = $332,750 divided by 2.7 months. This results in…
= $123,240 per month in sales x 10% GP
= $12,324 x 12 months
Watch the on-demand presentation that Chris and I delivered last year. Topic: 5 Ways Salespeople Can Create Compelling Value, Book Meetings and Build Pipeline. VIEW HERE