The Sales Pipeline Planning Model is a pragmatic approach to document how many direct sales reps are needed to attain or exceed the plan. More importantly, the template illustrates when a direct sales rep is expected to provide financial impact to the organization. The planning model then goes into more detail to calculate how many qualified sales opportunities are required for each direct sales rep. The model goes further to calculate how many conversations sales development representatives need to have in order for direct sales reps to achieve the revenue plan by quarter.
Sales Pipeline Planning Model – Direct Sales Reps
It’s a given that an organization that sells direct is dependent upon direct sales reps and that they are a very expensive resource, but they most often provide the highest contribution to revenue.
Most companies understand that they need direct sales reps but do not plan accordingly and, as a result, are often late in pulling the hiring trigger. The downside is that a sales organization starts the game behind as months or quarters of revenue generation are lost due to not hitting the fiscal year fully staffed and ramped. Specifically, the lead time required to attract, interview, and ramp a direct sales rep is significant, and hiring needs to be reverse engineered into the revenue equation. In addition, ramping a direct sales rep often requires several quarters to ensure success. Trying to cut the onboarding process short typically results in below-quota performance and high turnover; it’s estimated that a bad direct sales rep hire costs an organization at least $1M (organization cost of recruiting, salary, severance, and lost revenue).
Sales Pipeline Planning Model – Booking Targets
The Sales Pipeline Planning Model breaks down fiscal year quota into quarters and allows for ramping assumptions by quarter for each direct sales rep. Some sales leaders over-assign quota, as the expectation is that sales performance does not average out to 100%. The sales planning model encompasses additional assumptions and calculations that include:
- Average deal size
- Quota per rep
- Number of deals required
- Number of qualified sales opportunities required
The average deal size is typically calculated as an average; however, this could be expanded to include two or three different price points. In practice, a direct sales rep may realize small, medium, and elephant-sized deals. A basic rule of thumb is that there is more financial volatility and risk with a larger deal size, as a few misses can have a huge impact on the organization’s performance. The converse is that a few deals that are huge can propel and organization’s growth rate. Most sales leaders will argue that deals typically require the same amount of time and that argument is usually reserved for the big game hunting of elephants. But small and medium deals will balance financial predictability and can be beachheads that will lead to up-sell and cross-sell opportunities that will result in significant revenue recognition for an organization. There is no right answer, but a balance is usually preferred.
Sales Pipeline Planning Model – Direct Sales Ramp
, but the correlation is dependent on ramping. Ramping, or onboarding, is not factoring in all the resources and time required to hire a direct sales rep, which is usually a quarter and sometimes two. Ramping is focused on documenting bookings that a direct sales rep will close each quarter. Ramping is dependent upon:
- How well the sales process and methodology are documented
- How effective the sales training is to transfer knowledge to sales reps
- How fertile the sales territory is
- How developed the demand creation and management efforts are
- How meaningful and relevant the sales tools are to advance deals
For each direct sales rep, assumptions should be documented for each quarter regarding the booking expectation. Organizations typically use 25%, 50%, 75%, and 100% or some variation. In the first quarter that a direct sales rep is an employee, the expectation is that they are fully in the onboard mode and the expectation for booking revenue is 0%. From here, the expectation varies wildly. Some organizations ramp gradually by increasing in increments of 25% until fully ramped at 100% while some may shorten the number of quarters to ramp to 100%. Regardless of the choice, a key is to document it and then calculate expected bookings based on the ramp expectations.
Sales Pipeline Planning Model – Ownership
CEOs as well as sales and marketing leaders have varying opinions about who is responsible for filling the sales pipeline. On one end of the spectrum is a hard-core feeling that sales is responsible for 100% of the sales pipeline and anything marketing contributes is gravy. Another view is a belief that sales and marketing are integrated and a portion of the sales pipeline is delegated to the marketing team (usually field marketing, demand creation, and demand management). Companies that sell indirect embrace the partner community to fill part or all of the sales pipeline. The Sales Pipeline Planning Model allows for assumptions to split the sales pipeline responsibility into percentages across sales, marketing, and partners and calculates the corresponding number of deals and qualified sales opportunities to meet or exceed the plan required based on assumed closed ratios.
Sales Pipeline Planning Model – Sales Development Representatives
Sales development representatives (SDRs) are a critical component of the revenue chain, as they follow-up on leads, make cold calls to connect with leads, and process those leads through a qualification matrix to determine if they are worthy of a meeting with a direct sales rep. SDRs are very machine-like and coin operated. SDRs have to be efficient and effective on the phone and comfortable making phone calls, having conversations with prospects, qualifying prospects, and handing off qualified opportunities to the direct sales team. The productivity of a sales development representative is directly correlated to the effectiveness of a sales organization.
The Sales Pipeline Planning Model calculates the number of:
- Deals required
- Qualified sales opportunities required
- Meetings that must be set
- Conversations that must occur
Download the Sales Pipeline Planning Model to quickly determine if your organization is set up to succeed or fail in a pragmatic, quantifiable, and logical analysis.