When was the last time you considered deal size as a key component in assessing an opportunity? Sales managers often overlook the size of individual opportunities in the sales pipeline. While the average size of deals is an important metric to examine, segmenting big deals from average (or small deals from average) provides a much deeper dive and more meaningful insights.
All buyer segments behave differently, which means that your sellers have to as well. A buyer on a deal worth over $1M probably isn’t going to act in the same way as a customer looking to close on a deal worth $10,000. Using a one-size-fits-all approach – both in terms of how your reps work these deals and in using your pipeline information to forecast – is a lazy strategy that will lead to poor rep performances in closing larger deals, as well as an overall inaccurate forecast. You can’t make a fair judgment on a set of high-value opportunities based on the actions of buyers of a smaller scale and size.
Deals that are worth more tend to have smaller win rates and longer sales cycles. This information should guide your expectations in how many of these deals close, as well as the patience of your reps in working these deals. Look at the reports below. The first report indicates that the team’s average sales cycle across all opportunities is 21 days, with opportunities typically spending 8 days in the trial stage.
However, consider this second report, filtered to only include the top quarter of deals by size. The average sales cycle for these segmented deals has ballooned to 37 days, with each deal spending 18 days in the trial stage.
Using this data, reps can afford to be more patient with their most valuable opportunities, knowing that, historically, they will take longer to close. There is no need for reps to panic if an opportunity worth significantly more than the average deal size languishes in the trial stage for 20 days. When segmenting for larger deals, managers can coach their reps to adjust their expectations and sales cycles accordingly, instead of adopting an all-encompassing approach to all opportunities.
In addition to coaching reps on how to tackle large deals, segmenting sales data by deal size can also lead to more accurate sales forecasts. If the won/lost percentage for all opportunities is at 52%, managers who take blanket approaches to forecasting might simply multiply that conversion ratio by the opportunities in their current sales pipeline and present a revenue forecast figure that, while lofty, is incredibly inaccurate.
What if the pipeline is currently populated mostly by large and highly valuable opportunities? Applying won/lost percentages for smaller deals to large opportunities in the pipeline paints an inaccurate revenue picture. Instead, filtering for the top quarter of deals by size reveals a more realistic won/lost percentage of 33%. Proactive sales managers will then apply that more accurate conversion ratio to the appropriate pipeline opportunities as necessary and end up with a more realistic revenue forecast.
Sales is nuanced and constantly evolving. Treating every sale, opportunity and buyer in the same way represents a failure on the part of sales managers to account for these differences. The most proactive and effective sales managers recognize this and coach their reps accordingly, while inspecting each individual deal to apply the appropriate metrics. Smaller deals can be quickly moved through the sales cycle, while larger opportunities have to be handled more patiently and in a steadily progressive fashion. Similarly, this fact should also drive managers to make more accurate sales forecasts. Applying blanket pipeline review and forecast approaches is a dangerous tactic that will ultimately sink a company’s revenue growth prospects with its inaccuracies.
How does your sales team handle the size and value differences among its opportunities?
