Quick: what’s the biggest deal in this quarter’s sales pipeline? Was that the biggest deal in last quarter’s pipeline? How about the quarter before? Do you have deals in your pipeline older than your children?
If you’re answering yes to these questions, then you’re probably dealing with “rolling hairballs” in your pipeline. Rolling hairballs are bad:
- They exaggerate the size of the pipeline.
- They distort coverage and conversion ratios.
- They mess up expected-value forecasts, like a forecast-category or stage-weighted sales forecast.
Maybe they’re real deals; maybe they’re figments of a rep’s imagination. But, if you’re not careful, they pollute your pipeline and your metrics.
Let’s define a rolling hairball
A rolling hairball is a typically large opportunity that sits in your current-quarter pipeline every quarter, with a close date that slips every quarter. At 2 quarters it’s a suspected rolling hairball; at 3 or more quarter’s it’s a confirmed one.
Rolling Hairball Detection
The first thing you need to do is find rolling hairballs. They’re tricky because salesreps always swear they’re real deals that are supposed to finally close this quarter. What makes rolling hairballs obvious is their ever-sliding close dates. What makes them dangerous is their size (including an accumulation of them that aggregate to a material fraction of the pipeline).
If you want to find rolling hairballs, look for opportunities in the current-quarter pipeline that were also in last-quarter’s pipeline. That will find numerous bona fide slipped deals, but it will also light-up potential rolling hairballs. To determine if an opportunity is a rolling hairball, for sure, you can do one of two things:
- See if it also appeared in the current-quarter pipeline in any quarters prior to the previous one.
- Look at its stage or forecast category. If either of those suggest it won’t be closing this quarter, it’s another big hairball indicator.
The more sophisticated way to find them is to examine “stuck opportunity” reports that light-up deals that are moving through pipeline stages too slowly compared to your norms.
But typically, the hairball is a big opportunity hiding in plain sight. You know it was in last quarter’s pipeline and the quarter before that. You’ve just been deluded into believing it’s not a hairball.
Fixing Rolling Hairballs
There are two ways to fix rolling hairballs:
- Fix the close date. Reps are subtly incented to put deals in the current quarter (e.g., to show they’re working on something, to show they might bring in some big sales this quarter). The manager needs to get on the phone with the customer and, after having verified it’s a real opportunity, get the real timeframe in which it might close. Assigning a realistic close date to the opportunity makes your pipeline more real and reminds the rep that they need to be working on other shorter-term opportunities as well. (There is no mid-term if you fail enough in the short term.) The deal will still remain in the all-quarters pipeline, but it won’t always be in the current-quarter pipeline, ever-sliding, and distorting metrics and ratios.
- Fix the size. While a realistic close date is the best solution, what makes rolling hairballs dangerous is their size. So, if the salesrep really believes it’s a current-quarter opportunity, you can either reduce its size or split it into two opportunities (particularly if that’s a possible outcome), a small one in the current quarter along with an upsell in the future. Note that this approach can be dangerous, with lots of little hairball-lets flying below radar, so you should only try if it you’re sure your salesops team can produce the reports to find them and if you believe it reflects real customer buying patterns.
Don’t let rolling hairballs pollute your pipeline metrics and ratios. Admit they exist, find them, and fix them. Your sales and sales forecasting will be more consistent as a result.
(Cross-posted @ Kellblog)