Pizza Sauce and Sales. What's the connection?

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On to this week's blast topic!

Pizza Sauce and Sales. What's the connection?

How do you like your pizza? Extra cheesy? Extra crispy or doughy? I like mine with extra sauce. Like, a lot of sauce. It has to be saucy.

When I strategically look at growth goals in business, there is a secret sauce to achieving revenue and growth goals in sales. Imagine that, two of my favorite things! Sauce, and Sales. And it comes down to a simple math formula.

Pipeline ratios; An important math lesson.

Whether you saw my above tweet from last week or not, everyone should have a qualified pipeline ratio as part of their strategic selling roadmaps. The secret sauce to successful selling and meeting revenue goals!

What is a pipeline ratio?

A pipeline ratio equals the total value of new sales opportunities that could close in a specific period, divided by the target (goal) for that same period.

Let's assume your revenue target (goal) is $1M for the year. And let's also assume that your closing percentage is 33%.

Simple math would tell us that we need $3M+ in our pipeline to sell $1M+. Or 3X our new sales opportunity's revenue. Thus, your pipeline ratio would be 3X (times).

Why should I care about pipeline ratios?

If you want to plan, strategize, and ensure that you meet your revenue growth goals or obligations, you should care about what your pipeline ratio needs to be.

There are other items to be aware of, that can also impact pipeline ratios:

• New sales opportunities in your pipeline need to be deals that will make buying decisions during your current period. Remember, you're only assuming to win 33% of your deals (in our example above). You need to have enough new sales opportunities in your pipeline to be able to meet your goal. You aren't going to win every deal.

• The leg work to build a pipeline starts with understanding sales activity metrics. For a blueprint on those, refer back to my previous article here.

• All businesses don't purchase similarly. This will impact your closing percentage. Having diversity in your pipeline (something we'll discuss in a future blast) is a must.

• As your selling year winds down (Q3 into Q4) and you haven't yet met your target (goal), it's important to be able to break down the remaining new sales opportunities in your pipeline even further. You can look at similar ratios using the same exercise with monthly revenues and goals to finish a selling period.

The moral of the story? Revenue production happens as a result of appropriate sales planning and strategy. There isn't a mature business in the world that doesn't ask its sales leaders to forecast revenue and plan for production. Why? Because new sales opportunities feed operational needs and costs. Not to mention, aid in scale and growth. The most successful sales professionals understand what their pipeline ratio needs to be in order to achieve their revenue targets. They're able to see above the clouds, and they don't "wing it," hoping they'll sell enough business to hit target (goal). They also plan their own earnings around their sales activity, so why wouldn't you forecast how much is needed to ensure those earnings become reality? All of this starts with understanding the pipeline ratio needed for success. It's part of building a successful sales strategy. If you want to be the best, you should copy the efforts of the best.

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