Confidence percentages should indicate how close an opportunity line item is to closing. This concept is not new to most salespeople and managers. The challenge is ensuring that the confidence percentages that are associated with individual opportunity line items are truly valid. This is best accomplished by publishing explicit definitions for confidence percentages and teaching salespeople to apply them correctly. Managers can help ingrain this behavior by conducting frequent “Pipeline Reviews” with their salespeople.
The number of percentages that companies choose to define should be based upon the answers to two key questions: (1) How many steps are there in a typical sales cycle? (2) How significant is each step in advancing the opportunity toward closure? There is little value in including percentages for every step in the sales cycle if the completion of specific steps does not measurably move the opportunity closer to closure.
Here are some sample percentages and related definitions. You may choose to add or remove percentages, or change the definitions that are assigned to specific percentages.
- 10%: Unqualified opportunity. This percentage is included to enable salespeople to track unqualified prospects; plus it provides a useful measure of new prospecting activity.
- 20%: Business Problem Qualification completed (see The Secret to Closing More Sales)
- 30%: M-A-I-N BP Qualification completed (see The Secret to Closing More Sales)
- 40%: Quote or proposal submitted
- 50%: Competitor involved; 50/50 chance of winning
- 60%: Competitor involved; prospect/customer is leaning toward your company’s solution
- 80%: Verbal commitment received from prospect/customer
- 90%: Order booked
- 100-percent: Order shipped
If you want to maximize the accuracy of your company’s opportunity pipeline, pay special attention to the steps “Business Problem Qualification” and “M-A-I-N BP Qualification”. When you start inspecting these two activities, you will be astonished to learn how many opportunities with high confidence percentages have never been properly qualified! It is no wonder that opportunities languish for weeks and months with no change in opportunity status.
Here is another suggestion. Don’t allow salespeople to assign a Revenue value to an opportunity line item unless the Business Problem and M-A-I-N BP qualification steps have been completed, and a quote or proposal has been submitted to the prospect or customer. This removes unqualified opportunities from pipeline dollar totals and improves the accuracy of dollar estimates for qualified opportunities. Implementing this discipline will dramatically improve the quality of your pipeline-based strategic decision making.