- [Norman Behar] Welcome to SRG Insights, where we answer your questions about
sales, sales management, and sales training. And today's question is...
- Warren Miller, Director of Sales at Wendy's, asks,
"How many sales pipeline stages do you recommend in a CRM system?
And does the maturity of the business come into play?"
- So, that's an excellent question. Just how many stages should there be
associated with a sales pipeline in a CRM system? And, like you, I've seen
relatively few stages and I've seen a lot of stages. Typically I'd say the right
number is probably somewhere between four and seven. But I wouldn't fixate on
a number. I really think the number of stages has to do with the complexity
of the overall sales process. In a longer, more complex process, you may
have more stages, and in a relatively shorter sales cycle, a little bit more
transactional, you may have less stages. I think the real key is having clear
definition so that the stages themselves aren't fuzzy, and then making sure there
are clear criteria that are customer driven associated with each stage.
In fact, this is one of the key steps we've outlined in our book,
"The High Impact Sales Manager." There is a section on forecast accuracy
and pipeline management. Step number one is to assign clear criteria customer
driven to each stage. So, I'll give you an example. Let's say one stage is needs
discovery, that's a pretty common stage. You want to understand what the
customer's needs are, and then the stage following that is solutions presentations.
So, based on the customer's needs, you're going to make a solutions presentation.
So, some exit criteria might be the customer has clearly acknowledged
that there is a business problem. They understand the economic consequences
associated with solving that business problem. They've identified a budget and
they're open to seeing a solutions presentation. So, they're giving you great
clarity, and you know that opportunity is ready to advance from one stage, needs
identification, to solutions presentation.
The problem we often see, though, is that it's fuzzy and may even vary
from sales rep to sales rep. Meaning that it makes it very hard to
produce a forecast when there aren't objective criteria.
The other benefit of objective criteria is to give you a sense for how much more
work really remains to get the deal closed. So, if you're not meeting the
customer criteria, you know exactly what you need to do in order to advance to the
very next stage. So, as long as we've covered this, let's just kind of quickly
dive into the other two key steps. So, step number one is to assign clear
customer driven exit criteria for each stage. The other is to assign a
reasonable probability to each stage.
We've seen pipelines where sales reps assign their own probabilities or
managers meet with sales rep and then assign various probabilities.
We actually recommend having a set probability associated with each stage
that ties to the exit criteria and actually historical win rates from other
deals that have been in kind of the same situation. And this way you
get great consistency in terms of not only the exit criteria, but also
the stage probabilities. And then the third factor is, or the third step is, to
really track velocity. So, we have this concept that we call a bloated pipeline.
And that's when there are deals that seem to be stuck for too long in one stage.
So, if a deal isn't meeting the customer driven exit criteria, let's say you have a
complex field, say you have six stages and a six-months sales cycle, you
might have 60 days assigned to each stage.
If a deal remained in a stage for more than 60 days, you may want to move it
to an inactive pipeline and only move it back when it meets the
objective criteria. The key there, though, is that you need to make sure
you're managing both your active pipeline and reviewing the inactive pipeline to
see those opportunities re-engaged and active again. So, hopefully that helps.
Just to recap, no set number of stages, but make sure that the stage is kind of
tied to the customer criteria or customer process. Step one, assign clear exit
criteria associated with each stage. Step two, assign reasonable probabilities to
each stage. Three, track velocity within each stage and if a deal is dormant for
over a period of time, however you define it, move it to the inactive.
Hope this helps and look forward to future episodes of SRG Insights.