It’s not often that a sales manager gets to design new sales pipeline stage definitions used by an organization. It usually occurs in smaller organizations when a new sales leader is appointed and in larger organizations when a new sales methodology is adopted. Establishing optimal sales stages is a prerequisite for accurate pipeline metrics and, to a lesser extent, for more accurate forecasting. Here are some simple guidelines to help you optimize the design of new sales stages.
Sales stages should be directly linked to your sales methodology. It should go without saying that your sales methodology should be aligned with the buyers methodology. If you employ separate sales methodologies for direct vs. channel sales or distinct product categories (e.g. license, SaaS or services) then separate sales stages should be employed. One challenge of having multiple sets of sales stages is that you need a sufficient quantity of transactions managed under each methodology for statistically significant pipeline metrics. Insure you’ve got enough wood behind the arrow for your various GTM strategies.
Number of stages is determined by importance of the milestone. While six sales stages are fairly common there is no one correct answer for all circumstances. Again, you need to link the stages to the major milestones of your methodology. Highly complex or technical sales involving multiple resources from different teams within your organization or company could have more sales stages.
Each stage should have clearly defined exit criteria. In order for stages to have meaning all of the users must be able to accurately classify their opportunities. Having defined and documented exit criteria that must be met before the opportunity can be moved to the next stage is essential for the status of an opportunity to be universally understood.
Exit criteria should generally be based on the customer taking some action or providing feedback. To reduce the risk that a sales resource might misrepresent or misunderstand the status of an opportunity, base the exit criteria on milestones from the perspective of the customer. For example, the exit criteria could be the handoff from the business buyer to the purchasing department, or it could be the buyers agreement to the definition of success in a pending product evaluation. Some would assert that the entire sales methodology should be derived from the customer/buyer’s perspective so this should not be difficult task. The trap to avoid is linking the sales stages to internal activities (e.g. contract sent to Legal or business terms approved by Finance.)
Attainment of the final stage should be determined by a department other than Sales. Use this approach as a way to leverage your CRM system to communicate back to the field the coveted “booked” status thus giving your sales resources another reason to integrate the use of CRM into their daily routine. This will also increase your confidence in reports from your system regarding the amount of closed business in the current period.
Stages early in the process revolve around leads, leads nurturing and may include a sales development organization to further qualify the lead. The sales development team may also be tasked to close the smaller dollar opportunities. I will enlist the help of some friends in Marketing and focus on that aspect of the funnel in a future post.
For a direct, B2B software or SaaS sales organization I’ve listed below some possible sales stages and exit criteria as examples of the guidance provided above. As I mentioned earlier, this is just an illustration and probably not the optimal choice for your organization.
Are you in the process of redesigning your sales stages or methodology and what do you hope to achieve?
Are your current sales stages designed with these guidelines in mind?
Would you suggest any additional guidelines?
Feel free to post your response and suggestions below!