Pipeline Generation

Tips on how to establish, measure and manage pipeline trends and make them a top priority.

Pipeline is the #1 challenge to making the revenue number in 2023 - and if you are in Sales Development, Sales, or Marketing you are feeling it daily! So, how do you establish, measure and manage pipeline trends and make them a top priority?

Pipeline momentum dashboard:

I have been discussing pipeline generation and management with industry thought leaders, revenue practitioners and calling upon my own experiences. I am pleased to share the following ideas and best practices. The pipeline “momentum” dashboard shared by Bill Binch on an episode of the Metrics that Measure Up Podcast establishes pipeline specific objectives for AEs and SDRs. Let’s take a look.

It is important to establish pipeline specific objectives for AEs, SDRs, and Marketing. Did you know that over 50% of SDR teams do not currently have "pipeline dollars" as a goal?  Moreover, they are most often incented by meetings scheduled, meetings held, and less commonly, Sales Qualified Leads (SQL) or Sales Accepted Leads (SAL). In order to align the event-based measurements with the desired outcome of revenue growth, consider adding both a qualified pipeline ($) and Closed-Won ($) incentive compensation variable to SDRs. 

Additionally,  a majority of AE's do not have a specific measurable objective for self-directed pipeline generation. One novel concept is to consider paying a different commission rate for opportunities created and closed from self-directed AE generated pipeline, versus those generated by Sales Development and/or inbound Marketing leads.

Best practices? 

• Make qualified pipeline goal ($) the #1 objective and Closed-Won Revenue ($) goal from inbound hand raisers (contact us form or demo request form) the #2 objective for the "𝗛𝗲𝗮𝗱 𝗼𝗳 𝗠𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴".

• Establish both "New Customer" and "Existing Customer Expansion" pipeline goals - do not combine them as they have very different conversion performance metrics including Win Rate, Sales Cycle time, and ACV.

• Establish line item quota elements for New revenue vs Expansion revenue for AEs and SDRs - the result will be an increased pipeline focus on each type of ARR.

• Calculate, communicate, and publish "pipeline coverage ratio" for every rep, team, and “source” of opportunities for both New ARR and Expansion ARR at the beginning and end of every month or quarter.

  • Have a dashboard that shows every AE what their next "month/quarter" projected new bookings will be based upon their specific, and current pipeline coverage ratio (makes pipeline development more relevant when translated into projected bookings and quota achievement).

  • Measure the % of Closed-Won revenue from pipeline developed in the same period (month or quarter) and factor that into the pipeline coverage ratio and current period pipeline development goals.

Prioritizing Pipeline Generation:

Pipeline generation should be the number one measurable objective for the head of Marketing, and the head of Sales Development. This objective should cascade down to every Marketing and Sales Development resource involved in pipeline generation and pipeline capture. Every dollar of new pipeline required to hit the revenue number should be allocated down to the organization, team, and individual level, by having a well communicated and understood pipeline quota that is a primary variable for bonus and/or incentive compensation. This means that everyone in Sales Development and Marketing should own a portion of the pipeline goal. And if existing customer expansion is part of the revenue growth strategy, Customer Success should have an expansion pipeline goal in concert with a Customer Success Qualified Lead (CSQL) goal.

Measuring the Cost and Efficiency of Pipeline Generation:

Every dollar of pipeline generated should be measured to understand the "cost" to generate $1 of pipeline and ultimately $1 of New ARR by pipeline source.

• Pipeline efficiency ($) goals by ICP should be measured and tracked.

• Pipeline efficiency ($) goals by “every” customer segment should be measured and then tracked.

• Marketing CAC Ratio, Sales Development CAC Ratio, and Account-Based Program CAC Ratio should be calculated. 

Measuring Pipeline Conversion Rates:

Each dollar of pipeline generated should be measured by pipeline source to calculate the conversion rate from qualified opportunity to Closed-Won. Easy to understand pipeline source segments include:

• 𝐼𝑛𝑏𝑜𝑢𝑛𝑑 Marketing 𝑙𝑒𝑎𝑑 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 (𝑏𝑦 𝑠𝑡𝑎𝑔𝑒)

• O𝑢𝑡𝑏𝑜𝑢𝑛𝑑 𝑆𝐷𝑅 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝑔𝑒𝑛𝑒𝑟𝑎𝑡𝑒𝑑 𝑙𝑒𝑎𝑑 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 (𝑏𝑦 𝑠𝑡𝑎𝑔𝑒)

• 𝐴𝑐𝑐𝑜𝑢𝑛𝑡-𝑏𝑎𝑠𝑒𝑑 program 𝑙𝑒𝑎𝑑 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 (𝑏𝑦 𝑠𝑡𝑎𝑔𝑒)

Pipeline Generation Capacity comes BEFORE Sales:

If there is not enough proven pipeline generation capacity to support the current and/or additional sales resources - measure, analyze and fix the pipeline generation issue first. Do not hire more AEs thinking this will solve the pipeline generation and revenue growth challenges - it will exacerbate the issue. A common point of friction between Marketing and Sales in B2B SaaS companies is the lack of enough quality pipeline to support the Sales capacity. Consider the following reality:

• AE jobs are on the line for missing revenue quota

• Sales manager jobs are on the line for missing revenue quota

• CRO's job and career are on the line for missing revenue quota

                       “Whose job is on the line when pipeline goals are not met”

xDR Incentive Compensation Variables Drives Focus:

In recent RevOps Squared benchmarking research we asked xDRs and managers what are the top "quota elements" for a lead generation resource such as an SDR, BDR, or MDR? Top xDR Incentive Compensation Variables included:

The above data from a population of 400+ B2B SaaS companies speaks for itself when it comes to the PRIORITY being placed on pipeline development outcomes for xDRs.

The above findings motivated us to ask another related question regarding pipeline generation by xDRs which was: “What percentage of your pipeline as an xDR is generated by your own outbound activity versus inbound leads?”

𝘅𝗗𝗥 𝘀𝗼𝘂𝗿𝗰𝗲 𝗼𝗳 𝗽𝗶𝗽𝗲𝗹𝗶𝗻𝗲:

𝘅𝗗𝗥 𝗿𝗲𝘀𝗽𝗼𝗻𝘀𝗲:

Pipeline generated by outbound activity - 80% (median)

Pipeline generated by inbound leads - 20% (median)

𝗦𝗮𝗹𝗲𝘀 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗿𝗲𝘀𝗽𝗼𝗻𝘀𝗲:

Pipeline generated by xDR outbound activity- 50% (median)

Pipeline generated by inbound leads - 30% (median)

The above % of xDR pipeline perspectives from xDRs versus Sales managers was thought-provoking, to say the least. Here are a few ideas to increase the intentionality and clarify the most effective source(s) of pipeline generation.

• Pipeline generation ($) needs to be a top objective, quota element, and daily dashboard for every xDR and organization. 

  • Meetings at #1 vs Pipeline ($) at #5 is CONCERNING.

• Pipeline contribution from xDR teams needs to be measured not only from an outcome perspective ($ of qualified pipeline) but also from an expense perspective (SDR CAC Ratio).

• Pipeline coverage ratio for xDR outbound generated pipeline vs xDR supported inbound leads needs to be measured- benchmarks show inbound leads result in a 2x - 3.2x higher win rate.

• Inbound leads efficiency should be measured by a Marketing CAC Ratio which can include % xDR time/expenses invested in managing inbound leads to get a holistic picture.

• Cost per Sales Qualified Lead, Cost per $ of qualified pipeline, and Cost per $ of New Revenue from xDR outbound activity needs to become a TOP revenue growth efficiency metric…

  • If these pipeline generation efficiency metrics are not instrumented and measured, the understanding of the ROI from xDR investments will be primarily subjective and anecdotal.

  • This makes planning and budget decisions on how much to invest in pipeline development by xDRs outbound activity vs Inbound Marketing leads a subjective decision and far too often based upon which GTM leader has a more convincing story or more political capital.

Whose "𝙟𝙤𝙗 𝙞𝙨 𝙤𝙣 𝙩𝙝𝙚 𝙡𝙞𝙣𝙚" when pipeline goals are not met?

If you are in a GTM function and you do not have a pipeline goal - ask yourself who owns the pipeline at your company. If you cannot answer the question "whose job is on the line for pipeline generation" if pipeline ($) goals are unmet, you may have a problem.