Here’s a simple rule of thumb to figure out whether you’re likely to hit your target next quarter:
If your unweighted sales funnel is worth 3 to 3.5 times the size of your target, then you’re likely to make it.
In other words, if the total value of the opportunities you expect to close next quarter is more than 3 times the size of your sales target for that same quarter, then you should be able to make that target or, as one veteran sales VP put it to me once, “your biggest challenge for that quarter is not to find your quarter but to close it.”
Let me point out a few things here:
- this is just a rule of thumb but its been proven over decades of technology sales (engineering services & software)
- the big assumption here is that all the opportunities in that 3x total have been properly qualified, i.e. each opportunity has passed the BANT test successfully
- do this quick calculation using raw numbers, i.e. unweighted. For example if an opportunity is expected to generate $100k in revenue then it counts at $100k in your total whether it’s rated in your funnel as an early stage 10% probability opportunity or an everything-but-the-contract 90% opportunity.
- if most of your opportunities are in the early stages (10%-50%, or “a left-leaning funnel”), you will have to work extremely hard to progress these through the buying cycle in time to close them in that quarter. If, however, the majority of your opportunities you’re expecting to close during that quarter are in the later stages of the process (50%-90%, i.e. a “right-leaning funnel”), you should be able to slam-dunk that quarter.
Hope this helps. All comments and questions welcome!
p.s.: here’s another way of looking at this:
If sales funnel < 3 x revenue target = marketing challenge, if > 3 x target = sales challenge