This is the third in a three-post series focused on forecasting and pipeline. Part I examined triangulation forecasts to improve forecast accuracy and enable better conversations about the forecast. After a review of pipeline management fundamentals, part II discussed the use of to-go pipeline coverage to provide clarity on how your pipeline is evolving across the weeks of the quarter. In this, part III, we’ll introduce what I call this/next/all-quarter pipeline analysis as a way of looking at the entire pipeline that is superior to annual or rolling four-quarter pipeline analysis.
Let’s start by unveiling the last block on the sheet we’ve been using the previous two posts. Here’s the whole thing:
You’ll see two new sections added: next-quarter pipeline and all-quarters [1] pipeline. Here’s what we can do when we see all three of them, taken together:
- We can see slips. For example, in week 3 while this-quarter pipeline dropped by $3,275K, next-quarter pipeline increased by $2,000K and all-quarters only dropped by $500K. While there are many moving parts [2], this says to me that pipeline is likely sloshing around between quarters and not being lost.
- We can see losses. Similarly, when this-quarter drops, next-quarter is flat, and all-quarters drop, we are probably looking at deals lost from the pipeline [3].
- We can see wins. When you add a row at the bottom with quarter-to-date booked new ARR, if that increases, this-quarter pipeline decreases, next-quarter pipeline stays flat, and all-quarters pipeline decreases, we are likely looking at the best way of reducing pipeline: by winning deals!
- We can see how we’re building next-quarter’s pipeline. This keeps us focused on what matters [4]. If you start every quarter with 3.0x coverage you will be fine in the long run without the risk of a tantalizing four-quarter rolling pipeline where overall coverage looks sufficient, but all the closeable deals are always two to four quarters out [5].
Tantalus and his pipeline where all the closeable deals are always two quarters out
- We can develop a sense how next-quarter pipeline coverage develops over time and get better at forecasting day-1 next-quarter pipeline coverage, which I believe marketing should habitually do [6].
- We can look at whether we have enough total pipeline to keep our salesreps busy by not just looking at the total dollar volume, but the total count of oppties. I think this is the simplest and most intuitive way to answer that question. Typically 15 to 20 all-quarters oppties is the maximum any salesrep can possibly juggle.
- Finally, there’s nowhere to hide. Companies that only examine annual or rolling four-quarter pipeline inadvertently turn their 5+ quarter pipeline into a dumping ground full of fake deals, losses positioned as slips, long-term rolling hairballs [7], and oppties used for account squatting.
I hope you’ve enjoyed this three-part series on forecasting and pipeline. The spreadsheet used in the examples is available here.
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Notes
[1] Apologies for inconsistences in calling this all-quarter vs. all-quarters pipeline. I may fix it at some point, but first things first. Ditto for the inconsistency on this-quarter vs. current-quarter.
[2] You can and should have your salesops leader do the deeper analysis of inflows (including new pipegen) and outflows, but I love the first-order simplicity of saying, “this-quarter dropped by $800K, next-quarter increased by $800K and all-quarters was flat, ergo we are probably sloshing” or “this-quarter dropped by $1M, next-quarter was flat, and all-quarters dropped by $1M, so we probably lost $1M worth of deals.”
[3] Lost here in the broad sense meaning deal lost or no decision (aka, derail). In the former case, someone else wins the deal; in the latter case, no one does.
[4] How do you make 32 quarters in row? One at a time.
[5] Tantalus was a figure in Greek mythology, famous for his punishment: standing for eternity in a pool of water below a fruit tree where each time he ducked to drink the water it would recede and each time he reached for a fruit it was just beyond his grasp.
[6] Even though most companies have four different pipeline sources (marketing/inbound, SDR/outbound, sales/outbound, and partners), marketing should, by default, consider themselves the quarterback of the pipeline as they are usually the majority pipeline source and the most able to take corrective actions.
[7] By my definition a normal rolling hairball always sits in this quarter’s pipeline and slips one quarter every quarter. A long-term rolling hairball is thus one that sits just beyond your pipeline opportunity scrutiny window (e.g., 5 quarters out) and slips one quarter every quarter.