Pipeline Management- What it is, Why it is Essential, and How you can get Started Podcast Episode 6 Host: Beau Billington Guest: Steve Quehl Beau 0:01 Okay, so we are recording. I will. Alright. 321 Hello Everybody, Episode 6. This is brought to you by the Free Agent. We’re sitting here with Steve Quehl. Thanks for joining Steve. Steve 0:18 Great to be with you, Beau. Beau 0:20 So we brought Steve because he’s a Chief Revenue Officer or outsourced CRO if you will. And I know a lot of folks out there who struggle with Pipeline Management. What is a pipeline? How do you Institute one? When does it even make sense? And how can you maintain one? Being that I’m a small company myself, Pipeline Management is something that I’m continuously trying to improve, get better at, continuously iterate, and it’s not the easiest chore. And I use the word chore kind of loosely, because it’s something nobody wants to do. But at the end of the day, it’s something you’ve got to do as part of the blocking and tackling of having company. So at any rate, Steve, I really appreciate you joining in. Steve 1:01 Happy to be here. This is one of my favorite topics. Beau 1:03 Yeah. So if you can just give us a quick note, quick and 30 seconds on who you are and why people should tune in? Steve 1:11 Well, I’ve been in the software business for most of my career. I started my career with IBM. But in 1980, I jumped into the software business when it was much very much an infant industry. I grew up in sales, graduated into Sales Management, and then into general management. As the industry and companies developed, I took the role as either Chief Sales Officer or Chief Operating Officer at a variety of early stage, mid stage, and public companies across that time span. Moved to Atlanta in 2000 to run an internet software company. Just about the time the DOD bomb blew up in everyone’s face. And so that was the point at which I was encouraged to go and offer my services as a Fractional or Interim advisor, or CRO, CSO COO to early stage technology companies. And I did that for a period of time, independently. Beau 2:21 Sure. Steve 2:25 After about a five year period of traveling everywhere across the country, I stayed in Atlanta and bought a business and did that for a number of years until the great recession hit. Then I decided that I need to sell that and go back to work in the same space. So, I joined a firm called tech CXO, which is a company that offers the full suite of fractional and advisory services across all functions: Sales, Marketing, Technology, Finance, etc. So I’m one of the partners at Tech CXO, today. Beau 2:57 Got it and needless to say that Pipeline Management must be in your core, especially making it through the Great Recession, right? Steve 3:04 You can’t get away from it. And as much as we’ve talked about it and focused on it, and often through the lens of the many tools that are out there to help manage pipelines, I think one of the things that our discussion prompted is just a visit with the fundamentals and the reasons why you want to do this. And think about what you’re going to put in place in terms of process before you try to automate something. Beau 3:27 I totally agree. I think that’s a good segue into the actual topic here. And so of course, we collaborate on a blog post. And this is just a continuum of that blog post where we just wanted to get on the horn here via video and just kind of run through a few questions. So in that thing, the Pipeline Management process, “Why is a pipeline necessary for growing business?” Steve 3:51 Your pipeline is your view into the future. It’s a leading indicator for any company in terms of health and it’s really there to help you formalize the development and the transition of all of your potential revenue opportunities. When they come in the door as a lead, “What do they do to gestate and materialize then with revenue? There’s a lead time there. There’s a sales cycle if you will, or a buyer cycle. And there are steps within that and you have to know where you are with every prospect along the way in order to know, “Okay, where’s the money gonna come from?” So if you don’t have that formalized process, everything is a scientific, wild as guess. Beau 4:40 Yeah, totally agree. And also you mentioned where’s the revenue come from, but with that information, it can also put you in a position where you can invest the money back into your business because you’re more educated on when it’s coming, what’s coming in, and start looking at how you can best allocate those resources to help your business continue to grow. Steve 5:00 Right. Well, again back to the forward looking aspect here when you have to plan your cash, you plan your investments in whether it’s hiring people, expanding your business, adding functions to the business, whatever those things take cash. And you need to plan in advance so you need to see that there is that flow of capital coming into your business from customer revenue and so you have to have lead times and understand what those lead times are because you don’t hire a salesperson and turn them into a productive individual overnight. There’s a lead time there. So knowing that you’ve got the cash to support that run up to the to that productivity is important. Beau 5:48 Agree. I think you can also put a fire behind somebody behind because if you’re sitting there and you’re looking you know 60, 90, 120 days out and you don’t necessarily see some liquidity event or cash coming in from your business then as a sales leader obviously that’s going to prompt some discussions with your sales team and help you roll up your sleeves a little bit. And in order to kind of help further drive sales activity so 30, 60, 90, 120 days out, you actually have the cash flow that you need to sustain the business. Steve 6:17 Absolutely. You’re looking for early warning, you’re looking for signals of delay because delay is the enemy in that regard and you don’t want to be surprised at any given point in time. I mean you think about the CEO who walks into the boardroom and projects a forecast on a given quarter. The first time he or she is wrong maybe forgivable. The second or third time is not and all of a sudden there’s undue pressure and sometimes really bad things happen so that the way around that is to have the visibility that we’re talking about here not only to make those forecasts accurately but to meet them. Beau 6:56 Agreed. I think it’s a great point. So moving on to the next question in regards to a pipeline, I think a lot of times you think of pipelines more so mature companies but growth companies startups, this is a critical component to their success and i’d probably argue that it’s maybe even more critical for the success of a growing business than it is maybe more mature organization because they don’t have the cash flow that’s coming in that maybe a larger company does Steve 7:25 Indeed. And I don’t care whether it’s a new company, early stage company and you might only have a handful of opportunities. But they’re all crucial and you can’t afford not to get, not to land every one of them. Or whether you’ve got 5000 accounts each quarter in which case the task of managing and monitoring all those activities and events because the stakes are much higher. Either way the stakes are high. It’s all about the visibility, and it’s all about meeting commitments. Meeting commitments that you’ve made whether to your board, to your stakeholders, to your customers in many cases. Knowing how you’re going to be able to respond to what that future holds and be able to look out that 18 months and say, “Okay we’re on a run rate here that we can sustain. And that’s really a key. Beau 8:20 Absolutely. And again to go back to an earlier point, for me it helps me track ROI and put together a business case for investment. So I’ve got to have visibility into what’s coming in not even just this month but the next 2, 3, 4 months and a pipeline is a critical component of that. So to get a little bit more tactical, “How does a company that maybe doesn’t have a pipeline and prop in place, how would they actually go about creating a pipeline? Steve 8:47 Let’s put it in the context of any. I think in the case you’re asking they’re an early stage technology company perhaps that is just now formalizing its process and maybe it’s on the verge of that sacred product market fit. And it’s all of a sudden figured out there’s a market opportunity there and there’s something here that we can buy, do and build on a repetitive basis. It’s really important to understand the nature of your buyer. And the buyer in this case, has a profile. And so it’s important to understand what that ideal buyer looks like and put that in place and really study what makes the right kind of prospect for this business because in the aspiration to achieve repeatability you don’t want to be shooting at anything that moves, you want to be able to target a very specific profile aim your fire and and put your people in place with a sales playbook that calls them to run plays consistently and repeatedly against this ideal customer profile. Now this profile, it’s good to follow a pattern. Typically, we call it the buyer’s journey. In the old days when I was growing up in sales, we used to talk about a sales cycle, we used to talk about defining all the stages of a selling cycle. It might be an introduction, it might be a presentation and might be a demonstration, might be a proposal, and might be a win. Well, the buyers don’t think in those terms. They think in terms of, “Okay, do I really have a problem? Oh, my, well, this problem is real, and it’s costing me a lot of money. And I’ve got to go figure out how to solve this..” So they’re out there evaluating first of all their internals, they’re looking at an approach to solving this problem. They’re evaluating alternatives. And because of the internet today, they can do lots of research before they invoke or bring aboard an organization from whom they might choose to buy something or several in a competitive bidding process. So they may be 40 to 50 to 60%, through a sales cycle, a buyer cycle if you will before a salesperson can ever show up. So that person’s at a loss going in. They need to understand where those buyers are. They need to know where those buyers are headed, and how they’re going to make decisions. Because especially in complex sales, those decisions are very political. And their committee base. And there’s many different individuals that we would refer to as personas that have to be addressed each with their own different focus on the problem that they have identified. In many respects, there’s a lot of Binnie sales cycles that have to take place conversations that have to occur in order to create what we would then require as a consensus because it is a consensus. Any one of those individuals if there are, and I think the average today in the complex sale environment is upwards of seven to eight people who have to say “YES”, before you can win a deal. So knowing where each one of those is in their buying process is critical. And being able to present your value proposition in terms that will resonate with them is really important. All these things are steps in your selling process. All of these things require time, assets, individuals, and timing, in order to present those according to a normalized time frame. We call that the sales cycle, the average sales cycle, and that could be upwards anywhere from a month to two years depending upon the complexity of the product that you’re selling. So again, parsing that out makes that very clear, and then training salespeople in how to progress through that, and involving the entire team, the entire Corporation, from product management, marketing, finance, everybody has to have visibility into this process. Because again, back to that complex nature, you’ve got many of these moving parts in many different organizations simultaneously progressing through this pipeline. You got to know where each one of those is at any given moment in their buying process in order to be able to rationally predict where it’s going to end up for you. Now, the other thing is, you’re not going to win every deal no matter what. So you have to create a coverage model for yourself, I’ll call it insurance, I’ll call it a hedge. So if you know from your experience, in more recent times, that it’s going to take, I’m going to win two out of every four years, I’ve got a 50% run rate. Well, I better have four deals in the pipeline to get the two that I expect, any one of them is a potential to close. But the odds are two of them are gonna fall out, one is going to get delayed, another company might get acquired, that deal goes away. You have to rely on those others too in order to cover the number that you’ve projected in your forecast. I’m rambling a little bit here. But again, it’s bigger than a breadbox is that going into this is crucial. And understanding not just at the sales level, not just at the sales management level. But at the leadership level of the organization, all the way up to and including the board of directors. Knowing how this team effort functions, in order to make this business opportunity materialize is crucial. Beau 14:28 I think it’s a great point. I think there’s a big misnomer in regards to sales that even a monkey can do it. But especially when you talk about complex sales it gets quite scientific and we’re talking about personas. And a lot of times you think about personas as it pertains to marketing. But absolutely you need that within the sales process as well. And to your point, a customer may have gotten 50% of their decision criteria done by the time they even reach out to have a demo from you. And so it’s very, very important for organizations to track the typical buying process and when they get contacted with somebody, they’re able to put somebody within one of those called nine steps as an example. And so if somebody has already gotten a demo, you’re not starting them on step one, because you’re gonna lose them. You’re starting them appropriately, it’s Step five, or Step six, naturally, they’ve already done their due diligence, and then take into the process. Though, I think it’s very complex and people don’t understand the nuances and what’s involved for an effective pipeline. And also, to your point, you got to be able to track what you’ve done the last 3 6 9 months, even 12 years look back, and they kind of derive percentages. So moving forward, you’re able to effectively know what your win/loss ratio is? What’s going to come through the pipe effectively, because that’s what is the basis for actually planning and usually utilizing your cash flow to make investments in the business. So it’s way more complex, and the pipeline is the backbone for all the decisions even those financially driven by the CFO. Steve 15:56 That’s absolutely right. And again, it’s a process. It’s a process that must account for the individual buyer, and their proclivities, buyers, and their proclivities on how they make decisions. And remember, they don’t make these decisions for a living. We may sell for a living and have a process that we think should be Pat, but they don’t. And that’s why it’s very securities and all you have to do is go look at Gartner group’s depiction of a buyer’s journey which is a convoluted spaghetti diagram and recognize that as this tortuous path that they all follow. You have to have an organization that is lean and capable of administering the information and the confidence that’s going to be required for those buyers to move from one step to the next. That has to be institutionalized. And it has to be taught. And it has to be managed and overseen in a very disciplined fashion, from top management down. Beau 16:58 Totally agreed. And I think that’s a good segue into the next question, which we partially answered. But I’d still like to bring it up just to further emphasize the importance here. So, do you need to create a pipeline from multiple business offerings, customers, or even sales cycles? So, is there a different customer journey, customer map, should there be a different scenario for the different product offerings that a company may have within their organization? Steve 17:24 I think that’s a choice that each business needs to decide based upon the nature of their market, the nature of their value proposition, the nature of their buyer. And it certainly varies from the standpoint. I’ll go back to the early stage technology company who is selling a complex solution to a large scale organization. For them, the most expensive sale is a new account. But once they have an account, they have an opportunity to grow that account with add on sales, or expansion revenue that comes from building, bringing new product into that same customer, adding modules or adding features as a time. So those are less expensive sales. So at the very least, I always recommend that companies distinguish between New Account business, and add on business. But, with respect to a very mature organization that has multiple lines of business potentially, maybe different selling models going on concurrently. Some may be channel driven, some may be direct, some may be self-serve from the client themselves. Again, depending on the nature of the product and nature of the way the product is bought. That should dictate the degree to which you have separate or isolated pipeline systems. And then usually you’re in line of business management at that point. Usually looking at divisional or or P&L based cash flow models. Beau 19:06 I think that’s great. Absolutely big believer that if you have multiple service offerings, or you have new account reps that are focused on new accounts, and more so the company account management, there should be different pipelines because inherently the way that the customer should go through the customer buying journey is going to be different. So what you need to supply to them along the continuum, is going to be different from new business development as a contrast to account management. One thing that I want to underscore that you brought up a second ago, and I think a lot of people don’t understand this as well is, “How hard new customer acquisition actually is?” And I don’t want to say it’s easy but if you have an existing account, it’s a much lighter lift to cross sell and upsell. Once you have the paper signed, you’ve established trust and establish credibility. And it’s funny how most companies that I talked to, they’re solely focused on net new business which is important. But also to, “Are you providing the proper service to your customers and have you maximized the growth potential within those respective accounts?” Steve 19:40 Well, that’s obviously a key point here. Again, for a new business, a growth company and early stage technology company that’s getting ready to hit the gas and scale the business. It’s really important for them to show success in those new logos. But there’s a long road to profitability, in that regard. And profitability may not be the driver, revenue may be the driver, new accounts may be the driver. But at some point, because revenue is not revenue, but profit, all of a sudden, in cash flow, positive cash flow hopefully becomes the driver. You have to be able to manage the timing and the nature of the way these sales are mapped out. So to your point, YES, you want to be able to distinguish not only the timing but the profitability of the revenue coming in the door. Because at the end of the day, when you roll up that to a forecast, the revenue components they’re up, they’re not necessarily distinguishable inside. But when it all drops to a bottom line, that’s when you start to read and see how important it is to be able to really do this in a very efficient manner. Beau 21:30 Agree, absolutely. Cool. So two more questions. Steve, thanks for being a trooper here. So how can a growth company institute a pipeline both quickly and effectively? Is it about mapping that customer journey, getting the personas? Is that kind of the first step here? Steve 21:46 That’s the starting point. I think this is a whole company effort, quite frankly. I think creating that ideal customer profile and mapping that buyer journey which requires study, obviously. And it’s a little bit of trial and error at the beginning. But I think now we start to look at creating the collaboration model inside the organization between Product Management and Marketing, Marketing and Sales, and making sure that when there is a lead generation process. For example, from marketing and that there’s a handoff of a marketing qualified lead to sales. There is an agreement between marketing and sales between what constitutes a good lead or not. And by the same token, would sales accept the lead. And they’ve agreed that this is a sales qualified lead, that there is a purposeful process by which they will go and essentially process that lead and report back to marketing. So that continuing engine decade, engine retune at the same time. That goes behind the scenes. Now that we’re in the game, it’s incumbent upon the sales management organization to ensure that there is a rigorous discipline process in place to monitor the progress that occurs on a daily basis, quite frankly and may be reported or studied weekly in one on ones and discussions between salespeople and sales management. But that progress has to be understood. That plan has to be in place for next steps. The execution of those next steps has to be reported out. The accountability for meeting that number is created with those building blocks. So we can see if there’s breakdowns where in that process did it occur. So putting those building blocks in place, certainly at the sales level, the sales management level, and then raising that backup to show, “Okay, here are the early warnings for delays. But we’ve got coverage over here. And here’s a new situation that has now come in to accelerate it a bit. So we’ve got balance in our equation, and we have early warning of any risk to meeting that number at the end.” That process is ongoing, it’s perpetual, it should be daily on at the sales organization. And I think the one point we want to make is that it’s important that the information be gotten out of the heads of the salespeople in two forms into whether it’s a digital or spreadsheet form doesn’t really matter. Because they’re notoriously poor at maintaining this, they’re out doing stuff, right? Documenting is not their strength but it’s important to get the information out so it can be studied and shared, analyzed, and when problems arise, remediated and put them in a situation where they’re doing what they do best and brought back into the organization for again, evaluation and confidence that number is going to be met. Beau 24:46 Totally agree. I think what I’d like to underscore is your use of the word continuous education and sales is getting leads from marketing but they’re not communicating back to marketing. The validity of the leads. They’re good, they’re poor, they’re mediocre. How’s marketing going to be effective at driving good leads? And so, you have to have a continuous feedback loop so everybody knows what’s going on, and what the quality of the output coming in actually is. Without that, It’s all for not Steve 25:18 I was gonna say in the old days, it was like getting dogs and cats to live together. Marketing and Sales. Beau 25:24 Today, I don’t think much has changed. Steve 25:27 But in terms of what has to happen, and this is a leadership issue from the CEO down. Bringing them into the same room and holding them accountable to the same standards is key. Compensation alignment does that for you, by the way. But ensuring that feedback loop is there putting them both in charge of the destiny of the company. So to speak, by delivering what they promise is important. And I think at some point, the two can become indistinguishable because of the collaborative processes that they’re bringing to bear. And I think that’s critical in terms of organizational development. Beau 25:58 Absolutely starts with accountability. And a lot of that comes down to compensation. But that’s a topic for another day. Right? Steve 26:04 Right. Beau 26:04 So finally, what’s the ongoing maintenance of a pipeline? And how can you ensure that this is prioritized? I think you made a great point earlier about it coming from the CEO, top down, but how do you keep this top of mind and really drill into I guess your middle line managers and below, “How important pipeline is?” Because when people think of pipelines, it’s usually “Oh, it’s another TPS report, the chief revenue officer, or somebody just needs this for some philosophical reason.” But obviously, it’s much more than that. So how do you keep this priority, keep it Top of Mind, and help the sales folks understand the importance of pipelines which keeps them employed. Steve 26:41 Not only that, it gets them paid. And I think that’s really the key. If you tie it to their compensation, I mean salespeople are typically compensated on the basis of some combination of salary and incentive. You get paid a salary for a reason. And maybe this is one of the reasons why you get paid a salary is to do these administrative tasks that are necessary to input data to the system, and ensure that the reporting that comes out of that is accurate. When that doesn’t happen, there’s a difficult conversation and they have to occur. And no longer it happens, the less likely they are to hold that position. So I think that’s the starting point. It’s discipline. Its management discipline as well as individual contributor discipline. So that’s key. But that’s again, a philosophical point that has to be maintained from the top. It’s just one of those things that has to be done. It’s hygiene. The absence of it creates interest up to including diseases that don’t want to spread to the corporate organization. Beau 27:49 Absolutely. Agree. Awesome. Well, cool, Steve. Hey, I really appreciate you taking the time today. That wraps up our q&a session, but it has been extremely informative for me personally, and so I’m sure there’s many organizations out there that are going to benefit from this conversation. So I truly appreciate you joining today. Steve 28:05 I’m happy to be here. I look forward to more Beau 28:07 Awesome. Thank you, sir.