Many sales professionals often ask us, “Where do I find more leads?” They want to know how they can expand their pipeline of sales opportunities, so they can improve their chances of reaching or exceeding their goals. We’ve discovered, however, that few salespeople do a good job of tapping into their most lucrative source of new business – their current customers.

We recently published a short 10-minute video brief on the Sales Performance International website, entitled “How to find nuggets of gold in current accounts.” In the video, we illustrate an effective way to analyze customer accounts, so you can find those hidden opportunities.

This is especially critical today, when sales pipelines are generally leaner than usual. In their latest report on sales performance benchmarks, CSO Insights found that, on average, sales reps are generating over half (52%) of all of their own opportunities (with 24% generated by marketing and the rest from partners and referrals). Further, CSO Insights reports that almost two-thirds (64%) of all sales managers say that their sales teams need improvement in their ability to generate new leads. And the majority of sales managers (57%) also say that their teams need improvement in their ability to farm additional revenues from existing customers. To recap: salespeople find most of their own sales opportunities, yet far too many sellers lack essential lead generation and account management skills.

Many sales professionals believe that sales opportunities emerge only after a customer has established a clear vision of a solution, and is looking for the best way to fulfill it. This is indeed a legitimate source of sales opportunities, but it is not the only one. The most successful salespeople recognize that if they can help customers to recognize their pains (critical business issues or potential missed opportunities), and also assist them with their visioning process (helping them to see a potential solution to their problems), they can not only create new sales opportunities, but also do so in a way that favors the seller’s capabilities. This powerful method of finding potential deals is called latent opportunity development.

When serving a customer account, most salespeople spend their time working with people they know on needs they have defined. But salespeople that rely solely on their current presence in their accounts are vulnerable. They are missing the opportunity to create a defensible fortress of value and interdependence with that customer. Top performing sellers also push for deeper penetration by finding undefined needs that they can address, or by meeting new people in the account that may have similar needs they can help to solve.

To develop new business in a current account, top sellers perform a “white space” analysis. By mapping the key business units in the account and identifying their principal pains, and then indexing these to your portfolio of solutions, sellers can find untapped veins of gold in the account — new potential sales opportunities.

We find that few sellers conduct this sort of exercise. They are busy reacting to the customer and serving existing needs in the account. But a few minutes of analysis can reap huge rewards. By performing a simple white space analysis, sellers can increase the number and value of opportunities in their pipeline by 2 to 7 times – and in some cases, by even more.

Even better, a white space analysis can be the foundation upon which you can build higher levels of relationship within key accounts. By identifying the most critical business issues in an account, and finding creative ways to address those pains with your portfolio of solutions (or perhaps, a partner’s), you can demonstrate thought leadership and initiative, and provide additional value to your customer. This is how you become more than a vendor, and begin to elevate your relationship within an account, ultimately to that of a trusted advisor.

The white space exercise, while fairly easy to perform, can provide some insightful information about how you can add value in your account, and how you can create new opportunities to better serve your customer. We find that the number of opportunities in an account at least doubles, or more, after a seller conducts a white space exercise. In fact, you may find more opportunities in your account than you can reasonably manage!

By focusing on sales opportunities that not only produce high value for the seller – more revenues and profits, especially – but also those that provide high value to the customer, salespeople can simultaneously improve their own pipelines while also elevating their relationship with key customers. SPI developed a structured methodology to enable sellers to conduct account planning effectively, built upon the solid foundation of white space analysis. Click here to learn more.

Good luck and good selling!

In the last week, two different clients asked us for benchmarks on sales pipelines. Specifically, they wanted to know what a “good” sales pipeline coverage ratio should be. That is a question we hear often, and like all good consultants, we generally answer with the rather unhelpful response: “It all depends.”

First, the commonly held “rule of thumb” is that a ratio of the total gross value of all opportunities in a sales pipeline should be at least three times the total weighted value of opportunities, where the weighted value is calculated as a percentage probability of closing for each stage in the pipeline. Opportunities at the top of the pipeline which have just begun their sales cycle are weighted very low, while those that have successfully navigated to the bottom of the pipeline and are nearing closure are going to be weighted much higher. The rationale for this, of course, is that sales opportunities that remain qualified as they progress through a sales cycle are going to have a higher probability of producing business as they move closer to a final decision.

Users of Solution Selling® already know about the weighted calculation approach to pipeline valuation, as it’s an essential part of the methodology. But does the generally held 3-to-1 total/weighted pipeline ratio make sense?

SiriusDecisions conducted a study of this, and found that business-to-business (B2B) companies that more consistently achieved their sales goals had pipeline coverage ratios in excess of 3.6 – in some cases, they were as high as 4.0. They speculated that the reason for this higher coverage number is because of the increased complexity of selling B2B solutions – more people involved in evaluations, more educated buyers, and as a result, longer sales cycles. This seems consistent with our own clients’ experience, especially in the increased unpredictability of the current economic environment.

This is further substantiated by research recently conducted by CSO Insights, who found that conversion rates of opportunities from discovery to close are dropping. In other words, more opportunities entering into sales pipelines are now resulting in higher “no decisions” or losses. They confirm that sales cycles are indeed getting longer, almost every stage of the sales process requires more effort, and fewer deals are being won as forecast. The end result: a 3-to-1 coverage ratio is now most likely inadequate for most businesses.

There is one factor to consider, however, that can lower the required pipeline coverage ratio – the number of latent vs. active opportunities. An active opportunity is one where the buyer already has a vision of a solution, before they talk with a salesperson. Latent opportunities are those where the buyer is either unaware of a business need that they should address, or they are aware but aren’t yet motivated to do anything about it. If a salesperson can elevate a buyer from a latent state to an admitted state — that is, if they can help the buyer to realize that they must take action to address a business issue or potential missed opportunity — then they can create a new sales opportunity where they can influence the buyer’s vision of a solution: one that favors the solution provided by the seller.

Latent opportunities are extremely valuable. According to research conducted by IBM and other SPI clients, the win rate on opportunities created by a seller who stimulates buyer interest and raises their latent need to an admitted state is very high – in excess of 85% in most cases. Being “Column A” in the evaluation matrix is a powerful place to be – and they generally result in larger opportunities with a much higher than average probability of winning.

Recently, several consultants have written about the importance of latent opportunity development, although they give it different names. For example, an article in the March 2009 issue of Harvard Business Review called it “provocation-based selling”. The Sales Executive Council called it “hypothesis-based selling” in interviews and reports published last year. These pundits imply that pursuing latent opportunities is a new idea, but in fact it’s been a core principle of the Solution Selling® methodology for more than two decades, as described by Keith Eades in his book, The New Solution Selling (2003, McGraw-Hill, ISBN 978-0071435390). The recent surge in interest in latent opportunity development is a direct result of the uncertain and unpredictable economy, when customer demand is generally much lower than normal.

The interest is latent opportunity development is fueled further by the low win rate on active opportunities – where the customer already has a vision of a solution, and the seller must react to the buyer’s already established requirements. We’ve seen the win rate on active opportunities decline to below 10% in some highly competitive industries. In times of plenty, when buyer demand is high and they produce lots of unsolicited opportunities which flow into sales pipelines, many salespeople can make a good living by winning one-out-of-ten of their active opportunities. But in tougher times, the flow of active opportunities slows to a trickle, and therefore, top sales performers must either win an unnatural proportion of active deals to survive, or they have to become proficient in latent opportunity development. Usually, it’s a combination of both.

The most successful salespeople today are those with a balanced portfolio of both latent and active opportunities in their pipeline. If half of the opportunities in a pipeline are latent with expected win ratios of 85% or more, and half are active with win ratios of about 15% (assuming the rep is competing for them effectively), then the total overall win ratio should even out to about 50% of all opportunities in the pipeline, over time. With a balanced portfolio of active and latent opportunities, if we assume that the number of opportunities are evenly distributed throughout all the sales stages in the pipeline, then the total value to weighted value ratio can be lower than 3-to-1 and the rep can still achieve their sales goal.

Therefore, the cure to inflated pipeline coverage ratios is increased emphasis on latent opportunity development, while also competing effectively in active opportunities.

So, what is an optimum sales pipeline coverage ratio? Well, it all depends on:
- The number of active opportunities entering the pipeline
- The number of latent opportunities created by the salesperson
- The average value of opportunities in the pipeline
- Accurate weighted values by sales stage in the pipeline
- Accurate average length of sales cycles
- Win rates on latent opportunities (ideally above 85%)
- Win rates on active opportunities (ideally above 15% or more)

Consistent application of Solution Selling® principles throughout the sales force generates larger average opportunities, with reduced sales cycles, with a higher chance of winning, thereby reducing the required sales pipeline coverage ratio in order to achieve overall sales goals. With Solution Selling®, it is possible to reduce your coverage ratio to 3.0 or less, and still have a chance of “making the numbers”. Without it, then you must have coverage ratios of 3.6 or higher – and that is increasingly harder to achieve, if not nigh impossible in the current economic environment.

Good luck and good selling!