Taming the Volatile Sales Cycle
Many of the ups and downs of a company’s revenue stream can be smoothed out. Doing so, though, requires a fundamental change in how the organization prioritizes its sales activities.
Many companies regularly experience wild fluctuations in their revenues. During one quarter, new offerings are selling faster than proverbial hotcakes. But in the next quarter, the sales force can’t seem to give those same products away. “It’s either feast or famine,” is the all-too-familiar refrain. To exacerbate matters, these fluctuations are often unpredictable as evidenced by the countless companies that miss their revenue projections, unleashing the wrath of Wall Street. Many corporations have watched their stock price plunge because of a missed sales target. And bad sales projections also wreak internal havoc. Few things infuriate the manufacturing division more than ramping up the production of an item that only ends up sitting on shelves.
Of course, every sales cycle has some degree of volatility. A big customer could go bankrupt or a major deal could fall through because of management changes at the client’s firm. Conversely, sales of a new product could suddenly skyrocket because of a serendipitous endorsement. And there are certainly seasonal fluctuations and many other factors, including customer budgets, that affect the sales cycle.
Aside from these, there’s another type of volatility that many executives seem to think is some kind of natural law. At the beginning of every quarter, sales tend to falter; at the end, they often surge. This continuous roller coaster can be a huge problem when big deals fail to materialize at the last minute (that is, near the end of the quarter), leaving a shortfall. Indeed, the fear of that happening has led many companies astray. Some have even tried to fudge their numbers by taking expected sales and booking them in the current quarter.
Obviously, cooking the books is hardly the answer, but can companies actually achieve a consistent — and predictable — revenue stream through better management? Contrary to the prevailing view of many executives, organizations can indeed smooth out many of the kinks in their sales cycles. Doing so, however, requires a fundamental change in how they prioritize their sales activities.
The Sales Funnel
The typical sales process is like a funnel: At the bottom are the deals that are nearest to being closed; in the middle are other prospects in the works; and above the funnel are numerous promising leads that need further investigation. Each of the three areas of the funnel requires different activities.