Deal slippage: Uncovering the hidden cost in your sales pipeline
You’ve seen it happen before – the sales pipeline was looking great until two weeks before the end of the quarter, then it basically falls off a cliff! The deals are still there. Marketing are producing leads. The sales team are still celebrating new wins and the sales funnel looks healthy. But it just happened again: dreaded “DEAL SLIPPAGE” means you might not make target this quarter. So what do we mean by slippage?
Firstly, we can define slippage to mean when any close date on a deal changes. At QuarterOne, we also include any change that was made to the time which revenue from a sales opportunity is earned (‘recognised’ if you prefer). Sales optimism being what it is, dates normally slip back in time (i.e. move later) but they can sometimes slip forward (i.e. move earlier) too. Either way, close dates and revenue dates are important and any change counts towards slippage.
Why slippage matters
CRM software generally looks at the sales funnel at a specific point in time. Because dates can often be ignored, the deal looks the same in the funnel even if the close date changes, which can really matter when you care about sales for the month, the quarter or the year. We regularly see businesses where slippage for the quarter costs the sales forecast more than all the ‘lost deals’ added together, so slippage can be a big deal.
To fix slippage, you’d better measure it
To take control of slippage, you first need to measure it and understand it. The first step is to start thinking of the sales funnel by quarter rather than as a timeless, “date-ignorant” funnel. The second step is to keep a regular snapshot of your forecast so you have something to compare to. Then you just need to do a bit of number crunching! Visualising the changes in the pipeline is a great way to see slippage. At QuarterOne, we love ‘Sankey’ diagrams that show how value flows from the forecast on one date to the forecast on another date. For example, in the diagram below, any slippage is highlighted in yellow and the total cost of slippage is clearly highlighted, as are the main sources of slippage. Of course, these diagrams aren’t the only way to show slippage, but we find that they are a great way to see how every member of the sales team is performing, who is in control of their pipeline and who is not.
Having “slippage” can actually be a good thing
As mentioned above, slippage isn’t always bad – as close dates can move earlier as well as later. Once you start thinking about your sales pipeline in quarters, even dates slipping back can be a good thing. You might struggle to make this quarter’s sales targets because deals have moved back, but that means next quarter automatically gets off to a head start. Again, once you measure and visualise your slippage, you will get a much better handle on your forecast quarter to quarter.
Once you measure it, you can control it
Once you are able to analyse and measure slippage, what should you do about it? We recommend a few simple steps…..
1. Make slippage visible: share your analysis with the team. If possible, visualise slippage and other forecast changes for each individual in the team.
2. Remove “lazy slippage” for a less painful quarter-end. Get better at avoiding the last minute rush when everyone updates the CRM to remove unrealistic close dates. Share data early and make everyone aware that the accuracy of their pipeline matters. Improved visibility of the data will make a huge difference here.
3. Get your sales team to think in quarters. Move away from thinking about a date-ignorant sales funnel. Get everyone to start thinking in quarters and your forecast accuracy will improve. Ideally, make sure everyone has a quarterly sales targets to compare to (by the way, QuarterOne does that for you).
4. Build slippage into your KPIs and even into your forecast. Having reduced “lazy slippage”, you will still have the real world of changing deadlines and expectations to deal with.
But once you have control of your quarterly sales pipeline and understand where slippage occurs, you can decide what slippage % is acceptable and even start to build that into your sales forecast. Of course, if you can find a tool that does a lot of this out of the box, that will make your life so much easier. Ermm, did I mention QuarterOne?