“Choose What to Win” & “Lose Earlier”

We’re all busy.

There aren’t enough hours to do everything we want to do, especially if we set ourselves high standards.

This post is all about using our business development time most effectively. It’s summarised in the headline. What processes and habits can we establish that will enable us to choose what business to win? How can we learn to lose business earlier before we’ve wasted time?

The first assumption that I’m going to make is that you’re familiar with the Pareto Principle or 80:20 rule. If you haven’t come across this huge idea, you owe it to yourself to drop everything and click here to learn about it right now!

 

Pareto 80-20 Illustration

Opportunity Pipeline and the 80:20 Rule

How does the Pareto Principle help us to manage business opportunities?

80% of the business that you win comes from 20% of the opportunities that you develop

One of the key roles of the Business Development Team Leader is to manage opportunity pipelines so that time is invested accurately.

This means coaching business development team members about their pipeline of opportunities and applying the 80:20 rule. The outcome of this coaching will be that time and other business development resources will be spent most accurately on the most deserving opportunities.

B2B sales teams have learned three really important lessons about the 80:20 rule and opportunity pipelines:

  1. Fill your pipeline – we must continually add opportunities at a sufficient rate
  2. Choose what to win – apply disproportionately more resources to ensure the win
  3. Lose early – choose what you will not pursue and withdraw early to minimise wasting time and effort

Opportunities Are Not Prospects!

Just to be clear, opportunities are not the same as “prospects”. OK, so this is a semantics argument, but here are our recommendations for some useful definitions:

  • Prospect – an individual person or an organisation who might have a need for our products and services
  • Lead – typically used to define a prospect generated by marketing activity who may or may not yet be “qualified”
  • Qualified Prospect – an individual person or organisation who meets agreed qualification criteria and therefore definitely has a potential need for our products and services
  • Opportunity – specific business opportunity with defined scope, value, probability and timescale. This definition allows us to identify, track and manage multiple discrete opportunities from a single person or organisation

How Do We Manage Our Opportunity Pipeline?

Opportunity pipelines are typically managed within CRM system or in spreadsheets. Sometimes they’re on a whiteboard. As you might imagine from this post so far, our recommendation is that we don’t try to keep this only in our head!

If we’re using a spreadsheet, each opportunity will be a row. The columns will typically include:

  • Opportunity Owner – the person who is responsible for this opportunity
  • Client – enabling us to track multiple opportunities per client
  • Opportunity Type:
    • Recurring – Recurring work from existing clients
    • New/Existing – New work from existing clients
    • New/New – New work from new clients
  • Unique Opportunity Name – Enabling other people to understand the nature of the opportunity
  • Value – Enabling different opportunities to be compared. This value will typically be the total amount that will be defined in the agreement.
  • Probability – The decimal percentage that reflects our confidence about winning the opportunity (see definitions below)
  • Expected Revenue is the number that we get when we multiply value by probability. Of course in reality, the actual revenue will typically be all or nothing. “Expected Revenue” is used to prioritise opportunities
  • Decision Date – The date when decisions will be made and when the opportunity will be either be won, lost or deferred. This date may be defined as the date when we receive a letter of engagement
  • Business Line – Enabling us to group opportunities by business line
  • Office – Enabling us to group opportunities by office
  • Status – Open, Closed Won, Closed Lost, Deferred

Crystal Ball Time!

We’re predicting the future, and that’s not easy…

The three most important pieces of data for each opportunity are, in oder of relative difficulty to predict:

  • Value – easiest of the three because we’ll normally have an indication of opportunity size
  • Probability – typically much harder to estimate (read on to learn about how to make this quantifiable)
  • Decision Date – often the hardest part to get right but typically improves with experience

Sorting Opportunities – Descending Order of “Expected Revenue”

This is how we apply the Pareto Principle to the Opportunity Pipeline. If we have consistent estimates for value and for probability, we are able to multiply these numbers together to give a figure that we’re calling “expected revenue”.

“Expected Revenue” is the number that we use to prioritise our opportunities and to decide where to invest our precious time and effort. If we’re using a spreadsheet, we simply choose the “Expected Revenue” column and sort all rows in descending order of value of “Expected Revenue”. We’ll now have the most significant opportunity in terms of value and probability at the top of the list, and the next most significant immediately below, and so on.

The Pareto Principle or 80:20 rule means that we can expect to prioritise effort and resources on the top 20% of the list.

Our Business Development Team Leader can bring so much value to their colleagues by ensuring that this prioritisation takes place regularly. The key questions that underpin these discussions are:

  • What is the evidence to support your forecast value?
  • What is the evidence to support your forecast probability?
  • What is the evidence to support your forecast decision date?

How to Assign Probability?

We’ll finish this introduction to Professional Services Opportunity Pipelines by ensuring that we turn adjectives into numbers!

If people with business development roles use adjectives to describe opportunity probability, we’re bound to have problems. What does “they’re very keen” mean? How would we compare it with the next client being described as “relatively likely”?

What we need are some objective criteria, and growing experience based on reviewing previous forecasts with the benefit of hindsight.

To finish this post, here is the way that we describe relative probabilities. We hope you’ve found it all useful and of course we’ll be very pleased to hear from you.

We’ve got lots of experience helping people like you and your colleagues to learn how to use these processes in the real world.

Thanks for reading and we’re looking forward to any comments and questions that you might have.

Definitions of Opportunity Probability

Probability %

Success Ratio

Number of such opportunities we need to ensure one success

We expect to lose such opportunities in the following ratio

Use this probability when…

1

1:100

100

99 out of 100

It’s very early stages and we just don’t know

2

1:50

50

49 out of 50

There is a realistic possibility

5

1:20

20

19 out of 20

They’re prepared to speak with us

10

1:10

10

9 out of 10

We know that we are on their short list

20

1:5

5

4 out of 5

It’s a good qualified opportunity

33

1:3

3

2 out of 3

It’s a very good opportunity

50

1:2

2

1 out of 2

It’s an excellent opportunity

75

3:4

1.33

1 out of 4

Very, very good chance of success

80

4:5

1.25

1 out of 5

Agreement is almost complete

90

9:10

1.11

1 out of 10

“Yes” but we haven’t yet confirmed in writing

100

1:1

1

None

Opportunity “closed/won”