Insights From The RevOps Manual

We all know that great feeling of having a full pipeline. The comfort in the number of deals, the potential, and the opportunities that indicate a great quarter or strong finish of the year. But there's a hidden danger within any impressive pipeline, one that can really screw things up if left unchecked: dead deals.

The Illusion of a Healthy Pipeline

A large pipeline is the best. It signifies potential success and future revenue. However, not all deals within that pipeline are equal. Some are active opportunities with engaged stakeholders looking to solve a problem for which you are the solution, while others are just dead deals. Stale, inactive opportunities without any real chance of closing. These "dead deals" inflate your pipeline artificially, giving a false sense of security and skewing your metrics. When you don’t have an idea of what exactly is active, and what is dead, you could potentially having to scramble to find deals to close and completely miss your quota. This problem also gets worse throughout the year as reps tend to constantly push out dead deals into the next quarter which makes dead deals accumulate at the end of the year.

The Cost of Inactive Deals

The real danger of keeping these dead deals, or "inactive deals," is:

1. False Confidence: An inflated pipeline can make you overconfident. You might believe you're on track to hit your targets when, in reality, you're far from it. This can lead to missed quotas and unexpected shortfalls.
2. Skewed Metrics: When your pipeline is filled with dead deals, your metrics become unreliable. Conversion rates, win rates, and pipeline velocity—all critical indicators—are distorted, making it hard to diagnose real issues and take corrective actions.
3. Wasted Resources: Sales reps spending time on dead deals are not focusing on opportunities with real potential. This misallocation of time and effort can significantly impact overall productivity and success rates.

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The Numerical Impact of Inactive Deals

To illustrate the impact of inactive deals on your pipeline, let's consider a hypothetical scenario:

• Total Pipeline Value: $2,500,000
• Number of Deals: 100
• Average Deal Size: $25,000
• Historical Conversion Rate: 20%

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If 30% of these deals are inactive, here's how the numbers play out:

• Inactive Deals: 30
• Value of Inactive Deals: $750,000
• Active Pipeline Value: $1,750,000
• Adjusted Conversion Rate (with inactive deals): 14%
  • Calculation: 14 deals out of 100 (20% conversion of 70 active deals)

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Without removing inactive deals, you might project a revenue of $500,000 (20% of $2,500,000). However, after removing inactive deals, the more realistic projection is $350,000 (20% of $700,000). This discrepancy can lead to significant shortfalls in expected revenue. This problem also gets worse the longer you leave these deals in your pipeline. The longer they give you an incorrect view of the total value of your pipeline, the more skewed the numbers are at the end of the year and the bigger the gap is to your total pipeline target. See the following example below:

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Identifying Dead Deals

So, what do we do about this? First, recognizing the signs of a dead deal is crucial for maintaining a healthy pipeline. Here are some red flags to watch out for:

• Stagnation: Deals that have been in the same stage for too long without progress.
• Outdated Next Steps: Lack of recent activity or follow-up.
• Lack of Decision-Maker Access: No engagement from key stakeholders.
• No Budget: Deals without an approved budget late in the cycle.
• Unrealistic Close Dates: Opportunities set to close soon but with no recent interactions, or close dates way past your average sales cycle length.

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Cleaning Your Pipeline

Cleaning your pipeline of dead deals can be intimidating, but it’s absolutely necessary for accuracy and efficiency. Here’s how you can do it effectively:

1. Regular Reviews: Conduct regular pipeline reviews to identify and remove stagnant deals. Use your CRM to track time in stage and flag deals that have exceeded the typical cycle.
2. Clear Criteria: Establish clear criteria for what constitutes a dead deal. This could include time spent in a stage, lack of recent activity, or other deal-specific factors.
3. Empower Your Team: Encourage your sales team to close out dead deals without fear of repercussion. Create a culture where losing a deal is not seen as failure but as a step towards focusing on more viable opportunities.
4. Transparent Communication: Communicate the importance of a clean pipeline to your team and stakeholders. Explain the impact of dead deals on metrics and the overall business.

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Preventing Future Inactive Deals

The best way to manage dead deals is to prevent them from accumulating in the first place. Here’s how:

• Set Realistic Expectations: Ensure that your team understands what a qualified opportunity looks like. Set realistic criteria for entering deals into the pipeline.
• Incentivize Quality Over Quantity: Shift the focus from the number of deals to the quality of those deals. Incentivize your sales team based on deals won rather than pipeline size.
• Continuous Training: Regularly train your sales team on effective pipeline management and the importance of maintaining accurate data.

Conclusion

Effective pipeline management is about more than just filling the top of the funnel. It requires care, discipline, and a willingness to confront uncomfortable truths about the deals that aren’t going anywhere. By regularly purging your pipeline of dead deals and focusing on the opportunities with real potential, you ensure that your sales efforts are both efficient and effective. This clarity not only improves your metrics but also empowers your team to achieve true success.

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