Every week we receive calls from potential clients; people who have come our way through word of mouth, a Google search or in response to our amazing marketing efforts. We answer those calls and we begin a process that will, hopefully, lead the most qualified of the bunch to signing a contract. That process is called our Sales System.
But… how many of those calls are qualified to be our clients? How many people do we need to talk to in order to complete the process and sign a contract? How many contracts do we need to sign and how can we predict if we will meet those goals? How do we manage all those different prospects, in all different phases of our process?
This week on EntreArchitect Podcast, I will share How to Manage Your Sales Pipeline as a Small Firm Architect.
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A Sales Pipeline for Architects
How do we structure an effective sales pipeline?
Every sales system is different depending on who's developing the system, who's working the system and who we are hoping will buy.
Think about your process Write down all the steps you go through; every step of the process from initial contact through signing the contract.
That may be a few dozen steps.
Look through the steps and pick out the 5 or 6 most important steps that lead a contact to client. You do not want too many steps in the system, because we want the system to be simple. You want the system to be easy to use; easier to use it than not use it.
Maybe the 5 phases in your Sales Pipeline looks like this:
- Initial Contact
That's a simple system and probably a very similar process to what you already perform each time a contact calls inquiring about your services.
Probability of Closure
What is the probability that a prospect moves from one phase to the next?
Let's say you have 10 initial contacts each month. Out of the 10 contacts, let’s say that 1 of those 10 contacts are qualified as a prospect. That would make the probability, measured as a percentage, 10%. Ten percent of the initial contacts become qualified prospects.
Then do that math for the remaining steps of your process.
It may look something like this:
- Initial Contact – 0%
- Qualification – 10%
- Meeting – 30%
- Proposal – 60%
- Close – 100%
Every initial contact entering your sales pipeline becomes a sales opportunity.
Each sales opportunity has a value. One signed contract may be equal to $10,000 in revenue for your firm. You could determine the value of each specific opportunity or use a weighted opportunity value for each.
For this example, let's say that we use a weighted opportunity value of $10,000. Apply that $10,000 to the opportunities in each phase of the pipeline.
- Initial Contact – 0% X 10 opportunities = $0
- Qualification – 10% X 7 opportunities = $7.000
- Meeting – 30% X 5 opportunities = $15,000
- Proposal – 60% X 3 opportunities = $18,000
- Close – 100% X 2 opportunities = $20,000
The weighted value of the entire pipeline at this moment in time is $60,000.
If through our Profit for Small Firm Architects course we determined that we need $500,000 in annual revenue to hit our profit goal of 20%, we know that we need to sign about $42,000 worth of contracts each month.
$500,000 / 12 months = $41,667
A rule of thumb is to have about 3 times more value opportunities than your monthly requirement. With that in mind, if we need to hit $42,000 per month, the opportunity value of your pipeline needs to be $126,000 not $60,000.
We need to double the opportunities on our pipeline.
With this knowledge, we can use this Sales Pipeline for Architects to predict our future contracts and future revenue. We can be sure that we have the work we need to be profitable.
Sales Pipeline Tools
A sales pipeline is a visual representation of your sales process where you can see all your potential clients displayed and neatly organized according to their phase in the sales system.
You can create your own pipeline tools using a spreadsheet application like Microsoft Excel or Google Sheets, but there are also tools designed do this. There are many customer relationship management CRM tools to choose from. Here are a few examples: