Trees and Forests

It's in our nature to focus on narrative details of each deal. That's what good salespeople do: deeply understand what's going on with their deals. Careful analysis of deal data can add useful insight to that understanding [https://www.funnelcast.com/post/what-is-insight]. This is all good!

Even the best understanding yields a collection of deal narratives that are essentially anecdotes—the trees in a forest of deals. Effective teams manage the forest: they use evidence to optimize for a strategy that consistently controls risk and maximizes revenue.

Consider deal scores. A deal score is an estimate of the probability that a deal will close by, say, the end of the quarter. Good deal scores—good in the sense of reasonably accurate probability estimates—are surprisingly easy to produce. Let's say a deal has a score of 60%. This is useful and relevant info. But it's still wrong. Your deal will either close or not by the end of the quarter. A 60% score means that similar past deals did not close 2 out of 5 times.

Statistical analyses draw their strength from averaging because errors (deviations from average behavior) tend to cancel out in aggregate. Savvy sales teams add up deal scores and amount-weighted scores to produce forecasts of what to expect this quarter for deals in the pipeline. These are good forecasts in the sense that they give you a reasonable estimate of what to expect if nothing changes.

Now we're starting to see the forest.  But you can do a lot more! You can actively manage the forest.

Let's say the deal scores in your pipeline sum up to about 50 deals out of a total pipeline of 250 deals. So you estimate 20% of your pipeline will close this quarter. But which 20%? You want to focus on the 20% of the pipeline that maximizes sales within a given risk tolerance. In other words, optimize a portfolio of deals to close this quarter with the best chance of minimizing risk and maximizing sales.

There are more combinations choosing 50 deals out of 250 than there are atoms in the earth. Too many for humans to think about! But computers can—using portfolio optimization methods. 

This is what Funnelcast does. Use Funnelcast to manage your deal forest and maximize sales.