How to calculate revenue leakage in your sales pipeline
To calculate revenue leak in your sales pipeline, you need to first identify the total potential revenue that is currently in your sales pipeline. This would include the potential revenue from all the deals that are currently in progress, as well as any deals that are likely to close in the near future.
Reasons of revenue leakage
There can be many points of revenue leakage in your sales pipeline, we have classified them in following categories:
Winning Less Deals
Due to lack of organized historical data insights, both MQL and SQL does not actually filter out good leads. Due to this, a major portion of SQLs is not of great use. Leveraging historical data to modify the ICPs can work well in favor and provide a great sales ROI.
Even with good qualified leads, are your reps really converting? Surely not up to the mark, because after lead qualification only the real sales starts. Not prioritizing important deals, not including decision makers or not following up on time, there can be many reasons as to why the deal was lost. But is there a solution? Yes there is, implementation of real-time risk analysis and conversation insights. With this in place, a rep can easily identify all the possibly converting deals and what should be the next best steps for them to get a positive result.
Low Sales Productivity
This is a problem spread all across the organizations, irrespective of team size or industry, all companies face the problem in sales productivity. More than 30% of a rep's time is wasted in CRM data filling which is not at all a good sign for a company's growth. To solve this issue, many companies are now implementing numerous automation tools, but the problem still persists as the automations are not all accurate and the reps again have to waste their time in verifying the information. In place of all this, you should look for some CRM utility tools which can improve the data filling experience without changing the rep’s work dashboard. Check out Clientell’s chrome extension TrackTable, it will make you forget that CRM updation was even a task.
Retaining Less Customers
Losing the existing customer can be a huge indication for you to review the product offerings and pricings along with revamping the competitive strategy. Losing a customer means all the CAC investment is wasted and a drop in operational cash flow which directly impacts the revenue team spendings hence, to revenue leakage.
Not Able to Expand Existing Customers
Importance of customer retention can be easily seen by the fact that the CAC in cross-selling is 60% less than that of a new customer. Start improving your customer retention rate by seamlessly transferring sales data to the customer success teams.
Factors used in revenue leakage calculation
Those marked with a “+” have positive influence in the leakage number and similarly “-” ones have negative impact.
Deal Cycle Length(+)
Shorter deals are less predictable while longer deals are less likely to convert and are lying in CRM just increasing the pipeline numbers. Judge the right deal length for your company and industry and try to reduce deals which extend much longer than the defined time.
Average Annual Pipeline(+)
The pipeline should give you the estimate of the amount you can convert at the end of the quarter or the year. But not viewing the number correctly during forecast can lead to huge deviations in the forecast numbers and hence the poor resource allocation and revenue leakage.
Average Deal Size(+)
Your deal size when compared to the industry averages can be really helpful to see if the GTM strategies are working fine or not. This can be a major factor while expanding existing customers or even winning more new deals.
Sales Team Size(+)
Productivity is directly related to the team size, if the team size is more than what is required then productivity is deemed to decline as the probability of error increases.
Number of customers directly shows how many cross-sell or upsell opportunities you are giving up and hence showing the revenue leakage due to it
Average Win Rate(-)
Having a low deal win rate is an indication of low lead qualification accuracy and lack of sales training, this can highly impact the revenue leakage due to slipping deals and winning less deals.
Average Customer Retention Rate(-)
As stated above, the inability to retain customers can cause immense revenue leakage so the retention rate should always be taken into account as higher the retention rate lower the revenue leakage.
Keeping all the above factors in mind you can build formulas around different sales theories. But wait, you aren’t really gonna do that, we know. So, we have already built the calculator on our website which will provide you with..
- Detailed view of revenue leakage in your current sales pipeline
- Tips which can reduce the leakage by 15% from the next day itself
- Free Revenue Intelligence Consulting, so you can realize the true potential of your pipeline