The 5 Sales deal stages that you need to track

What are the sales deal stages?

The sales cycle and the buying cycle

A sales cycle mirrors the purchase cycle- or it should.

The customer moves from initial awareness to interested and gets more involved in the decision making. He evaluates the solution and compares features, price and so on. Finally, he is ready with a decision.

Similarly, a sales cycle proceeds from initial sketchy understanding to deeper understanding- we learn more about the customer and his objectives, needs, how much he is prepared to spend and by when. The customer learns more about our solution as well. While this is a continuum, it is useful to create milestones to really understand how much work is still left to convert the opportunity/ deal into a purchase order. These milestones are the sales deal stages.

What makes it interesting is that, in almost all cases, you will have lesser quantity of deals in advanced stages of sales progression than at the beginning. What you lose in quantity, you make up for in quality- in being able to convert a far higher percentage of the advanced deals into orders.

Lots of names are used for the sales deal stages. Here’s what we use:

sales deal stagesYou will see many, different names being used- depending on industries, even companies- they all use their own. Here’s how Hubspot describes the lead progression stages. Let us at least tell you what ours stand for.

Illustrating sales deal stages on the deal details screen

The 5 sales deal stages

Prospecting:

You have just enough information about a potential sale. Some approximate idea of the budget and initial idea of the product/ solution fit to his needs.

Budget known, At least one Decision maker identified, Budget not identified, Budget Stage not identified.

Opportunity:

Now you are sizing out the opportunity. Enough to schedule a visit/ call- some task to progress the deal with the decision makers. To early to forecast the time-frame or indeed the chance of closure.

At least one decision maker identified, Budget value OR stage identified, not yet met with or discussed the solution with the decision makers, some task scheduled.

Investigation:

A lot more information and interaction under your belt. You have met with the decision maker (s), discussed the solution enough to report their reaction to it, have a better grip on the budget size and approval cycle. And, you can commit yourself to a forecast date (howsoever tentative) or even a chance of win (howsoever low!).

Presentation:

The final stage before you reach the stage of closure. At this stage, you are in possession of all the information related to the deal. You have also submitted a firm priced proposal.

This stage is called Presentation because it is here that you are making the final solution presentation to the clients to swing the deal your way.

Closure:

Closure is often mistaken as a Win. While that may be the desirable outcome 🙂 , we take a deal closure as the stage where the deal is awarded to one of the competitors, including you!

It is close enough after the Presentation stage; so, think of this as the Presentation stage done and waiting for the result- handling last minute objections, ensuring your messages have sunk in and definitely a sales deal stage which can be forecasted to close in the next month or so.

 

A meaningful sales forecast

Forecasting sales with confidence

Is forecasting sales a matter of guesswork? Or is it scientific, based on rules and mathematically modeled?
The answer is that it is somewhere in between. Let me take a shot at sharing some simple yet effective funnel management best practices. When you are a small business, you need to forecast sales and collections, to be able to keep on top of cash flow, deliveries and other commitments.

How does Saleswah help you forecast?
Let me first bring in the concept of a “weighted funnel”.
Let us say you had a few deals you were working on. And they looked like this:

Deals List

How much should you forecast for the next month?
The value of the forecast for next month (that is January 2013), seeing that it is December 2012 when I am writing this, will be $41,000.
However, we all know that we rarerly, if ever, win 100% of deals- there is competition, fickle minded customers, economic uncertainty etc. Some cause deals to “drop” out of the funnel – read cancelled/ lost- and some cause them to be moved to the next month.

Let us get the salesman to apply his mind and commit a win probability number to all the deals.

Applying chance to funnel management

As you can see, the picture does not look quite so good any more :), though it is probably more realistic. Specifically, if you go by this measure, the Dec’12 numbers have dropped to 32,000 from 46,000 and January ’13 numbers have dropped to 21,000 from 41,000.

“Oh, but, this is all subjective: based on an individual salesman’s assessment”

Agreed. That is why, we also track the stage of qualification on every deal. Like this:

What does Saleswah capture?
1. Has the solution been presented? (Choices: No; Yes it was and was found- better than/ same as/ worse than competition).

2. Budget Stage: No status/ Planning/ Applied For/ Obtained. Also, Budget value

3. If a quote has been sent (Incidentally, you can configure and send a quote directly from Saleswah and have the quote “attached” to the deal), then:

– is the customer’s budget less than or more than what you have quoted?

Why do we not include the deal stage in the “weighted funnel” calculations as above?

Couple of reasons. Firstly, as with the chance of win, these stages are also captured by individual sales executives and can have their share of biases and buffers. Secondly, we provide these fields for exectives to do a reality check before committing the forecast numbers. And, for their managers to review as well. After all, a deal where you have not yet met the decision makers to discuss the solution, is unlikely to close early and forecasting a 80% confidence level in a win is foolhardy.

Should we include these in forecasting as well? What do you think? Tell us in comments below.