By Kristen Hayer
If you’ve been following this blog for a while, you know that I fall solidly in the camp that believes CSMs should sell (with a few notable exceptions). However, when I do see CS teams selling it often looks random and disorganized. One of the most important pieces of an organized selling process is a pipeline report. If you use Salesforce or another mainstream CRM tool, you’ve probably seen pipeline, forecast or funnel reports. These aren’t just for sales teams. You can and should use them in customer success as well, but you need to dial them in. Here are the best practices for managing an opportunity pipeline as a CS leader.
Why Is Pipeline Management Important?
Pipeline reporting tells your leadership team how much revenue to expect from your existing customers over a given period of time. This impacts almost every area of your business. Finance uses your pipeline forecast to project budgets for the coming quarter, and then cost-based teams like marketing, product and engineering are allocated additional resources and headcount based on those projections. This has an important impact on your success team: More resources across these other teams generally means more tools, new features and product enhancements for your customers.
Components of a Selling Opportunity
The first step of managing a selling pipeline is setting up an Opportunity record. In CRM systems, an Opportunity is a type of record that sits under the Account or Contact record and describes a deal that you’re working on with a customer. A lot of companies customize this record type for their sales teams, but you really only need to worry about the basics in order to build a great pipeline report. Your Opportunity record must include:
• Link to Account and Contact
• Opportunity Name (generally a short overview of the solution being sold, like “Training for New Users”)
• Amount (total dollar amount above and beyond current ARR, or the renewal amount)
• Stage (where are you at with the deal and how likely it is to close, see below)
• Close Date (when you expect this deal to be signed)
You can certainly get more fancy and include things like health score, next steps, demographic information or a product breakdown, but these 5 items are all you need to create a working pipeline report.
Selling Stages
The Stage of an Opportunity record represents 2 things. It represents how far along you are in the selling process, and given that, how likely you are to close the deal (shown as a percentage). In a pipeline report the Amount is multiplied by the percentage associated with the current Stage and used to estimate how much money should be coming in. For example, if you were selling training for $10,000 and you are at the Proposal Stage (let’s say that Stage is 50% likely to close) then your pipeline report would show that $5000 is expected to come in. Of course, when you think about that in terms of one deal it is just silly. You’re either going to win the deal or you aren’t. But, when you start to average that across a bunch of Opportunities and an entire team, it becomes more and more accurate.
Many customer success teams use the same Stages as their sales teams when they are using Opportunities. Most of the time this is a mistake, and especially when the Opportunities are related to renewals. Selling to an existing customer doesn’t start at 0% like a new sale opportunity does. You have built a relationship, and that counts for something. When you’re thinking about renewals it counts for quite a lot. A renewal sales process also isn’t linear like a new sale. Your deal starts at your average retention rate, which is often 90% or more. However, it can drop back to a lower likelihood to close (say, 25%) if there are risk factors at play. It is important to set up your selling Stages to match your actual process and likelihood to close. As you gather data over time, you can dial this in to be very accurate.
Stages and Gates
One thing that helps a customer success team maintain the accuracy of their Stages and pipeline is setting up Gates. A Gate is a concrete activity or action that it takes to move an Opportunity from one Stage to another. For example, in a new sale Opportunity, a Gate might be sending out a proposal to the customer. In order for a sales rep to move an Opportunity to the Proposal Stage, they need to have sent the proposal. In the case of a renewal, a Gate might be seeing the health score drop from green to yellow during a renewal cycle. If that happens, the CSM might need to move a renewal opportunity from On Track to At Risk, thus dropping the percentage associated with the Stage.
Many (I would argue, most) customer success teams leave it up to the CSM to determine how likely the deal is to close and use their best judgement to determine the Stage and percentage. This is a mistake for a few reasons. First, there is huge variation across teams in terms of confidence in deals. Nervous CSMs will wait until a deal is practically signed to even add it to the pipeline, whereas overly confident CSMs will imply that a deal is done well before they should. Gates create consistency across the team. Second, CSMs will look at deals through the linear lens of a new sale rep because that is how most CRM tools are set up. They will not typically consider that a renewal should be at your average renewal rate until proven otherwise. This will lead to overly conservative pipelines that scare your leadership and finance team unnecessarily.
Updating Opportunities
The key to all of this is teaching your team to manage their Opportunities on a daily basis. A best practice is to have the CRM tool open all day long. First thing in the morning, CSMs should open up their CRM. Then, as they engage with customers throughout the day, they need to log those activities and update Opportunity records as they go. This doesn’t need to be a big challenge. Typically, the only things that change as a CSM goes through a sales cycle with a customer are the Amount, Stage and Close Date. By keeping these 3 items updated in real time, you can count on your pipeline report to be accurate.
As a former Sales and CS leader, the best way I have found to hold my teams accountable to doing this was to use the pipeline report as the basis of our weekly one on one meetings. When CSMs know they are going to need to show you what they have done that week, and where their deals are in the pipeline, they will be much more likely to keep everything up to date.
By formalizing your pipeline reporting process, dialing in Stages, and setting up Gates, you’ll be able to reap the rewards of an accurate pipeline: Resources flowing across your organization and providing your customers with the services and solutions they need to succeed.
The Success League is a customer success consulting and training firm. Our CSM Certification Program includes courses like Managing the Selling Cycle, Managing Your Portfolio, and Business Strategy for CSMs. Visit TheSuccessLeague.io for our full list of offerings.
Kristen Hayer - Kristen believes that customer success is the key to driving renewal and expansion revenue, and delivering exceptional customer experiences that produce referrals. Over the past 20 years Kristen has been a success, sales, and marketing executive, primarily working with growth-stage tech companies, and leading several award-winning customer success teams. She has written over 100 articles on customer success, and is the host of 2 podcasts about the field: Strikedeck Radio and Reading for Success. Kristen serves on the board of the Customer Success Leadership Network and the board of the Customer Success program at the University of San Francisco. She received her MBA from the University of Washington in Seattle, and now lives in San Francisco.