Maximizing Sales Pipeline Efficiency with Cohort Analysis for B2B Founders and Sales Leaders

This article may be of interest to early-stage B2B founders who:

• practice founder-led sales,
• are approaching product/market fit,
• have an increasing lead velocity,
• and have a repeatable sales process.

In addition, this could be useful for early-stage startup sales leaders overseeing at least two sales reps, as well as scale-up sales/revenue ops teams.
Ideally, this can help B2B founders, sales managers, and sales reps make better decisions in their business related to the sales motion.

I used this type of analysis to perfect my sales efforts back in the days when I was in the position of Head of Sales and Sales Executive.

A template can be found below in the article.

What is a Cohort Analysis

Before we look at how cohort analysis can be used in the context of the B2B sales pipeline, we should briefly discuss what cohort analysis is.

Cohort analysis is a method of data analysis that examines the behavior of groups or cohorts over a period of time. It’s often used to study customer behavior, user engagement, and other metrics related to online businesses and consumer behavior. The goal of cohort analysis is to identify patterns and trends in the behavior of different cohorts, which can then be used to inform business decisions and strategies. This analysis can help companies understand how different groups of customers or users behave and what factors influence their behavior, giving them insights into customer segments, retention, and lifetime value, etc.

Cohort analysis is often used in the B2C space to gain insights into user behavior. By tracking the behavior of different user cohorts, companies can understand user engagement and retention and identify group-specific usage patterns.

In B2B, cohort analysis can be used to monitor the actions of customers acquired in a given month (which serves as the basis for the cohort) and assess their engagement over time. This approach is applicable not only at a customer level but also at the revenue (MRR) level. You’ll find plenty of material on this topic on the web, so feel free to look around if you’re interested.

How to use it for the B2B sales Pipeline context

Speaking about cohorts in the business-to-business sales pipeline, I am referring to all potential qualified deals created within a given month — that’s what the cohort is based on.

Subsequently, the progress of each cohort represents the timing of closing the deals. In the example below, a chunk of the deals are closed in the same month (month 0) in which the deals were actually created (~17% in terms of $$$ amount) and the rest are closed over the period of the next 7–8 months.

This cohort analysis can be presented in terms of dollar amounts and the number of deals. It can be presented as an absolute value or as a percentage of deals closed or won.

As the business becomes more advanced in its development, it may be beneficial to divide the deals into larger and smaller ones to analyze how the cohorts develop based on the size of the contracts.

Benefits of applying cohort analysis to the sales pipeline

See how the pipeline generation goes on a Cohort level

If you do a cohort analysis of your pipeline, you can see the progress of pipeline generation at the cohort level and potentially improve collaboration between departments (Marketing and Sales).

Additionally, you’ll learn how many opportunities have been created for each cohort, the quality of those opportunities, and the sales team’s close rate relative to each cohort. You can also evaluate the typical deal value of each cohort and compare it to the different marketing activities you’ve done for a specific month.

Perfect the timing and understand better the sales cycle of every cohort

The method will help you optimize the timing of your sales process and gain insight into the dynamics of the sales cycle. You can determine this by finding out how long it takes to fully process the cohort and close the majority of the deals in it. You can also understand on average how much of the cohort stays unclosed and how to optimize the marketing efforts, based on that information.

Use it when setting goals and targets

This can also be used in setting business goals. It helps you understand how much acquisition you need to do to reach a particular goal, and whether there is an unmet pipeline from previous vintages and what the potential for additional revenue might be.

Help with forecasting and commitments

Cohort analysis can be helpful when used for estimating and planning at the individual contributor or team level, whether weekly or monthly. It can help you to identify gaps in your pipeline — how much new pipeline it is needed to generate in order to hit the target, and also what needs to be done to close this gap. For example, let’s say you have a goal of reaching 10,000 MRR this month. Cohort analysis can be used to determine how much MRR can be closed from previous cohorts and how much new business needs to be acquired to reach the goal. This can help teams and invidicuals commit and plan ahead.

Template

You can find the template here: https://docs.google.com/spreadsheets/d/1MycnrWfe05hMtj_kVWmGFXlnF2PAJkZm/edit?usp=sharing&ouid=105294722075888076989&rtpof=true&sd=true

The only thing that you need to do is to download your Pipeline, from your CRM and get the following fields:

• Opportunity created date
• Opportunity Closed Date (Forecasted and Historical)
• Stage
• Opportunity Name
• Amount

Then you will need to copy/paste this data after row 140 in the Source Data section of the template.

Disclaimer

It’s important to note that this analysis is only relevant for B2B startups that have achieved a significant level of pipeline generation and have managed to initiate a repeatable sales process.