6 Rules to Demystify Your Sales Stages
By following these simple principles you can optimize the most important part of your sales funnel and set your sales team and your business up for success.
In sales, defining and sticking to simple best practices can make a world of difference, and “Sales Stages” are no exception. Everyone building a B2B SaaS business knows that you need Sales Stages — sounds simple, no? Sales. Stages. Stages of the sale. What could go wrong? This part of the sales funnel is often one of the messiest.
Below I’ll outline a few of these simple best practices that I’ve picked up over the years. While they may require some fine tuning for your specific sales organization, I’m hoping the end result will look something like this email from my friend Frederic Krahforst, CEO of Point Nine portfolio company Tradelink:
“I LOVE the new pipeline visibility just by changing the stages… Great input! Enjoy your weekend!”
Like many things in sales, managing sales stages effectively is about not only setting the sales stages correctly but also enforcing your rules in a repeatable manner that reps can understand. Every sales team needs discipline, and applying discipline across the sales pipeline, systems, and workflows allows the team to thrive and maximize revenue. These 6 rules should help make your sales stages considerably easier to set up and manage:
- Sales Stages should mirror milestones in the sales process.
- Open Opportunities NEED to have momentum.
- Each stage should have an expiration timeframe.
- The best stages are “PENDING” some event.
- Each stage needs qualification criteria.
- Sales stages are not a “Trello board of To-Do Tasks.”
1. Sales Stages should mirror milestones in the sales process.
Your sales stages should be based on your sales process and feel natural. Sales reps should know what needs to happen to move an opportunity forward to the next stage.
Having each stage mirror a milestone helps sales reps drive the opportunity toward that milestone. Whether that milestone is getting introduced to the decision maker, completing a scoping call, or going live with a proof of concept, pick the key moments in your sales process and use those as your opportunity stage. Too many founders/leaders default to the generic stages in the CRM, and this is a bad idea. Sales milestones are unique to your company, and your sales stages should reflect this. This requires you to reflect on deals that have moved to “Closed Won” (yes that’s always a stage name) and understand the path that took them there.
2. Open Opportunities NEED to have momentum.
I define an “open opportunity” as a deal that has momentum, i.e. that is moving toward a conclusion. Here I often think of a quote from my favorite sales trainer, Jeff Hoffman: “I get more NO’s than all my peer reps, but I also get more prospects to say YES!” This has stuck with me and serves as a reminder that any sales cycle that results in a “no decision” is by default a NO. So unless you’re driving things toward decisions, you don’t have an open opportunity.
Each open opportunity needs to have a plan to get to that next milestone and sales stage. That’s where the momentum to push an opportunity to the next stage comes from.
You can’t be in a situation where your sales stages don’t align with the actions that are necessary to move the opportunity along. There’s no momentum with a sales stage like “Evaluating,” which means the deal is just sitting in the pipeline.
3. Each stage should have an expiration timeframe.
A practical way to demonstrate momentum (or the lack thereof) is to look at how long an opportunity has been in a sales stage. Each stage should have a maximum amount of time that an opportunity can remain in that stage. Opportunities that live for too long in a given stage are often called “stale” or “expired” (or in the worst case, “rotten”).
During deal reviews, it’s essential to pay attention to the length of time each opportunity has been in its current stage. Opportunities that have exceeded the expiration timeframe should either have very clearly agreed on next steps that will allow them to move to the next stage by a given date or should be “Closed Lost” (yes that’s another stage name). Exceptions that require a bit more time are normal, and you shouldn’t worry too much about them. That said, if there are too many exceptions, then you may need to lengthen your expiration timeframes.
Nothing destroys sales reps or hampers their success like overly optimistic pipelines. Open opportunities that have lost momentum and become stale in the pipeline spread distortions of reality throughout the sales org and often result in “too little, too late” scenarios for your sales goals. Kill those stalled deals, not your sales team.
4. The best stages are “PENDING” some event.
One of the ways to bake some momentum into your sales stages is to have each stage be pending some event or milestone. With this method, sales reps know what needs to be accomplished to move the opportunity from one stage to the next. I love this methodology for the simple reason that once that milestone has been accomplished, the deal needs to move to the next stage or “Closed Lost”.
Take “Discovery Call Pending” as an example: it’s very clear to everyone what is happening in that stage. If the next stage is “Demo Pending” (which is often the case), then it’s clear that both (i) the next step is to schedule the demo and (ii) it hasn’t happened yet. Also, if there are other qualification criteria for scheduling a demo, those requirements need to be gathered in the Discovery Call. Opportunities that don’t meet these requirements should be moved to “Closed Lost” to ensure the sales team doesn’t spend time on deals that aren’t qualified.
A stage like “Evaluating Solution” is a good example of something to avoid — here there’s no obvious momentum or a clear next step for the rep and leadership to agree on.
5. Each stage needs qualification criteria.
I touched on this in rule #4, but this could be the most important rule. Qualification criteria are critical to driving efficiency and revenue across the entire sales funnel. I see many pipelines for early stage startups and, all too often the qualification criteria aren’t clearly defined. This leads to many deals sitting in later stages that will never close.
I write a lot about momentum, and qualification criteria are connected to this. If an opportunity doesn’t meet the qualification criteria agreed on to move to the next sales stage, then it should be moved to “Closed Lost.” Why would you invest your very precious time into an opportunity that we as an organization agree isn’t likely to close and will almost certainly be a waste of time?
Qualification criteria need to be clear and agreed on by the team to ensure bad deals don’t enter or progress in the funnel. This also forces reps to ask the hard questions and get to the truth about whether the opportunity meets the criteria for the next stage. This is particularly important for junior reps that frequently lack the discipline to rigorously qualify opportunities. Lack of qualification leads to the harmful overoptimism I mentioned before when what we’re seeking is the truth.
6. Sales stages are not a “Trello board of To-Do Tasks.”
Imagine having 426 “Open Opportunities” in a sales pipeline for a team of 3. That’s 142 “Open Opportunities” per sales rep. This sounds impossible to manage, and guess what: it is! This is a real example, and I’ve seen this type of bloated pipeline MANY times.
At first I was shocked, but things started to make sense when I dug deeper. The first-time sales leader was letting the sales team use the opportunities as a to-do list. This significantly distorted the numbers, introduced a huge amount of overoptimism with no qualification, and prevented reps from focusing on the most important revenue-generating activities. They were literally tracking EVERY person they’d spoken to as an opportunity. If you’ve been paying attention, this contradicts every rule I’ve outlined in this post.
Every CRM has tasks, and you should use them. This could be (will be) a whole post, but in short: many prospects should be managed outside the sales stages with tasks. When a deal is “Closed Lost,” that doesn’t mean the deal is dead forever, it just means it’s not worthy of being an open opportunity.
When a deal goes to “Closed Lost,” schedule a task for the future and get back to work.
Conclusion
Like many parts of building a startup, nailing your sales stages is an iterative process that requires some trial and error. While it’s tempting to think you’ll find the perfect sales stages, don’t fall into this trap. I look at the best sales stages as those that help both sales people and leadership and have enough flexibility to capture almost every sales scenario in an evolving business. The best practices and rules I’ve outlined here are a good framework for constructing your own, but only by putting them into practice and running deals through them will you figure out exactly what works for your business.
At Point Nine, we obsess about these things. The details make a world of difference when it comes to growth rate and revenue generation for SaaS sales teams. I’m fortunate enough to work with many teams inside and outside the Point Nine community on optimizing their sales funnels. If you ever want to nerd out with me about sales stages or other sales topics, I’m always happy to chat seth@pointnine.com
