Evolution of a Metrics-Driven Sales Pipeline

Scaling Our Tech Services Company. Flux7

A more updated version of this article can be found on our blog.

On our Vixul blog, we recently shared this article about the KPIs for a sales pipeline. If you’re building a differentiated technology services company, you will find that article extremely useful for operationalizing your business. That post isolates the critical KPIs we monitored at Flux7 to ensure our pipeline health. But that list was not created overnight. It was a result of a long journey filled with many mistakes. Someone reading that article may find it overwhelming. I hope you find the journey more achievable after reading our story.

With time and faced with day-to-day challenges our metrics became smarter // Image credits in link

Stage 1: Brownian Motion

Flux7 started with Aater applying for projects on Upwork, then called oDesk. We didn’t need a pipeline at that time because we were grabbing tiny contracts from a pool of ready-to-close leads. We did not have a CRM or any other analytics. But for where we were at the time, it was the right decision. We had no credibility, no network, no understanding of how consulting works, and we weren’t even operating in our area of expertise. We could not be analytical about building our business because we didn’t know what business we were in. We would frequently joke our lack of strategy as Brownian Motion.

Without any foundation tethering us, our strategy was more resembling of a random walk like a particle in Brownian Motion. // Image courtesy Wikipedia

While we could find contracts on Upwork, we did not have the financial maturity to understand our current state. We were taking fixed-price bids and sometimes contracting out the work. We did not have a complete understanding of the responsibility we were assuming. We had some money fiascos. Fortunately, the company was still small, and our personal savings were enough to get us through the issues. We also had to learn about accrual accounting to get a handle on our finances. By mid-2015, our books were clean, and we had a handle on our finances.

Company State:

1. Ad-hoc quick-to-close revenue. Extreme fluctuations in business, although mitigated by quick time to close.
2. Low gross margins and unstable revenue, but we didn’t have the financial maturity to understand how we were performing.

Planning Implemented:

1. Start learning about accrual accounting to get a proper understanding of finances.
2. Sharpen company focus to cloud and DevOps.

Stage 2: Headcount Growth

Flux7 was in a fast-growing area. Enterprise started moving to the cloud in 2015. And we were ready to take advantage of the change. In 2015 our roster had multiple enterprise clients. And our success was getting us more attention from AWS and more business in return. Not constrained by leads, we focused on growing the business. We believed that, for some reason, growth just happens because it had been happening for us. In 2016, we created a spreadsheet forecasting the needs according to our aspirational targets to ensure delivery capacity to match the anticipated growth.

In November 2016, Aater and I reached one day earlier to get time together to work on the business. We parked ourselves in a coffee shop, got our drinks, pulled out the delivery capacity spreadsheet, and started planning the rest of the company. For the first time, we started understanding the cost of growth and the constraints it imposes on us.

Company State:

1. Narrowed down in a fast-growing area and growing with the market.
2. We did not know we needed to create proper systems for intentional growth, but we were lucky to be in the right area.

Planning Implemented:

1. Started creating annual revenue targets and appropriate hiring plans.
2. Modulated growth targets with an understanding of cost of growth.

Stage 3: Planning Meeting Reality

By creating our targets and planning to reach them, we started our journey to become intentional entrepreneurs. But our approach had a critical flaw. We were modeling the company around the headcount. That implies hiring a person is the same as solving a problem. This approach divorced us from the reality of the situation. We always knew we could do the math differently based on forecasts. But we did not know how to reconcile the two pieces of information. We also did not have proper strategic planning in the organization. We had targets but did not create intermediate goals and plans to reach the targets.

This went exactly as you would have expected. Growth in 2017 drastically slowed down. But we spent the year looking inward at the business. We upskilled ourselves as leaders. We reformed our leadership with a mix of internal team members and new hires we brought into leadership roles. We implemented OKRs. We extended our models to include pipeline targets. We started talking more about our bookings targets. We created company-wide bonuses for hitting our bookings goals. We built account management to start generating reoccurring revenue. In the end, we got ourselves more on track.

Company State:

1. We got kicked out of our fairy tale land and were trying to get a handle on our new reality.
2. We were hitting a chasm where the organization needed to scale beyond the co-founders, especially scaling sales.

Planning Implemented:

1. Added sales and pipeline information to the model.
2. Reconcile the model with reality.
3. Implement OKRs to rally the org around the goals.

Stage 4: Shift Left

As we got our growth back on track, we still had uncertainty from bumpy pipelines. Our average utilization was below 70%. Fortunately, our bill rate was very high, so we could absorb the hit. But this drove us to shift our planning further left. That way, we could see if we were headed towards a disaster and take steps to correct that. We strengthened our forecasts using the metrics in this article. We also correctly integrated forecasts into the plan, considering the learnings we shared in this article. By implementing these fixes, we were able to shift ourselves left. We could anticipate the bookings for the next two quarters and generate the lead funnel beyond that.

Company State:

1. A leadership team that is finding its groove, and the company is starting to execute.
2. Still have ambitious growth targets
3. Taking ownership of our lead funnel, diversifying the sources, and building the funnel to meet future needs.

Planning Implemented:

1. Being proactive about lead generation.
2. Develop a proper understanding of backlog and model in-quarter and future business.
3. Measure lead sources, including repeat business, separately to develop each channel.
4. Develop forecasts more than two quarters out, giving us time to take proactive steps to achieve the desired outcome.

Takeaways

The reason I shared this journey is because I wanted you to have an understanding that this is a difficult journey. The articles we’ve shared on these topics can be overwhelming. At the end of each article, we include a line reminding you to try what you can start today. This article is to show that you need to start working on implementing planning today. You will have a lot of assumptions and simplifications. It is okay to have those as long as you start taking a more intentional approach today. Building and growing a company takes time.

This is also why in the Vixul accelerator, we keep the boot camp short but continue to advise your team through its journey. If you’re interested in learning more about the Vixul accelerator program, please contact us on LinkedIn or fill out an application for a24–1 cohort.