Track Your Pipeline Properly - Manage Customer Pipeline

Track Your Pipeline Properly

BY brett

One vitally important skill to master as a business owner is forecasting. 
If you can accurately forecast your income it gives you a feeling of confidence. If you can’t, it can really sap your confidence. 
One key metric to track that helps greatly with forecasting your future income, is what I call your pipeline. Some firms call it their sales pipeline or business pipeline. 
Basically, it’s a record of the potential clients who haven’t yet converted, but might do in the future. 

What it’s not

Here’s what I mean by your pipeline metric and it’s not what I see most firms tracking.
The most common pipeline metric I see firms using is the money they’re expecting to be paid from sales they’ve already made. That is, after months of meetings with a potential client, the client has given the go-ahead and all paperwork has been submitted. Now the financial planning firm is waiting to be paid. That’s what a lot of firms call their pipeline.
Is this metric useful for forecasting?
Sure…if you want to know what you’ll earn next month. 
But looking one month ahead is not what I’d think of as forecasting. It doesn’t let you see 6 – 9 months into the future.
If you can see more accurately 9 months ahead, it’s much easier to foresee future cashflow problems before they actually become problems. That’s how you ‘manage’ your business. You don’t react to stuff, you look ahead and plan strategically before something becomes a major issue. 
So you need to be tracking a different pipeline metric. 

Get it right and see further ahead

I recommend tracking every single new prospective client, from the second they get on your radar.
For example, you get an email enquiry from a new prospect. Your team sets up an initial call with you and the prospect. 
On the call, you discover they want to come and speak to you about their pension funds, which are about £500,000. They agree to a first meeting, which you book in for 3 weeks hence. 
In your pipeline metric, add that client by name (to avoid double-counting in the future) and record the potential assets for them of £500,000. 


Name Potential assets
Anna Smith £500,000

I realise that tracking potential assets under management from a client is a very crude measure. You’re not doing it because you’re an evil, ravenous, asset-gathering IFA. You’re doing it because it’s a quick and easy measure of potential revenue. 
Let’s say you tend to charge around £2,000 for the financial planning work (on average), 1% of any assets invested as the implementation fee and 1% of any assets under management as the ongoing fee. In that case, ‘potential assets’ works as a quick proxy for all of that. 
If ‘potential assets’ doesn’t work for your firm, then choose another metric. For example, estimated fees generated in year 1, or something else that works for you. 
3 weeks later, Anna arrives for her first meeting and after a good 60-90 minute discussion, tells you she has another £500,000 in assets that she didn’t mention on the phone and engages you to create a financial plan. 
Immediately after the meeting, you change your pipeline spreadsheet to read:

Name Potential assets
Anna Smith £1,000,000

When you move on to the next step and do the detailed fact-finding for Anna, you realise that some of the pension assets have exit fees, if taken out of their current environment. So only half of those assets can be moved and dealt with by you right now. 
So you change your pipeline spreadsheet to read:

Name Potential assets
Anna Smith £750,000

All of these changes are being made the second you find out more information.

If you and all of the advisers in your business do this every week, you end up with the most accurate potential forecast of how much business is in your pipeline and it’s always looking 6 – 9 months ahead. 

Just as Anna is booked in to come and hear your final recommendations, she calls up to say she’s been to the doctor and found out she has a major health issue. As a result, she wants to put all of the planning on hold for the next 18 months while she undergoes treatment. 

Obviously you really feel for Anna. Then, you go and update your pipeline spreadsheet and remove Anna from your pipeline. For now, this is not actually a piece of work for your business. 

2 years later, Anna gives you a call and says her treatment has been successful and she’d like to come back and pick up with the financial planning work again. At that point, you add her back into the spreadsheet and she becomes part of your business pipeline again.

What does this tell you?

When you have a spreadsheet of every single client that you’re working on in your pipeline metric, you start to get a flavour of what’s ‘normal’ for your business.
For example, in one firm I worked with, they tracked the potential income sitting in their pipeline (rather than potential AUM) and the ‘normal’ level was about £80,000. It might have been £89,000 one month and £81,000 the next. 
When the pipeline started to rise, it got as high as £120,000 at one point, what useful information is that telling the business?
Firstly, it indicates that new work is flowing in, which is great. However, it might also be indicating that work is stuck in the pipeline. So the advisers or back office team need to look at each case to make sure they’ve done everything they can to keep things moving forward. Are there actions they could take to get things moving? A call to a slow provider who hasn’t actioned a request, or a call to one of the clients in question who hasn’t supplied some important information that’s holding things up?

Typically in this situation, the advisers or back office team get on the phone and shake things up and then a whole lot of new business gets completed. A month or two after that, loads of cash comes into the business. 
What happens if the pipeline drops down to £40,000, as it did on some occasions; what useful information is that telling the business?
Typically this happens in a phase where a lot of work has completed, so the firm is riding high on that successful feeling of having secured a bunch of new clients and the cash is flowing. 
However, if they don’t take any action to re-stock the pipeline, then 3 months, 6 months or 9 months down the road they might find themselves in a bit of a cashflow hole again and that’s no good. 
When the pipeline number drops below ‘normal’, it’s time to be ramping up the marketing activity to generate more enquiries. 
Another business I worked with was a one adviser owner-operated business. His ‘normal’ pipeline number was around £2M of potential assets. When it climbed above that, he shook the tree to make sure every case was moving forward and when it was below that number he upped the marketing activity to re-stock the pipeline. 
So tracking this pipeline metric provides some really helpful forward guidance for your business.

Converting pipeline to a forecast

If you want to use the pipeline data to help you with your income forecasts, you might want to add some more information to the spreadsheet.
For example, a time estimate of when the business is likely to get completed. And let’s be honest, for some larger or more complex cases that could be 6, 9 or 12 months away. Every month, you can update the estimated timescale based on the latest information that you and your advisers know. 
After you’ve tracked this data for a while, you’ll also have useful ‘real’ information on what percentage of your pipeline tends to convert. Is it 80%, or 60%, or 40%? Keep an eye over the course of a full year and work out what this percentage conversion rate is for you and your business. That will help you extrapolate potential earnings from your pipeline more realistically. 

The biggest mistake

If you’re managing a group of advisers, your biggest challenge is getting them to add this information accurately every week. If the pipeline number is not updated correctly each week, it becomes useless or misleading information.
Salespeople can also deceive themselves sometimes with possible sales, so track each individual client by name so there’s no counting them three weeks in succession. 
But the biggest mistake I see firms making is not removing clients or assets, or potential fee income from the spreadsheet as soon as new information comes to light. Like in my example with Anna Smith above, things can change throughout the engagement with a potential client. If every piece of client data is as accurate as possible, the story that your pipeline tells you is a lot more informative. 
Have you got effective pipeline tracking in place?
What’s your ‘normal’ pipeline number?
Let me know how you go.

I just want to be clear about what I mean by your pipeline metric and it’s not what I see most firms tracking.

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ABOUT BRETT DAVIDSON When you work with FP Advance you work with me, Brett Davidson, directly. My motto is ‘advise better, live better’ and I practice what I preach. I’m straight talking and get to the heart of an issue quickly. There’s no beating about the bush, just a focus on helping things improve. Ask my clients – what I teach works.