3 Sales Metrics a Scaling Agency Should Track

Looking to Scale Like the Top Agencies? Here’s What to Track in Your Sales Pipeline.

Figuring out how to scale to the next level is one of the top reasons that agency owners turn to Advocation for support.

After we review their business model, services, team structure, financials, and processes from top to bottom, a common issue we find is a lack of reliability in forecasting their sales pipeline, which is crucial for:

• Better predicting what revenue will look like in the next 30, 60, 90 days, and beyond
• Making data-informed decisions on hiring to staff new projects
• Pivoting new business tactics well before you’ve run out of runway to secure revenue 

Every firm will have a unique approach to managing its pipeline and new business processes. Unfortunately, there’s not one magical key to getting it right–we know this for a fact after reviewing the backend of countless sales systems. However, there are a few commonalities among the most successful agencies. 

The first? Consistency. If you’re building an economic engine for your firm, it’s much easier to keep it running than it is to start and stop over and over. 

The second? Tracking the right metrics, which we’ll dive into below! 

1. Track a Weighted Sales Pipeline

What is that? 

A weighted pipeline is a forecasting method that determines the likelihood of a deal closing based on which stage it’s at. The concept recognizes that not every opportunity will result in a sale, and thus, each deal’s potential revenue is weighted by its closing potential. 

As you move a deal through a sales pipeline, the probability of it closing increases.

Here’s an example.

Let’s say an agency has five deals in its pipeline, each for a $20,000 project. However, all of them are at various stages in closing. Here’s how we might weigh them:

• Deal 1: Has received a proposal, so we weigh it with a 50% chance of closing; $20,000 x 0.80 = $10,000 
• Deal 2: Still in the negotiation stage after receiving a proposal, so it’s weighed with a 70% chance of closing = $20,000 x 0.70 = $14,000
• Deal 3: Has received a contract for signature, which means it’s very likely to close, but still a small chance to fall through, so it has a 95% chance of closing = $20,000 x 0.95 = $19,000
• Deal 4: In the discovery stage, 30% chance of closing = $20,000 x 0.30 = $6,000
• Deal 5: In the initial contact stage, 10% chance of closing = $20,000 x 0.10 = $2,000

Total weighted pipeline value = $10,000 + $14,000 + $19,000 + $6,000 + $2,000 = $51,000

In this example, although the total unweighted pipeline value is $100,000, the weighted value, which gives a more realistic forecast of actual revenue closing, is $51,000.

Why is a Weighted Pipeline Important?

1. Accurate Forecasting: A weighted pipeline provides a more realistic view of an agency’s potential revenue. It helps differentiate between what’s likely to close and what might fall through, allowing for better financial planning and resource allocation.
2. Prioritization: By understanding the likelihood of each deal closing, the team can prioritize efforts on deals more likely to convert, improving efficiency and increasing the chances of meeting sales targets.
3. Risk Management: Recognizing that not all deals will close enables an agency to build a buffer into sales targets, preventing shortfalls in revenue that can disrupt operations and growth plans.

Implementing a Weighted Pipeline

1. Define each Stage of the Sales Funnel. Clearly define the stages of the agency’s sales process. Each stage should represent a step closer to closing the deal. 
2. Assign a probability of closing to each stage. These probabilities can be based on historical data, industry benchmarks, or the agency owner or sales team’s experience. To get started, you don’t have to overthink this! Use our model above and update it over time as you gather more data from prospects.
3. Calculate Weighted Values: For each deal, multiply its potential revenue by the probability of closing to get the weighted value. The sum of these weighted values will be the total weighted pipeline value.
4. Utilize CRM Tools: While it’s fairly simple to establish an Excel grid with formulas that will calculate a weighted pipeline, most CRM tools offer built-in functionalities for managing this to make it even easier. Tools like Teamwork, Salesforce, HubSpot, and Pipedrive can automate the process, ensuring accuracy and saving time.
5. Review and Adjust Regularly: Regularly review and adjust probabilities and pipeline stages based on new data and insights. The more accurate the probabilities, the more reliable sales forecasts will be.

2. Expected Revenue and Pipeline Value

Understanding and effectively managing how an agency’s expected revenue and current pipeline value compare to its sales goals is critical for firms on the path to scaling. 

First, what do we mean by these two terms? 

Expected revenue is based on what has already been closed by the agency. This includes recurring monthly revenue from retainers, project installments, or revenue that’s been committed through signed contracts, but perhaps hasn’t been invoiced or paid yet. 

Pipeline value is exactly what we laid out above–calculating the weighted value of the deals in your sales pipeline.  

How to Calculate an Ideal Pipeline Value

One of the most common mistakes agencies make is striving for a pipeline value that only meets the gap between expected revenue and sales goals. Unfortunately, even with a top closer and the best of luck, this rarely works out for firms who are serious about meeting revenue targets. 

Here’s a process to shift your thinking around a pipeline value.

1. Determine the Sales Target: Start by identifying the monthly or quarterly sales goal. This is the revenue the agency aims to achieve in a given period.
   Example: Agency A wants to achieve $500,000 in sales this month.
2. Identify Current Expected Revenue: Calculate the current expected revenue from already closed deals (Monthly Recurring Revenue - MRR, and Projects).
   Example: Agency A has $275,000 in MRR and projects under contract for the month.
3. Calculate the Revenue Gap: Subtract the current expected revenue from the sales target to find the revenue gap that needs to be filled with new deals.
   Example: $500,000 (sales target) - $275,000 (current expected revenue) = $225,000 (revenue gap).
4. Determine the Ideal Pipeline Value: Calculate a weighted pipeline value that is 2.5-3 times the revenue gap.
   Example: $225,000 (revenue gap) x 2.5 = $562,500 (minimum pipeline value) or $225,000 (revenue gap) x 3 = $675,000 (optimal pipeline value).

Based on these calculations, this agency should aim to have a weighted pipeline value between $562,500 and $675,000 to achieve its $500,000 sales target. 

Why Pair Expected Revenue with Pipeline Value?

To meet sales goals, it’s essential to have a clear picture of both the expected revenue and the value of the pipeline. Here’s why:

1. Realistic Goal Setting: From our experience working with many firms, without a weighted pipeline that is 2.5-3x of a revenue gap, it’s highly unlikely they will meet revenue targets. This creates an ongoing cycle of constantly feeling behind on growth when in reality, a firm usually just needs a bigger boost in pipeline either through additional business development tactics or hiring another salesperson.
2. Buffer for Uncertainties: Sales deals can fall through for various reasons—client budget cuts, changes in project scope, or even market conditions. By working with a pipeline value that is 2.5-3 times the gap in their sales target, leaders can account for these uncertainties.
3. Improved Cash Flow Management: Aligning the pipeline value with expected revenue helps agencies manage cash flow more effectively. It also ensures enough deals in the pipeline to cover operational costs and invest in growth opportunities.

Managing the Weighted Pipeline Value

Once the ideal pipeline value has been calculated, the next step is managing and tracking it effectively. Here are some tips:

1. Regular Pipeline Reviews: Conduct regular reviews of the pipeline to ensure it aligns with sales targets. This helps agencies identify deals that may need more attention or are at risk of falling through. Use a simple CRM like the ones mentioned above to make this even easier.
2. Adjust Sales Strategies: If the weighted pipeline value falls short of the ideal range, explore new business development tactics as part of your firm’s next strategic planning session. This could mean increasing lead generation efforts, improving sales pitches, or exploring new market segments.
3. Monitor Deal Progression: Keep a close eye on the progression of deals through the sales funnel. Ensure that deals are moving at a steady pace and identify any bottlenecks that could delay closing. 

3. Align Sales Efforts to 90-Day Cash Projections

In today’s agency landscape, it usually takes a minimum of 90 days to make any type of meaningful headway in prospecting and lead generation. This doesn’t mean there aren’t opportunities to close deals more quickly, but it’s the exception, not the rule. 

The golden rule we give our agency clients who want to build a sales engine: What your lead flow looks like today, will indicate the deals most likely to close over the next three months. 

This is important because agencies often lose sight of what their cash position will look like next quarter as they are busy delivering work and serving clients. When they desperately need a boost in sales, it can unfortunately be too late if they need to generate revenue in a shorter period.

To give another concrete example using the metrics we’ve discussed in this article:

If an agency needs to close $600k in the next quarter, lead generation efforts today must be robust enough to create a minimum weighted pipeline value of $1.5m over the next 90 days. This might mean ramping up marketing efforts, refining the outreach strategy, sponsoring an event, asking for referrals, or exploring new channels to generate leads.

To Wrap Up 

Tracking these three elements—weighted pipeline, expected revenue + pipeline value, and aligning lead generation with 90-day cash projections—will create more predictable business development. 

By focusing on these key areas, agencies can avoid the common pitfalls that prevent scaling and ensure they are prepared for both busy and slow seasons.

Implementing these tracking methods does take time and effort, but the payoff is a more stable and scalable business and growth without the constant stress of unpredictable revenue. We promise, it’s worth it.

P.S. Productized services are another one of our favorite strategies to drive additional agency stability. Have you downloaded our guide on the topic here?

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