Why More Prospects ≠ More Pipeline
The math behind doing less to win more.
tl;dr - A better account strategy beats more activity, even for commercial teams:
Volume vs. Efficiency – Sales isn’t just about doing more; it’s about doing the right things.
The Pipeline Plateau – Larger territories ≠ more pipeline. Reps get overwhelmed, leading to diminishing returns.
Activity vs. Accounts – Smaller, high-quality books yield more pipeline with less effort. This outperforms simply trying to squeeze more activity out of reps.
Read on for the whole story.
“Sales is a numbers game.” It’s an old cliche for a reason. Sales is a numbers game. It’s chock full of numbers. Of course only one number matters—the revenue number. The score. The rest are the numbers you look at to help you get there.
What most people usually mean by this is volume—just do more and you’ll be ok. People rarely apply it to efficiency—doing the things that yield the best outcomes.
On April 16th, 2016, I was in a bar in San Francisco watching basketball. It was the last night of the NBA regular season. Kobe Bryant (RIP) was playing his last game, scoring 60 points on 50 shots for the last place Lakers. Meanwhile, my beloved Golden State Warriors were clinching their historic 73rd win. Steph Curry was scoring 46 points on only 24 shots and becoming the first (and only) player ever to hit 400 3-pointers in a season.
It was a passing of the torch. 27 years after first installing the 3-point line, the NBA had arrived at a new era of efficiency. The days of winning with a high volume of 2-point shots were gone. Shooting 3-pointers was just too efficient.
I don’t remember where I was on March 16, 2022. That was the day the Federal Reserve raised interest rates to 0.25% and ended ZIRP. One GTM era ended, another era began. Volume out, efficiency in.
Luckily there’s another GTM cliche that captures some of that ethos as well: “the list is the strategy.” By focusing on the right part of the market, we can efficiently unlock growth.
Paul Stansik puts it well:
In my world of B2B software, pipeline creation starts with building a better list. You need to not only define your market, but also find a way to convert more of those who might buy someday into those who are thinking seriously about buying soon. A better list won’t solve all your problems, but it’ll make everything that goes into running a proper sales play (messaging, enablement, training, tracking, and adjustment) a lot easier. Without a clear, printable list of who you’re trying to sell to, you don’t know who you’re aiming at - which almost guarantees that you’ll miss.
— Paul Stansik, How CEOS Should Think About Growth
When you break out of a volume mindset and focus on efficiency, less actually can yield more. Let’s look at why this matters for pipeline creation and the math behind why it works.
The Pipeline Plateau
I’ve never met a new business rep who didn’t want more accounts in their territory. For reps, each account represents an option (in the financial sense) on future earnings. It seems simple—more accounts, more potential, more pipeline, more wins.
It is not, in fact, that simple. More accounts often makes things worse.
I’ve seen this over and over again in all sorts of commercial sales teams.1 I call it the pipeline plateau.
At Gradient Works, we do a Coverage Analysis for sales teams considering our pipeline platform. We take a year’s worth of opportunity, account and activity data and use it to analyze rep performance and account coverage. One of the most eye-opening analyses is when we compare current territory size to opportunities created.
The chart below is a real anonymized example. Each dot is a rep. The horizontal axis (x) is the number of accounts in the rep’s territory and the vertical axis (y) is the number of opportunities created by the rep.
Look at the trendline. It shows a rough positive correlation between number of accounts and opportunities created—up to a point. After that, it plateaus. And after that, there’s often a decline in total opportunity creation. The exact threshold at which this happens varies by company and sales cycle but it does happen.
The simplest explanation for this is a combination of rep overwhelm and time. At some point the overhead of choosing which accounts to work from such a large set starts to outweigh the productivity boost of having more accounts.
There’s some evidence here that less is more (or at least more isn’t always more) when it comes to territory design and book size. An old school sales leader might say, “Of course there is. The reps need to be a little hungry and they’ll work harder.” Perhaps, but I think we can do better than that—you can’t just just slice territories smaller and expect better results without thinking about another set of factors: account quality and focus. Those are the real secrets to making less do more.
How to do more with less
Let’s start with some simple funnel math we’ve all done a hundred times. We’ll use it to work backwards from a desired output to what we think are a required set of inputs.
Assuming our goal is to get 20 wins and our win rate is 20%, we’ll need 100 meetings that go into pipeline with a chance to close over the course of the year.2 The tables above look at the problem in two ways: as a number of accounts and as a number of activities. The Activity Math side is just there to keep reps on their toes. The Account Math actually drives your funnel and hinges on opportunity creation rate.
If you need a reminder why that is, allow me to quote myself:
Let’s go back to the idea of opportunity creation as the outcome of activity alone: “It takes 100 dials to set a meeting.”
It’s not wrong, but it’s inadequate. It starts from the premise of turning activity directly into meetings when B2B outbound is about applying activity to turn accounts into meetings.
— Yours Truly, 3 Outbound Metrics CROs Need
Now let’s drill into what actually happens when you assign a rep 1,000 accounts and they execute this plan pretty much flawlessly.
I said pretty much flawlessly. We’re two wins short. We had the right opportunity creation rate and the right win rate but didn’t get there. What gives?
Well for starters, I modeled in an assumption that the rep would only work about 90% of the total accounts. If you’re like most sales leaders you’re probably looking at those ~100 unengaged accounts and saying some variation of, “The rep left two deals on the table by not talking to those 100 accounts. A few more activities a day and they would have gotten those two wins!”
Let’s investigate that.
I assume you expect your reps to be thorough when they outbound—no spray and pray for your team. I commonly see that expressed as something like, “enroll at least 3 contacts per account into a 15-touch cadence”. That implies each account requires 45 touches to be fully “worked”. Hmm. That’s a little troubling because that means reps actually need to do 45,000 activities per year, not 10,000 like we sketched out above. That’s 21.6 touches every hour, 8 hours a day, 5 days a week, 52 weeks a year.
You can reasonably argue with that activity math. A lot of this can be automated. Some sequences end early because reps set a meeting or get a hard no. Sure, but I also imagine you’re telling your reps to tailor some of those steps. Plus, reps also occasionally get sick, take a vacation or (god forbid) have to be in meetings3. All I’m saying is that if your reps are working 900 accounts during a year, “just do 10% more activity” may not be the way forward here.
If we can’t just pull the “work harder” lever, what do we do? During ZIRP, we’d just raise some more money, increase headcount and pay out on a lower target. Everyone hits 120% of plan. The company grows! Who cares about CAC!? We’ll figure it out in the Series D!
We don’t live in that world anymore. Maybe there’s another way to make our existing reps more successful. To do that we need to drill in. Here’s that 18 win outcome broken down further.
The basic funnel math doesn’t consider quality variations among the accounts. The above image takes that into account, albeit with a simplifying assumption: 50% of the accounts are quite good and 50% are less good. The reality won’t be as clear cut, but suffice it to say I’ve never seen a 1,000 account territory where all accounts were actually created equal. In fact, I’ve more often seen the quality bar go down to ensure there are “enough” accounts to hit the number based on the funnel math. (This may also partially help explain the pipeline plateau.)
Shouldn’t the reps just figure out which prospects are good and which are bad? Possibly, but that just adds to their workload. The trick here is that it’s often hard to operationalize these quality variations in a way that’s useful to reps. And even if you do, you can’t be sure that the reps will follow that guidance. They’ll chase down inbounds with minimal qualifications (in fact, you’re probably requiring them to for “speed to lead” reasons) or go after the accounts they just like better first.
Some large percentage of rep effort is ultimately wasted on accounts that represent comparatively bad fits. This is a double whammy. Not only does that effort have a poor yield overall, it also represents an opportunity cost. It’s work that could have been applied to the higher yield accounts—possibly improving their yield even further with more targeted effort.
You probably see where this is going. Let’s just increase the concentration of high-fit accounts.
That’s more like it. Using the same conversation rates as above, we hit the 20 win plan and we did it with 300 fewer accounts.4 We also did it while still leaving 10% of accounts overall unengaged. If you assume that the rep has more time and could engage 100% of accounts, then this model actually produces 22 wins.
This is a radical efficiency gain. It’s essentially what folks like Kyle Norton at Owner.com have done to turn their companies into rocket ships propelled by outbound. When Kyle says “start with the data” this is what he means.
If you want outbound to meaningfully contribute to pipeline with good unit economics that don’t blow the lid off your CAC, the most important thing you can do is invest in the accounts.
This means every rep should have a focused book of the best possible accounts they could be working. Each of those accounts should be cleaned, enriched, ranked, prioritized and—when possible—in market. As a corollary, I strongly believe that account sourcing, research, ranking, selection and assignment should be an ongoing, centrally managed process. The more you “outsource” that work to your reps, the less efficient your entire sales engine will be. The best way to do all that is a discussion for a future post.
I’ve done the described Coverage Analysis for more than 20 different companies and seen some variation of this plateau in the majority. The ones that didn’t show it usually had more territory discipline. This phenomenon generally doesn’t happen in enterprise because everyone knows they should have a small, focused book.
If the rep is starting at 0, this really says they need to set 100 meetings in 12 months - sales cycle length in order for those to have a chance to close in-year. If your sales cycle is 45 days, the rep needs to set 100 meetings by mid-November to have a shot at 20 wins by EoY.
Here’s the math: 620 high fit accounts * 90% worked * 15% opp creation rate * 24% win rate = 20 wins. 80 low fit accounts * 90% worked * 5% opp creation rate * 8% win rate = 0.29 wins so I rounded down to 0.