January 09, 2020

Sales Execution

Forecasting

Deal Slippage: Everything You Need to Know

Michael Lowe

Michael Lowe

Michael Lowe
Michael Lowe

Director, Content Marketing, Clari

Slip Rates

Dread, urgency, and disappointment — the uncomfortable mix of emotions is all too familiar when the end of the quarter creeps closer. You might’ve started with a plump pipeline, healthy sales forecast, and plenty of committed deals, according to your sales team. But as the weeks flew by and reps pushed out close date after close date, your chances of hitting your forecast whittled away. Now all you can do is push your target closing dates further out, beyond this quarter and into next leading to deal slippage across the board.

The inner optimist says, “We can learn from this experience. We can stop this from happening next quarter.”

The inner pessimist says, “Deals committed this quarter should not get pushed to next quarter. . . Why does this keep happening?!”

But then the realist says, “Deals actually slip all the time — even for the best sales teams. If we know when in the quarter and how often our deals slip, we can actually use those data points to drive more predictability in our sales process.”

No matter how skilled your sales team is or how solid your sales process is, nothing is guaranteed until that contract is signed. “The reality is nobody has a 100% conversion rate for committed deals,” says Jessica Starr, Director of Customer Success Operations at Clari. “It just doesn’t happen.”

At Clari, we believe that predictable revenue is critical to success. While there’s no silver bullet to preventing deal slippage, the more intimately you understand the patterns behind your slipped deals, the better your sales forecast accuracy will be.

What is deal slippage?

When a deal doesn’t close within the expected timeline in the sales forecast, the target date gets pushed further out. The deal hasn’t been completely lost and the buyer may still show interest — or the sales rep may be overly optimistic about a prospect’s commitment to purchase.

Either way, deal slippage occurs when that once-committed opportunity gets pushed into the next quarter, month, or designated sales period. “Tumbleweed deals” are deals that never seem to close and simply keep moving from one period to the next.

What is a slip rate?

The percentage of deals in commit that fail to close within the forecasted period is your slip rate. The truth is, everyone slips deals — even if they don’t think they do. The important thing is to be able to identify what your slip rate is so you can properly plan for it.

“The best teams that we've seen typically convert around 80% of the deals that they have in commit,” Starr says. On the lower end of teams we’ve seen, the typical conversion rate is about 60%.

Knowing your slip rate, along with a few other critical sales forecasting metrics, can mean the difference between on target and a blown quarter.

3 important things to know about slipped deals

Deal slippage distorts the sales forecast, which can trigger a detrimental domino effect on the business. Less revenue than expected negatively impacts stockholders and the company’s valuation. In worst-case scenarios, a missed forecast can lead to layoffs or downsizing. To mitigate the impact of slippage, sales teams need the right information to make the right decisions.

1. Having visibility into when a deal slips will give you a chance to recover

“Let’s say you have a committed deal at the beginning of the quarter and that slips out 30 days into the quarter. That’s not that big of a deal,” Starr says. “But if you have a committed deal that's committed at Day 60 or Day 75 with only a few weeks to go, then that's a problem.”

Deals that slip later in the quarter leave your sales team less time to pull deals in to band-aid the situation. If deals consistently slip later in the quarter, either identify the root cause of the problem to prevent it, or have a solid backup plan on hand that can be turned around in a tight window.

2. Knowing how often you slip deals is more important than never slipping deals

If you feel like slippage is increasing, that could be a major red flag, and if the same deal keeps moving down the line, becoming a tumbleweed deal that can also be cause for concern.

But as our Clari experts have confirmed, even the most effective sales teams slip deals. So you might be wondering what you should aim for: getting slip rates down or getting conversion rates up?

Both are extremely important, but from our perspective, the most critical factor that impacts effective sales forecasting is consistency. “The thing about consistency is it leads to predictability, which is always a good thing,” Starr says.

If you can track your slip rate and determine how consistent it is quarter after quarter, you can plan for it, work that into your forecast and have a backup plan on standby, Starr advises. If you have a healthy pipeline you can pull from, you should still be able to hit your number before the end of the quarter.

3. Having a tool to identify slipped deals will allow you to close them

Slipped deals can often get lost in the hustle and bustle of preparing for the next quarter. As soon as one quarter closes, teams can get swept up in QBRs, territory reassignments, sales kickoffs and more, and those slipped deals can fall by the wayside.

You must be equipped to identify slipped deals and get a quick snapshot of the circumstances. Without that visibility, your sales team could be missing out on extremely valuable revenue insights.

“Make sure you have a tool that allows you to go back to the last quarter or last week of the quarter, figure out which deals were in commit there, and where they stand,” says Marc Dupuis, Director of Product Management at Clari. “Supposedly those deals should be among the first to close.”

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