Stu Sjouwerman is co-founder and CEO of ReadingMinds, a pioneering AI-moderated interview platform for conducting sentiment analysis.
Here’s the typical pattern you’ll see in B2B boardrooms in businesses of all types and sizes. The quarter is coming to an end. The board convenes to review the sales forecasts. They look promising.
Then, a week to 10 days later, everything falls apart. Deals slip or fail to materialize. Sales lag. Returns spike. The revenue target is missed, and everyone is caught by surprise. The Chief Revenue Officer (CRO) is asked to resign and a new CRO is brought in.
Eighteen months later, the cycle repeats. This isn’t simply bad luck. It’s a governance failure that most boards overlook because they’re looking for clues in the wrong places.
Leading Vs. Lagging Indicators
Board reporting tends to be thorough, but it’s backward-looking. Quarterly numbers, EBITDA, gross margins, headcount versus plan. These are certainly legitimate metrics, but they’re lagging indicators. They reflect the results of decisions that were made two quarters ago.
By the time the numbers reveal a problem, the pipeline that produced them has already moved on. Boards see healthy numbers right up until the moment the quarter closes short.
The pipeline looked fine. What wasn’t being monitored, though, were the leading indicators that could have hinted at problems down the road. Leading indicators, like conversion rates at each stage of the buyer’s journey, can provide an important early indication of what the pipeline is likely to look like when quarterly numbers are being reviewed.
A board that monitors only aggregate revenue outcomes doesn’t have revenue oversight. It has revenue history. Are you missing the metrics that could point to an impending revenue miss? Here are five red flags to be alert to.
Red Flags That Belong On Every Board Agenda
Five patterns can potentially point to an impending revenue miss. Most boards never see it coming because these signs don’t show up in standard reporting. But each is diagnosable before it becomes a crisis.
1. The Pretty Pipeline: Forecasts are looking strong as the quarter draws to a close, yet at the last juncture, a cluster of deals slips. Why? The pipeline was built on optimism and lacked insights into real buyer readiness.
2. The Forgotten Founder: Sales discussions are moving forward, but not everyone is at the table. When revenue depends on the founder or a key decision-maker being in the room, and they’re not present, your deal may not advance.
3. The 80/20 Rule: If 80% of your revenue is being generated by 20% of your sales team, resources are being wasted. The knee-jerk reaction? Ramp up recruitment efforts. The better choice? Examine the key characteristics of top performers and clone them across the entire sales organization.
4. The Silent Signals: If your sales cycles are slowing or becoming stagnant, either your team is failing to generate buyer urgency or your message is simply not landing with prospects. Your buyers’ behaviors should be sending the signals, not your CRM records.
5. GIGO: If every new CRO simply cycles into the existing system expecting a win, no wins will be forthcoming. Garbage in, garbage out (GIGO). When new hires, regardless of how capable or qualified they are, inherit bad systems, the results are inevitable and they aren’t good.
Your sales pipeline leaks are as financially consequential as poor financial reports. Unfortunately, those pipeline leaks are often unseen, so they fail to receive the scrutiny they require. The key takeaway: Proactively monitoring leading indicators will yield better results than reactively replacing “failed” CROs.
The Changes You’ll See
Boards tend to look at total pipeline numbers when instead they should be looking at conversion rates across the buyer’s journey and how those conversion rates are trending. Where are improvements being made? Where and when are conversions lagging?
These are nuanced indicators that most companies can’t measure clearly. Instead, they may point to a single, blended conversion rate. This isn’t a data problem. It’s about the buyer signals that often go overlooked: whether the key decision-maker engaged or went silent, whether the prospect hesitated, whether the most recent conversation signaled a lack of energy that could spell the loss of a sale.
These are signals you won’t find in any field that lives in your CRM. They are signals, though, that could be unearthed through AI-native research and speech-to-text customer interviews at critical junctures, such as after a discovery call or after a major demo.
When aggregated across the entire pipeline, these signals can provide an important leading indicator of what’s moving sales forward and what’s about to stop forward progress.
To get a clear view of the next quarter before the quarter even starts, boards need to shift their focus from lagging pipeline indicators to the nuanced leading indicators that customer research can reveal.
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