Stock and flow
Stock and flow is a way of seeing a business as things that pile up and the rates at which they move. In a sales pipeline, open deals are the stock, and new leads and deals closing or dying are the flows. The stock grows whenever more flows in than flows out, and shrinks when the reverse is true.
Why it matters
It explains how a full pipeline can still mean a bad quarter. A big pile of open deals looks healthy, but if deals leave the pile slower than they enter, the pile grows while revenue doesn't. A CRM shows the stock in every column, so the stock is what gets watched. The flows are harder to see: how many leads came in this week, how many moved forward and how many went cold. Those rates tell you where work is stuck.
An example
As an example, take an agency whose pipeline report shows more open deals every month, and the owner reads that as a good sign. Closed deals per month have stayed flat the whole time. New leads come in faster than deals leave, by winning or by being marked lost, so the pile grows and the oldest deals in it go stale. The pile looked like progress, and the flat outflow was the real news.
How a system handles it
A system measures the flows and shows them next to the piles. Each week it counts what entered and left every stage, flags the stage where work arrives faster than it leaves, and shows how long items have been waiting there. Then the effort goes where the flows point: a follow-up on every deal that has sat past its usual time, and closing out the dead ones, so the pile shows what's real.
Questions
Where does the idea come from?
Systems thinking. Donella Meadows' book Thinking in Systems is the usual starting point. I use it in plain terms: find what's piling up, then look at what goes in and what comes out.
Is stock and flow the same as a bottleneck?
They work together. Stock and flow shows you where things pile up, and the bottleneck is the stage causing the pile. Once you see the stock growing in front of one stage, you've found it.
Related
- BottleneckA bottleneck is the one stage that limits how much your whole business can move. The Theory of Constraints in plain words, with an example and the fix.
- Pipeline stallA pipeline stall is a deal that has stopped moving but still counts in the forecast. How to spot a stalled deal and how a system flags it in time.
- The four places a lead diesLeads drain out of a pipeline in four places: never recorded, never answered, never followed up and never closed out. How to count each one this week.