What Is a Sales Pipeline?
When thinking of a sale, you may defer to the official closing of a sale. However, to fully understand how selling works, you’ll need to know what goes into the entire process from start to finish. How does your prospect move through each stage of the sales cycle until they finally become a buyer? That’s where a sales pipeline comes in.
The more control and insight you have into your sales pipeline, the greater your chances of turning prospects into customers and, ultimately, bringing in more revenue. Growing a robust sales pipeline is achievable through strategic pipeline management. To help you get started, we’ve put together this comprehensive guide on sales pipelines that covers the following:
What Is a Sales Pipeline?
A sales pipeline provides you with a visual representation of where your prospects are in the sales cycle. As your prospects move through your sales pipeline by completing specific activities, which you can identify in your CRM, you'll be able to better move a deal from start to close, as well as forecast the revenue and health of your business.
Prospects generally move through the sales pipeline at different rates based on their level of interest, demand, and how much research they've done on the type of product or service you're offering. Since sales processes are different for every company based on the complexity of the product or service offering, your sales pipeline will be unique. However, it should still be reflective of the typical buyer's journey which consists of:
- Awareness: Buyer realizes they have a specific pain point or opportunity
- Consideration: Buyer defines their challenge and needs, and researches potential solutions
- Decision: Buyer finalizes their strategy and begins comparing businesses' offerings
Insight into deals & metrics
Sales pipelines provide sales reps with the necessary insights that indicate which deals are most likely to close.
Sales team performance
Sales pipelines give you visibility into your sales team’s performance to analyze how close each sales rep is to reaching their sales goals.
Sales pipelines indicate the value of potential deals that help you better predict monthly revenue.
Sales pipeline vs sales funnel
A sales pipeline and sales funnel are often used interchangeably despite carrying distinctive meanings in sales, both in data and how that data is showcased. A sales funnel is about leads and includes the stages in the buying process your prospects go through before becoming buyers. On the other hand, a sales pipeline is about deals and refers to the steps in your sales process that you take to move a deal from start to close.
Another term to not be confused with a sales pipeline is a sales forecast. While they’re analyzed from similar data pools, a sales pipeline focuses on what sales reps should be doing in the midst of their sales process, while a sales forecast estimates how much revenue a business can potentially bring in if those opportunities are successful.
Stages of a Sales Pipeline
The more complex your product or service, the longer your sales cycle will take — and the more stages you’ll have in your sales pipeline. Typically, the sales pipeline has 5–7 stages that often involve sales prospecting, lead nurturing, and objection handling. If your business follows a typical B2B sales process, here’s how the stages of a sales pipeline might look:
While lead generation involves reaching out to several potential customers at once through various campaigns, prospecting in sales is a more tailored approach to bring in prospects that may want to use your product or service. With outbound and inbound prospecting methods, sales reps can gauge interest with potential buyers through personalized emails, customer referrals, industry events, and social selling. Learn more about how to prospect in sales with our comprehensive guide.
2. Lead qualification
This crucial step in the sales pipeline cycle is where you'll focus on filtering out leads by creating your ideal customer profile. Identify traits like preferred industry, location, company size, pain points, and other key characteristics to help you decide whether a prospect is a good fit for your business.
To move leads downstream in the sales pipeline, initiate contact with your prospect by offering an e-book, a webinar, case study, or another free source to determine if they’re interested in learning more about your company's products or services.
3. Meeting / demo
After you've filtered out leads that either aren't ready to make a purchase or aren't a good fit for your business, you can begin to narrow in on those that are. Once you have your list of potential buyers, schedule a meeting to introduce them to your product or service. This is where you’ll want to evaluate if there’s a strong business case for the buyer to receive a proposal.
Now you can make an official sales offer to your potential buyer by summarizing how your company can help address their needs. Showcase how the prices you propose coincide with the value of your product to offset the engagement cost. This is also the point in the sales pipeline cycle where you'll identify to your proposal the unique advantages of your product or service that helps differentiate your proposal from competitors in the market. It's crucial to tailor to your prospect's specific pain points by providing them with a personalized proposal rather than a cookie-cutter one.
5. Negotiation / commitment
Now that your prospect has expressed interest in buying your services, this is where negotiation comes in. Prospects may have some reluctances or additional inquiries that require negotiating the initial proposal. So, you can discuss expanding or shrinking the scope of work, adjusting pricing or conditions, and setting any other expectations to come to a mutually beneficial proposal.
6. Closing the deal
You've just closed a deal — time to celebrate! Make it easy for your customer to-be to sign the contract through an e-signature service that allows them to sign and send from anywhere at their convenience. Afterward, you can move the deal toward order fulfillment.
Note: There are times when the buyer is not quite ready to buy yet. In these cases, you can mark them as "nurture" and follow up later.
You may think the sales pipeline is over once you've closed a deal — but the true customer experience has just begun! This is where sales reps can further leverage their offerings and make their business stand out in the market. Since your new customer will expect attentive service during the onboarding phase alongside regular monitoring of the account's progress, it's essential to maintain consistent communication.
Keep the conversation moving forward by cross-selling your existing customers on other services they might benefit from. When the contract is almost over, you can explore renewal options or even upsell your buyers on enticing premium solutions. At the end of the day, you'll want to treat your new customers well — after all, future sales and referrals can depend on it!
How to Build a Sales Pipeline
Now that you know what a sales pipeline is, why it’s important, and what the phases look like, how do you actually build one? While it will be unique to your sales process, your company, and what you’re selling, here’s a general rundown on building a sales pipeline. From there, you can make adjustments to meet your specific needs.
1. Identify your buyers and pipeline stages
First, consolidate your potential buyers into your sales pipeline and place them in their respective stages depending on where they are in their buying journey. For example, if you've contacted a lead and shared a promotional e-book, they would be in the "lead qualification" stage. If they've requested a demo of your product, then the deal would be in the "meeting / demo" stage. Have they shown readiness to buy and perhaps even discussed terms of your proposal? They're ready to be placed in the "closing the deal" stage.
Identifying which stages your deals are in will help you organize each opportunity by each stage.
2. Delegate sales activities amongst your team
With many balls rolling across different stages of the pipeline, you'll want to assign specific tasks to your sales team to ensure everything runs smoothly. If you've decided the first stage of your sales pipeline to be contact initiation, identify the corresponding sales activities. Tasks can include sending emails, tracking metrics, gathering and sharing lead magnets, and creating promotional content. Assigning specific responsibilities to your sales will lend clarity and ensure they're ready to move the sales pipeline forward.
3. Set the length of your sales cycle
Depending on how fast or time consuming it is for your sales reps to close deals, the length of your sales cycle will also vary. Determine if any of these factors apply:
Complexity: If your product or service is complex, your sales cycle will be longer due to multiple people or teams involved in helping prospects understand those intricacies — and convince them to buy!
Customization: Does your product or service require customization? If so, the deal may take longer to close due to the unique customer requirements.
Lead source: Inbound leads, like direct referrals or social media connection, work faster than outbound sales like phone calls or email marketing.
4. Determine the ideal size of your pipeline
This is where you'll need to dive deep into your team’s goals to identify how many deals your salespeople are pursuing. Since deals fall off the radar over time and may not convert to a sale, just going after a sales target isn't enough. In fact, 24% of forecasted deals go dark.
To make sure your opportunities make it to the end of your sales pipeline, you'll want to upscale the number of deals you start with. For example, working backwards from your sales target, if your team is to close on 500 deals, you'll want to have at least 1,000 prospects to pursue.
5. Remove inactive deals from the pipeline
As we mentioned above, deals won't always live on! Keep track of the age of your deals to determine if any have surpassed the length of your sales cycle. If any are still of opportune, prioritize them; if not, move them to your "dead deals" list.
Coinciding with task assignment, you'll want to give your team a system for following up with leads — including timing, frequency, and method of contact. This will help you clean up your sales pipeline by removing stagnant deals that aren't likely to convert.
6. Define the metrics of your sales pipeline
Since sales pipelines change with sales activities, monitoring metrics can help ensure your pipeline is healthy. Once you define your sales targets, track metrics like average deal value, average win rate, and conversion rate. This way, you can identify how many deals your team needs to bring in to earn profits. We go deeper into this below as well.
As you can see, to have a healthy sales pipeline, it must flow well. Reviewing your pipeline regularly helps ensure you have consistent and reliable data about each opportunity. Bringing in fresh leads, qualifying those leads, and nurturing them to generate interest in your product will ultimately lead you to closing deals.
Sales Pipeline Management
Pipeline management is an estimate of how much revenue your sales reps will bring in from current deals. With regular monitoring, your sales team can organize their prospects to see how their deals are tracking against their goals. Managing your sales pipeline can also help you catch any small problems before they become larger ones that could potentially impact revenue.
To estimate your revenue, you'll need to know the following metrics, which your CRM can also automatically populate for you:
- Number of active deals your sales reps are working on
- Which stage in the pipeline each opportunity is in
- Number of deals that typically move from one stage to the next
- Average size of deal
- Average length of sales cycle
Pipeline management may feel cumbersome at first, but with the help of a CRM and clear, consistent communication with your team, it will drive consistent revenue. Let's dive into four ways to effectively manage your sales pipeline.
1. Review your sales pipeline
The last thing you want is your sales pipeline to go dry, so it's important to conduct regular review meetings. Doing so can help you understand the status of deals, any additional deals needed to reach goals, and the effectiveness of your team. Inspecting your sales pipeline each month, and even meeting weekly with your sales team, allows you to brainstorm tangible opportunities to keep moving through the pipeline, along with where your process might be stagnant.
2. Track your deals using a CRM
By using a CRM software, you can stay on top of all the deals in your pipeline and determine where each one is in the sales pipeline stage — which is essential to ensure it keeps moving! Having a sales CRM as part of your pipeline strategy also helps you eliminate manual tasks by allowing sales teams to automatically set up calls, schedule demos, send out reminders, and the like.
Learn about how LinkedIn Sales Navigator syncs to your CRM
3. Encourage collaboration amongst teams
An effective sales pipeline from initial concept to launch requires multiple teams to perform well in their roles — and be in sync with one another. Ensure visibility into your business' sales pipeline for departments including inbound and outbound sales, finance, marketing, C-suite, and any other essential members involved. This is also where a CRM can help all those teams align and get the necessary visibility.
4. Create sales pipeline reports
Measuring your sales metrics on a regular basis and taking the necessary corrective steps can prevent your sales pipeline from getting stagnant. For example, if a deal is sitting in the same stage of your pipeline for weeks, you'll want to ensure the responsible sales rep has the resources they need to move it down the pipeline.
Creating a sales pipeline report in a CRM that features custom templates helps you save extra time and make smarter decisions. Plus, you can estimate incoming revenue and consolidate your strategy appropriately.
An effective sales pipeline strategy and management process isn't just beneficial to the sales team. When your entire organization is aligned around revenue goals, everyone succeeds. Use our tips and tools to help you maintain best practices that empower sales reps, better serve your prospects, and, ultimately, reach those goals.