It is important to have visibility and control over your Sales Pipeline because it will lead to greater revenues. But that is the wrong place to start. After all, shouldn’t we first be finding out what, exactly, a sales pipeline is? We should seek to know just what its significance is in the success of your sales department. That’s what we’re going to do today: we’re going to go in-depth and learn about sales pipeline management.

The definition of a sales pipeline

Sales pipeline a visual representation of your buyer’s journey from beginning to final purchase along the stages you have set to your sales process. There is an opportunity at every stage of the sales pipeline and it is based on the actions that the buyer takes, being eventually visually depicted by your CRM system.

The rate of motion of these opportunities through your sales pipeline will differ from opportunity to opportunity, depending on how interested the opportunity is, how urgent it is for them to make a purchase, how much research that opportunity had already done by the time they got into the pipeline, and so on. There are even certain leads that will skip many of the middle stages of the sales pipeline. If your buyer takes the initiative to introducing you to their sales department, then you don’t need to waste time with the nitty gritties and you can go straight to the final stages of the pipeline.

What is the difference between a sales pipeline and a sales forecast?

It is very common to confuse a sales pipeline with a sales forecast. The pipeline includes all the leads being handled by a given salesperson. This includes relatively new and fresh leads as well as old and mature leads. A sales forecast, on the other hand, is a calculation of the potential leads that will close during a certain period.

These two also have different purposes, altogether. As a sales representative, you will use your sales pipeline to figure out where a particular opportunity is in the sales pipeline and what the appropriate actions are to take in order to move them along.

On the other hand, a sales forecast will show you and your managers how close you are to your sales goals and what you need to do to make progress toward that goal. If your sales forecast tells you you are going to miss the objective for the period, then you should become more aggressive in your sales activities. If the sales forecast shows you that you’re about to make double what your sales quota for the period is, then you can relax for the rest of the period and start working on making sure the next period is just as successful, if not more successful.

What is the difference between a sales pipeline and a sales funnel?

It is often the case that people say “sales pipeline” when they mean to say “sales funnel” and vice versa. The two have a lot of similarities. There is, however, a crucial difference in that “sales funnel” is the appropriate term to use when the number of opportunities reduces as you progress further through the sales process.

The reason why it is called a funnel is to help your mind connect with the idea that, if you’re going to have a lot of opportunities making it to the end of the sales process, then you need to have thrice that number at the beginning. A sales manager who decides to implement this idea might ask his sales rep to contact 300 potential buyers just to make sure he gets 100 purchases.

The better metaphor would be a champagne glass with a wide brim. You could have a vast number of prospects at the beginning of the process, but lose a significant number right after the qualification stage. Once the customers are past that crucial point, a majority of them are highly likely to become paying customers.

The most successful sales managers and sales reps have a ratio of prospects to closed deals of between 1.25x and 1.5x.

How do you build a sales pipeline?

There are a few basic steps you can follow to build a sales pipeline. They are outlined below:

• You should begin by having a clear definition of the stages of your sales process, including a comprehensive definition of your sales cycle.
• You should have the number of leads that typically make it from one stage to another on hand.
• You should then try to work backwards to come up with the number of opportunities you need at each stage of your sales process if you’re going to meet your sales objectives.
• You should take stock of what all the converting prospects have in common at every stage. This includes the actions you take yourself as a sales rep and also they the responses given by the prospect.
• You should create a sales process that is tailored to these statistics and actions for optimal results.

You’re probably wondering, after reading all that, how long it takes to come up with a sales pipeline. The answer isn’t exact or even specific. It pretty much depends on a number of factors, including the product you’re dealing with, the number and type of prospects you’re getting, and the resources available to you for your marketing efforts.

If your solution is a low cost one, then you can buy ads on Facebook within a day and try to generate leads from that. On the other hand, if the product you’re selling is a premium quality one, then you might have to grind for many months, or even a year, to get a proper list of contacts and paying accounts.

So we have an outline of the process of building a sales pipeline. We should look at the steps one by one.

The Stages of a Sales Pipeline

The best way to make a definition of these stages would be to come up with a detailed template. You could go on to copy one from the internet, but it’s a better idea to draw up your own so that you can adapt it to your own unique circumstances.

The reason why it’s important to draw up your own sales pipeline template is that your own buyers will have a journey through the sales process that is unique from those of buyers of other products. Here are some of the steps they go through:

• An awareness of the product – This when the buyer notices that they have a need for the product or an opportunity to use the product to their own ends.
• A Consideration of the situation – This is when the buyer has a clear definition of their opportunity or need. They then develop criteria and needs upon which they will base their evaluation. This is there point where the potential for research first surfaces.
• The decision – This when the buyer finally has a concrete strategy involving how they will take advantage of their opportunity or fulfill their needs. At this point, all they are doing is comparing the solutions offered by specific vendors, or within the same vendor.

If we decide to build on this further, we can develop a sales pipeline based on the processes that a buyer goes through. This pipeline might have the stages outline below:

• Connecting with the company – This is the point where the buyer decides to move to engage with your company. It could be something as simple as reading an email sent to them by a salesperson from your company or something as engaging as downloading content from your company website.
• Setting an appointment – This is when the buyer agrees to meet a representative from your company. It is an important stage as it is the stage in which the buyer gets to learn more about your company.
• Completing the appointment – This is the stage where the buyer actually shows up to the meeting with a representative from your company. They get to talk to you and you get a chance to confirm that the next steps in the pipeline will take place.
• The solution is proposed – The buyer receives a presentation and demo of the solution you are offering for their pain point or to help them capitalize on their opportunity. They then express interest.
• A proposal is sent – This is the stage where you send a proposal or contract to the buyer for review.

If you have a complex product, you should expect the sales cycle to be longer and the pipeline to have more stages. The above example pipeline is a simplification based on a simple product.

It is important to know the duration of time spent by buyers in each stage of your sales process. That includes list of prospects in its entirety as well as the buyers who actually end up buying your product. It’s possible that you may find that the prospects that buy spend longer in some crucial stages than the average prospect, such as the demo stage.

This data will help you better predict the likelihood of any given prospect to close.

You should also be able to estimate the yield of every stage. This is the rate of conversion that you can expect from the sage. Once you have reliable percentages, it will be much easier to prepare period estimates and much more accurate sales forecasts.

What is the ideal pipeline size?

Once you have done the groundwork, it should now be easier to figure out how many prospects you need at each stage for your to meet your quotas. You should start with your target revenue per period and divide that by the average amount of your deals. That will give you an idea how many deals you should close in the given period.

Your target number of deals should then be divided by your conversion rate for each stage, which will show you how many opportunities should reach that stage in the given period.

This process should be completed for every stage, giving you all your milestones for the period.

Mistakes made in sales pipelines

If you want to keep your pipeline functioning properly, avoid making these common mistakes:

1. Don’t let your pipeline shrink

Many reps hate the job of prospecting. As a result, they fall into something known as a “sales trap”.

This is when you’re getting a lot of good business and are looking likely to hit your targets. The problem is that you haven’t been prospecting lately and so you look likely to face a barren pipeline in the next period.

To avoid this, make sure your sales pipeline is constantly growing, and that the number of prospects at every stage does not either remain stagnant or diminish.

2. Don’t lose your leads

If your follow-up process isn’t well established, you will eventually lose your leads. That is money slipping through the cracks. Your team should have a proper system for following up with leads to avoid losing them, such as contacting them early, sending them a variety emails and social media touches, and providing them with new information at every touch.

When you keep your follow-up strategy uniform, your reps get to maintain healthy pipelines and know when to disqualify prospects.

3. Don’t allow disorganization in your sales pipeline

It’s important to clean up your sales pipeline every once in a while to ensure you don’t get ridiculous and wildly inaccurate sales forecasts. Sales forecasts typically use the stage at which a prospect is to determine how likely that opportunity is to close. They rarely consider the age of that opportunity.

As an example, consider a situation where you sent a proposal to an opportunity one month. That buyer hasn’t replied to any of your emails or calls since you sent the proposal, which means you can forget about their business.

Let’s say the proposal was $4,000. Your yield probability for the proposal stage is, say, 90%. That means your sales forecast will count that opportunity as a potential revenue of $3,600 for the next month. Your sales forecast will be off by that amount and the gap will only continue to widen for as long as you don’t clean up the dead prospects from the pipeline. You can clean your pipeline in the following ways:

• Find out which prospects have lived in the pipeline longer than average. You can decide whether they should be removed or not based on your own judgement.
• Send prospects an email before you give up on them. That way you’ll get to know if they are still interested or not.
• Keep your data updated and accurate. Sometimes you may have to demote opportunities to a previous stage in the pipeline due to arising circumstances.
• Review your sales pipeline regularly to find prospects that have gone silent or deals that haven’t progressed from their current stage for a very long time.

Ultimately, sales pipeline management is an active process, and your sales pipeline will only be as clean and effective as you keep it. It is a very rewarding process, however, as it ensures that there is a system to your sales process and, over time, increases your revenue.

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