Understanding what works and what doesn’t within the sales process can be complex for any sales team. But a strong understanding of your most — and least — effective activities is a critical part of predicting revenue and reaching targets.
In order to gain an accurate picture of progress and better manage performance, organizations need an efficient, predictable sales pipeline. Here, we’ll take a deep dive into what a sales pipeline is, why it’s valuable, and how to build one that can make a real impact.
What is a sales pipeline?
A sales pipeline is a powerful tool that enables you to visualize various potential customers as they move through different stages in the buyer’s journey. It’s a highly organized means for tracking and managing sales activities, with details about each prospect, deal, and even money.
Sales pipelines are essential for uncovering key insights that drive efficiency, effectiveness, and, ultimately, your bottom line. And because sales people already have a lot on their plates — e.g., prospecting, interacting with clients, preparing reports, closing deals and more — they need instant, seamless visibility into granular details on buyer progress. If your sales management operation doesn’t utilize a pipeline tool, you’re at risk for key information falling through the cracks.
We can’t discuss what a sales pipeline is without also diving into what it isn’t, particularly because it’s commonly confused with other sales terms.
A sales pipeline is not a sales funnel
Though the two are very similar and closely related, it’s important to note the distinctive qualities of each. A sales funnel revolves around leads, operates from the prospect’s perspective, and illustrates conversion rates at each stage of the sales process. The funnel acts as a general visualization for the overall lead qualification process, with many sales leads entering the wide top of the funnel, and very few making it to the bottom as actual customers.
A sales pipeline, on the other hand, centers around revenue opportunities, operates from the seller’s perspective, and illustrates which sales activities are needed to meet quota or revenue targets. It visually demonstrates the stages of your sales process (like prospecting, needs analysis, proposal, negotiation, and closing) and the distribution of revenue opportunities across those stages.
A sales pipeline is not a sales forecast
To accurately predict future revenue, understand lead conversion ratios, and make smart decisions that improve your team’s performance, you need both a pipeline and forecast. A sales forecast is just a small piece of your broader pipeline, which can be used to predict expected revenue in a given time period.
Precise forecasts are calculated when an opportunity reaches the ‘fully qualified’ stage in your pipeline. They require reps to predict what deals will close — often based on weighted percentages, categorizing deals, or the total number of sales they’ve committed to for a specific period of time. Some revenue teams leverage revenue intelligence software that help them build these forecasts based on their sales pipeline. Those tools then help them identify where, exactly, they need to adjust pipeline to hit their revenue goals.
In contrast, your sales pipeline should show all of your opportunities — giving you a clear view into everything from newly identified opportunities all the way through to opportunities that are ready to close. Where your pipeline helps you understand and strategize each step in the sales process, your forecast acts as a projection based upon more specific assumptions within that pipeline.
The Stages of the Sales Pipeline
Before you can benefit from the transparency and operational efficiency that a sales pipeline offers, you must first understand the stages it's comprised of. It’s important to note that both the specific industry in which your organization operates and your unique business model can affect the actual stages.
Here, we’ll take a look at some common stages that are often included in a sales pipeline:
1. Prospecting, or lead generation
Before customers can start buying your product and service to resolve their pain points, they need to first discover that it actually exists. In this stage, sellers identify and contact potential leads who fit the profile of an ideal buyer.
Prospecting often includes activities like sending outbound emails, cold calling, messaging through LinkedIn, and other promotional activities. If your organization relies on inbound marketing techniques to generate leads, they might refer to this stage as ‘lead generation’.
Regardless of what you call it, this stage is crucial, as 82% of buyers say they’re willing to accept meetings with sellers who proactively reach out. And since a company loses a portion of its customer base each year from gradual attrition, your team likely can’t afford to ignore the benefit of attracting potential customers whom they can convert to buyers. Remember: acquiring more customers helps mitigate the risks of lost sales, so it works to your advantage to create a strong prospecting strategy.
2. Qualification
Not all prospects are viable in terms of becoming actual customers. Even if they fit the profile of your ideal buyer, it doesn’t necessarily mean they’re going to move forward in the sales pipeline. In fact, while 61% of B2B marketers send all direct leads to sales, only 21% of those leads will actually be qualified.
Without a qualification process, reps risk wasting valuable time chasing leads who can’t — or won’t — ever actually buy your product or service. Worse yet, they could end up buying a solution that doesn’t solve their pain points, which causes issues in attrition and customer service in the long run.
Qualification is essential for distinguishing between hot and cold leads, so make sure your pipeline includes a research process that answers these questions for each prospect:
Does the prospect have the appropriate budget for your product or service?
Does your solution solve the prospect’s pain point?
Does your prospect have the authority to make purchasing decisions regarding your product or service, or do they need buy-in from other stakeholders?
Is the prospect ready to buy now?
By offering insightful resources to prospects (and determining if they’re interested in learning more), sales reps can more accurately uncover whether or not a lead is truly qualified. Make sure your sellers are empowered with a strong strategy for handling objections, which can help warm up those initially cold leads.
3. Contact
This stage of the pipeline is pretty straightforward: one a rep has determined that a lead is qualified, they can reach out to actually engage with that prospect.
62% of buyers want to hear from sellers when they’re actively looking for a solution to their problem. By contacting qualified prospects with a tailored message, sales reps can get ahead of their competition and nudge leads in the right direction. It’s important that reps first research buyer pain points and build a strong case for how your product or service resolves those pain points, then contact the lead (whether by phone or email) while it’s still hot.
4. Relationship building
Building meaningful relationships with customers is crucial for closing more deals — and closing them faster. Strong relationships (created by a customer-centric approach) can help you sell 4 to 8% more than competitors who don’t prioritize a high level of engagement.
This stage should ideally extend across the remaining stages of the pipeline, too, as building rapport and enhancing trust isn’t a one-and-done kind of gig. Through effective listening, expertly-crafted content, sharing your company’s mission, personalizing each interaction, and collecting and addressing feedback, reps can cultivate strong bonds that ultimately increase conversions.
5. Meeting, demo, Sales call
Once a rep has established a relationship with a prospect, it’s time for them to actually set up a meeting. This is where sellers present (and often demonstrate) your product or service in an effort to prove its value to the prospect.
58% of sales meetings are not valuable to buyers. That’s a staggering (and scary) number, but there are best practices reps can follow to ensure success at this stage in the pipeline. Making a great impression and influencing buyer decisions in a positive way requires:
Focusing on the specific value that your product or service can provide to the buyer
Collaborating with the buyer to develop a mutual action plan (MAP) that takes their input into consideration
Educating the buyer with new perspectives and ideas
Understanding the unique challenges within the buyer’s market or industry
Conducting successful sales meetings can be time-consuming and burdensome for busy managers and reps. They must often spend the entire time scrambling to take accurate notes, which is distracting, error-prone, and challenging.
Modern sales organizations rely on virtual assistant tools that help improve their meetings without sacrificing rep productivity. These technologies provide conversation intelligence, real-time coaching, live transcription and notes, and actionable data, so sales teams can focus on the customer during meetings (and still have accurate notes for followup).
6. Deal closing
Closing a deal requires more than just a handshake. You must first send a detailed proposal, which outlines how your product or service will address the buyer’s needs, how the value of your offerings justify their cost, and how your company offers a distinct advantage over competitive vendors.
The customer will likely then negotiate these terms — perhaps several times — until you both come to an agreement on the scope of work, price, and managing expectations. This can sometimes be a complex, lengthy part of the sales pipeline, as both sides must be willing to compromise until they reach a mutually beneficial agreement. And since 48% of salespeople say that competing against lower-priced competitors is their biggest challenge when closing deals, it’s paramount that your reps know how to successfully negotiate without crumbling.
Once these negotiations have been completed, it’s time to (finally!) close the deal. For some businesses, this stage includes signing a contract, while others simply facilitate a transaction.
How to Generate Sales Pipeline
There’s no doubt that using a sales pipeline can empower teams to become more efficient and effective. But building a pipeline that’s specific to your unique business needs, sales process, and customers can be daunting.
Here, we’ve outlined some basic steps to help you get started with building a sales pipeline that can help your team improve performance and drive more revenue:
Determine your ideal buyers
Start by identifying to whom you want to sell your product or service. You can develop your ideal customer profile (ICP) by studying direct competitors, which should help you understand the types of businesses and personas that might benefit from your solutions.
Make a comprehensive list of target companies and key decision-makers. This could be a pretty lengthy list, so use a tool to help you keep track of all the details (like company, contact information, and any interactions you may have with them). Some smaller companies choose simple tools, like spreadsheets, to manage this information, but it’s important to note that this method doesn’t offer the functionality needed for larger businesses — or businesses that are looking to scale.
Other organizations rely on their CRM to track these details, as it centralizes, analyzes, and updates all of their information about prospects, leads, and clients. This is a much stronger option than, say, Excel, but it still leaves much to be desired as your company grows.
Competitive sales enterprises have started investing in sales engagement solutions, which fill in the gaps left behind by their CRM. Sales engagement platforms automate repetitive tasks, clean your data, and leverage machine learning, so managing and engaging the contacts in your pipeline is a breeze, no matter how quickly your business grows.
Define and set up stages
Reps are busy, and the stress of achieving their goals can lead to burnout and employee turnover. Your pipeline should take some of this burden off their shoulders by effectively measuring and managing all of the daily activities they need to execute to reach those goals.
To determine the stages in your pipeline, outline all of the daily activities your reps must complete. Be sure to highlight those that you believe have the most impact on your sales, then assign each activity to a stage in your sales cycle. The stages above can help guide you, but this should really reflect your business’s specific sales process, so don’t be afraid to make it work for you.
Traditional sales tools (like a CRM), can help with defining your stages, but they really don’t offer all the necessary capabilities for total visibility and pipeline optimization. That’s why more and more teams have implemented sales pipeline management solutions, which make building your stages an easier, more effective task. This technology helps you visualize which activities provide the best outcomes and help you create a pipeline that makes your team more effective, productive, and profitable.
Refine your stages
Remember that your pipeline is a living, breathing tool, so it shouldn’t be set in stone. Once it’s up and running, you might notice that some activities or conversation types garner better results. This could mean that those activities or conversations should actually become an individual stage in your pipeline. Others might need to be removed if they’re ineffective.
As you refine your stages, make sure that your team has a shared definition of each stage. It can help to use a roadmap for this, as it captures the customer journey and establishes a defined sales process for reps. Look for a roadmap that covers the following for each stage:
Activities
Time spent in stage
Sales questions
Exit criteria
If you use key insights to modify your pipeline over time, you can more accurately predict revenue moving forward. But this data can be difficult to string together if you use disparate systems, manual tools, or a basic system of record for managing your pipeline. This means issues are often missed, and you’re always at risk for unexpected slippage and losses — especially as market conditions shift.
Some businesses are instead leveraging more robust tools that provide a single view of pipeline health and buyer engagement signals, so they can easily build accurate forecasts. What’s more, these systems include warning signals that help teams fix pipeline issues even before they show up on a forecast. That means you can proactively tweak and resolve problems before it’s too late.
How to Manage a Sales Pipeline
So now you’ve got your sales pipeline set up and ready to go: but now what? While there’s no secret formula for managing a successful pipeline, there are a few tactics that can help:
Define metrics to evaluate progress
You should set key metrics that help you consistently measure overall pipeline health and sales performance. These might include:
Number of new leads per month
Number of deals
Pipeline value
Average deal size
Average sales velocity
Use software to keep track of sales activity and attribution
Make sure you implement the right tools for support. An advanced pipeline management solution seamlessly tracks each activity in your sales process and determines how they influence your pipeline and impact attribution. That way, you can identify which activities are actually moving the needle in terms of revenue.
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