What Is a Sales Pipeline?

How a Sales Pipeline Can Help Your Small Business

Understanding and prioritizing your sales pipeline can help you increase sales. After all, the more you know about your prospects, the more targeted your approach can be. But, what is a sales pipeline and how can it help you bring in more revenue?

A sales pipeline covers every stage of your sales process, helping you track opportunities as they move from stage to stage based on specific actions. The term “pipeline” comes from the idea that deals travel along a set path, from initial contact with salespeople to consideration to closing the deal.

Pipelines also provide an overview of each sales rep’s account forecast, how close he or she is to making quota, and how close the team is to reaching quota.

Sales Pipeline vs Funnel

The terms sales pipeline and sales funnel are often used interchangeably, but they have real differences.

A sales pipeline focuses on the predefined sequence of actions that need to occur to move a prospect through the purchasing process. Once each stage is completed, the prospect moves to the next one. This allows sales reps to track the status of every deal.

On the other hand, a sales funnel visually communicates the conversion rate of prospects as they move through the pipeline stages. It’s called a “funnel” because of its shape: wide at the top as prospects enter, then increasingly narrow as prospects are removed (as a result of being unqualified or deciding not to buy).

To sum up the difference in one sentence: a sales pipeline shows what actions need to happen during the sales process and a sales funnel shows the conversion rate during that sales process.

Sales Pipeline Stages

While every company and every sales rep uses different sales methods, the actual stages of the sales pipeline are very similar. At a high level, you identify new leads, get in contact with them, and evaluate whether they are a good fit for the product or service before closing the deal.

Here are the seven stages in the sales pipeline:

  1. New opportunity: You identify a new lead and his or her contact information is recorded. How do you get these new leads? Through a variety of different lead generation activities, like webinars, ads, or content marketing.
  2. Contacting: It’s time for one of the most challenging parts of the sales process: actually getting in touch with the lead. The prospect remains in this stage until you make contact.
  3. Engaging: By this stage, you have talked to the prospect to determine whether he or she is qualified to make a purchase.
  4. Qualified: This is the point where you need to decide whether the lead is qualified, meaning that he or she has the need, budget, and authority to make a purchase.
  5. Custom stages: Somes businesses have unique sales stages, like scheduling in-person meetings or offering a free trial. Regardless of the tactic, this stage is designed to move the prospect closer to making a purchase.
  6. Closing: As the sales process comes to an end, you ask the prospect to finalize the deal.
  7. Won/Lost: All the stages come down to this final moment: whether the deal was a win or loss. Both results can prompt a set of subsequent actions, like a series of onboarding emails for new customers or a six-month check-in email for leads who didn’t end up buying.

Sales Pipeline Metrics

How do you know if your sales pipeline is healthy? Here are five metrics to track:

  1. Win rate is the percentage of leads that convert to actual sales. By monitoring win rate at each stage of your pipeline, you’ll understand where you excel and where prospect most often drop off.
  2. Sales cycle length is the amount of time it takes for a lead to move from initial contact to a sale. If your team takes too long to move leads through the pipeline, you risk losing opportunities.
  3. Deal fallout by phase refers to the predictable percentage of deals that drops off at every step of the pipeline. It’s important to understand why these deals fall through and to monitor this number — a big spike will impact your numbers for the following two or three quarters.
  4. Lead response time is the amount of time it takes to contact or act on a new lead. This number is also a good indication of the health of your sales team. Are lead response times getting longer? Perhaps you need to grow your sales team.
  5. Close ratio is the number of closed sales as a percentage of total sales presentations made. You can use this to evaluate sales performance, industry trends, pricing, and your value proposition. For example, if leads fall off in the final stages of the pipeline, this could point to some problems with the product or pricing structure.

Sales Pipeline and CRM

The real power of your sales pipeline comes when you can manage it in a CRM, letting you automate your pipeline and getting greater visibility into the sales process.

Here are three ways to manage and automate your sales pipeline in a CRM:

  1. Cold lead notifications: Most CRMs have the ability to trigger automation based on when a prospect moves out of a sales stage. Similarly, you can also set up notification emails if someone sits in a sales stage for too long (i.e. becomes a cold lead), reminding sales reps to follow up.
  2. Automated emails: You can set up actions that correlate to when a sales rep updates a prospect’s stage. For example, if a prospect is in the closing stage and you sent him or her a proposal, you could trigger an automated email sequence that reminds the prospect to review the proposal and offers to answer any questions, schedule a meeting, etc.
  3. Reporting and forecasting: Tracking opportunities and prospects in a CRM allows you to leverage powerful reporting to evaluate sales performance and forecast future sales. This information can help you manage lead flow, distribute new opportunities, and optimize your entire sales process.

For an in-depth guide to automating your sales process, read our ebook, “In the Pipeline: Keep, Convert, and Close More Leads in Less Time with Automation.”

Final Thoughts

A sales pipeline offers a concrete, actionable view into how your sales process is performing. It answers questions like, “Will we reach our quota?” “How many deals are going to close this week?” and “Which part of our sales pipeline is the weakest?” Ultimately, it creates the foundation for you to convert prospects, leading to more sales.

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