If you have ever spent your time around the sales and marketing team, you have probably heard a lot about the ‘sales pipeline.’ Since pipelines are closely associated with the sales process, if you are not implementing these, you are most probably lacking insights that can further help optimize your sales processes.
When running a business, it’s not only about closing a deal but it also involves embracing the journey of a prospect into deal closing. With a sales pipeline, it is easier to keep track of your prospects, and how they move from one stage of the pipeline to another, identifying the roadblocks and implementing the strategies to optimize the sales process.
In the guide below, we have discussed everything about a sales pipeline: its stages, importance, metrics, ways to build a healthy pipeline, and much more.
What is a sales pipeline?
A sales pipeline visually represents the prospect’s journey through the sales process, i.e., how it moves from one stage to another until the deal is closed. It helps sales teams identify potential bottlenecks and delays in prospects’ progress to the next stage of the pipeline. The pipeline is more focused on the buyer’s journey and helps sales representatives take measures to move the deal faster.
Inside the sales pipeline, the sales process is divided into multiple stages and each stage has certain benchmarks which need to be met to move the lead to the next stage of the pipeline. Different businesses will have different pipelines based on the customer journey so you should create a pipeline that is uniquely based on your prospects and their respective journeys.
Not every prospect holistically follows all stages of the pipeline as in some cases, a prospect may close the deal soon after he enters into a pipeline. For instance, a prospect visits your website randomly or via referrals and instantly decides to purchase the product. In this case, he will be moved from the first stage to the decision-making stage.
Benefits of a Sales Pipeline
A sales pipeline gives you a comprehensive view of how the deal is moving inside the pipeline and if there is any possible obstacle in its way to closing. It helps you identify the weak points and the potential gaps and forecast the sales revenue so you can adjust your sales strategies accordingly. Platforms like Kemo SaaS provide a comprehensive view of each stage of the pipeline; you can monitor if there is any potential bottleneck, and you can even add multiple pipelines.
Let’s look at how important a healthy sales pipeline is for every business and how it can get you successful deals.
Consistent business growth
A sales pipeline is a well-organized way of representing the pathway a prospect takes from the initial contact to the deal closing. It lets the sales team strategize and manage the sales process for better outcomes. It helps in determining the potential opportunities, and threats, measuring the performance of the sales team, and predicting the sales revenue. With this effective planning, it becomes easier to move your business on the right track and ensure its consistent growth.
Shorten the sales cycle
The sales pipeline allows you to take a closer look at the sales cycle and helps you implement the strategies that lead to sales acceleration. Your sales team can analyze which tools to use for improved workflows, the areas where the sales team needs to improve, and the prospects that are taking too long to convert but are highly valuable. With these insights in hand, the sales process is streamlined and the sales cycle is shortened.
Revenue forecast
As every deal moves through the pipeline stages, you can forecast the more valuable deals and deals with the more potential to close. You can strategize your marketing campaigns around those deals and make accurate predictions on monthly revenue generated through them.
Identify and resolve bottlenecks
A sales pipeline offers a bird’s eye view of the customer’s buying journey which makes it easy to identify bottlenecks that are causing the sales cycle to break or slow down. There could be stalled deals, unnecessary time spent on a certain pipeline stage, or a sales rep not finding the sales content, etc. By analyzing these bottlenecks, you can determine where you need to provide more support to the sales team and allocate resources at the right stage.
Track sales team performance
A sales pipeline is a great tool to measure the productivity of your sales representative and how your team has performed to achieve the business goals. These insights can help you evaluate your team’s efficacy and the best-performing sales rep and offer coaching support to the underperforming reps.
Sales pipeline vs sales funnel
Most of the time, the terms sales funnel and sales pipeline are confused with each other and used interchangeably. Although they both cater to the same process, they are not the same.
- While a sales funnel is the representation of a sales journey from the buyer’s perspective, a sales pipeline illustrates the sales process from the perspective of the sales team.
- A sales funnel analyzes the actions taken by the leads from the first business inquiry to the decision. A sales pipeline helps sales reps find how close a lead is to finalizing a deal.
- A sales funnel is more general and cannot be changed i.e., the buyer has to pass through all stages of the funnel. On the other hand, a sales pipeline can be adjusted according to the length of the sales cycle i.e., the sales rep might add additional stages or modify them when targeting a strong customer base.
- Inside the sales funnel, the prospects keep on decreasing as the sales process proceeds while in the sales pipeline, the prospects are more likely to convert after they pass through a critical point.
What do you need before building your sales pipeline?
If you want to build a focused sales pipeline, you need to collect accurate data regarding your target audience, your team, and your sales process. You should be clear about how your ideal customer should look like and their need regarding your products or services.
Let’s look at what information you should have before building a sales pipeline.
A list of prospective customers
Identify your prospects by reviewing your CRM, email box, social media, or any resource that you use to store customer information. Build a detailed list of the prospects who fit into your ideal buyer personas and are interested in buying your services or products. You should sort and store every detail regarding your prospects, including name, contact details, their business, job, roles, preferences, challenges, how they first inquired about your business, etc. This comprehensive detail helps in assigning a pipeline stage to every prospect.
Sales Process
To build a sales pipeline, it is crucial to have a structured and straightforward sales process that your sales reps should follow to make a sale. It represents the series of activities that the sales team follows to close a deal. You can define multiple stages of the sales process while building a sales pipeline to empower your sales team to win more deals.
Targeted revenue
Before building a pipeline, you should align your goals. A pipeline is an important business tool but without a defined revenue target, it is complicated to effectively build and manage a pipeline. For example; when the goals are defined, it helps you determine how many deals you need to add to your pipeline to accomplish your targeted revenue goals, how many qualified deals are converted into sales, etc. By setting daily, weekly, and monthly targets, you can build a pipeline to accommodate those revenue targets.
Your team
Your sales team should be a part of the decision-making process of building a sales pipeline. Since every sales rep will be using the pipeline, it is important to ask for their opinions and suggestions and ensure they have enough support at every stage of the pipeline. Collaborate with your team and offer them opportunities to build an effective, high-performing sales pipeline.
Stages of a sales pipeline
Two pipelines of two different businesses cannot be the same. Every sales pipeline follows certain stages based on the leads and business offerings. Some businesses use a pipeline with five stages, while some use a pipeline with up to eight stages. Regardless of how many stages you want to incorporate into your pipeline, it usually follows the same order that starts from prospecting and proceeds with lead qualification, engagement, lead nurturing, sending proposals, negotiation, and deal closing. Once the deal is closed, the post-purchase stage is implemented for customer retention.
Let’s explore what each stage of the sales pipeline comes up with.
Prospecting or Lead Generation
Prospecting, also known as lead generation, is the first stage in which you find potential customers for your business, i.e., people who are more likely to purchase from you. They are either contacted via cold outreach, i.e., pitching individuals who fit into your ideal buyer persona, or by reaching businesses or individuals who are already aware of your business and are interested in your offerings.
For example; You may qualify prospects for your pipeline from different resources like cold calling, Newsletter subscriptions, form submissions, event sign-ups, etc.
The lead generation team sources the potential leads via marketing campaigns involving email marketing, social media marketing, websites, downloadable files, etc. The entire sales pipeline relies upon the prospects generated in the first stage. The leads that respond positively to the outreach are moved to the next stage.
Qualifying Lead/Prospects
Not all prospects have a high potential for conversion, and it is important to identify which prospects are a suitable fit for your business. Define the criteria for a lead to qualify it for the next stage, such as its tendency to purchase, level of interest, and whether they are ready to purchase. You wouldn’t want to spend your money and efforts on prospects who are not ready to purchase or not a suitable fit for your business. This is why it is vital to determine which leads have a high tendency to convert and which leads are not interested at the moment.
In this stage, the lead scoring is performed based on the specified criteria, and the cold opportunities are separated from the qualified lead. For example, a specific group of prospects is interested in buying your products but is not willing to buy sooner for some reason. On the other hand, there is another group of prospects that has a tendency and will to buy your product. In this case, the prospects who have a high potential to close the deal are further moved to the next stage. You may send the cold leads to another pipeline or store their data in the CRM for later use.
Contacting the lead
This is the stage when the sales rep makes the first contact with the qualified lead in the form of email, social media, a phone call, or in-person chat. Since you have already qualified the interested leads and have enough data about them, you will offer them valuable information regarding your business at this stage. Here, you can build trust among your prospects and create strong engagements.
Lead nurturing
You cannot just ask your customers to purchase from you without demonstrating to them what exactly they are getting. After the initial discovery contact, the qualified prospects are nurtured by the sales reps in this stage. By lead nurturing, it does not mean that the sales reps will forward the annoying ads, emails or make calls to the leads all the time but it’s a strategic approach in which a particular piece of content is forwarded to them based on their issues and respective solutions.
For instance; you may schedule a call or a meeting with the prospects to help them understand how your products or services can resolve their pain points. At the end of the stage, you get the sales-qualified leads and you can target them with the best sales and marketing resources.
In some instances, individuals might attend the demo calls but not move to the next stage. To save your pipeline from this potential bottleneck, you may work on the effectiveness of your demo videos.
Proposal
Now that your prospects have turned into qualified sales leads, this is when you present them with a sales offer. It’s important to offer them personalized solutions by addressing how your product/service is tailored to resolve their pain points. The proposal should include product benefits and costs and highlight how your business has a competitive advantage in the market.
Negotiating with the lead
There might be some objection raised by the prospects or probably they want to negotiate over pricing. You may discuss their concerns and explain your proposal. For instance; your prospects have developed a high intent to purchase but are negotiating over the price. So in this case, you may leverage the opportunity by compromising on your price.
Lead closing
Congratulations if you have successfully closed a deal. If not, you have either lost it, or you can also put it on hold if the lead has the purchase intent but not at the moment. If the deal is closed, you may get a contract signed via e-signature and seal the deal.
If a lead disappears right before closing the deal, you may check on them periodically to analyze if they are ready to close the deal. Mark the lead as cold and follow up with them later.
Retention
After successfully closing a deal, don’t make your customers feel left out. Based on their interest, you can upsell or cross-sell them, collect their feedback, build loyalty, generate referrals, and convert first-time customers into loyal customers.
How to build a healthy sales pipeline?
To build a healthy pipeline, the prospects need to move smoothly from one stage to another. Right from the beginning, the flow of the pipeline should be uninterrupted, which is only possible if you build a healthy pipeline.
Take in the prospective buyers
Bring in the prospects who are interested in spending on your products or services and create a comprehensive list of them. Not only do you have to manage their data, but also intellectually manage their interactions through a customer relationship management system. When qualifying the leads, you may ask about their interests, pain points, budget to purchase your product/service, their timeline for purchasing, etc. These queries will help you bring in those leads who have a high potential to convert into customers.
Build the pipeline stages
Once you have created a list of prospects, it’s time to define the stages of the pipeline. Sometimes, the sales reps feel overwhelmed by the goals. But with a sales pipeline, you can define how a typical sales process will proceed from initial contact to closing the deal without burdening the sales reps. If your business is of a complicated nature, you may add additional stages into the pipeline to cover the sales aspects.
Assign activities to each stage
Next, assign the sales activities to every stage of the pipeline, such as forwarding personalized emails, scheduling a demo or a meeting, etc.
Identify the number of leads that move through the pipeline
When building a pipeline, it is important to determine how much time a prospect spends at every stage of the pipeline and how many leads move to the next stage. You can utilize the sales pipeline metrics to analyze the overall performance of the pipeline and how many deals should be there at every stage to meet the targeted revenue.
Establish and maintain relationships with the leads
As the lead moves through the pipeline, you may establish relationships with them to cross-sell or upsell them in the future. Offer them valuable support to maximize their chances of conversions and then retention.
Setup the sales pipeline reporting
The next important thing is to track the effectiveness of your sales pipeline, which you can do by setting up the pipeline reporting tools within the CRM. It indicates if the pipeline stages follow the benchmarks that you specified. The pipeline reporting will provide you with information regarding your sales reps’ performance, the health of your sales process, and forecasting accurate sales.
Keep updating your pipeline
Ensure that your sales pipeline moves the prospects from stage to stage without any interruption. Add new leads, remove the dead deals that are clogging the pipeline, and make sure that every qualified lead follows a smooth flow inside the pipeline until it closes the deal. Keep moving deals through the pipeline stages so the pipeline is updated and there is no stalled deal at any stage.
Sales pipeline management tools
Several tools can help you build and manage the sales pipeline and organize customers’ data to make data-driven decisions. Kemo SaaS’s user-friendly interface makes it easier to customize and manage your pipeline to fit your sales process. The sales teams can easily log in to the platform to continue their activities. Here are some of the vital tools that can help you manage a healthy sales pipeline.
CRM software: Customer relationship management software is the key to organizing and managing data, monitoring interactions, and tracking every stage of the pipeline. This centralized data helps carry vital tasks such as lead tracking and task automation that improve the overall efficiency of your pipeline. To keep your deal moving in the pipeline, the data from sources like chat, calls, emails, etc. is automatically added to the CRM.
Analytics and reporting tools: The sales pipeline metrics are evaluated with the help of analytics and reporting tools to understand how the deal is performing at every stage, their conversion rates, customer churn and retention rates, age of lead, pipeline coverage, etc. Kemo SaaS analytical and reporting tools gather real-time data that helps the sales team manage the pipeline by making data-driven strategies.
Communication tools: Tools such as video conferencing software, email, messaging platforms, etc., help sales reps connect with prospects and communicate with them down the pipeline stages. They can connect with the leads via communication tools at every stage, answer their inquiries, share updates, and stay in touch with them in real-time. These tools also help the sales team to collaborate to keep the deals moving uninterruptedly in the pipeline.
Sales enablement tools: These tools help sales reps close deals rapidly and more efficiently by providing them with training courses and modules. They can help the sales team manage the product’s requirements at a particular stage and provide them with the right support to maximize the deal conversion.
Sales pipeline key metrics
Your sales pipeline is a vital asset for your business so, it is important to track its performance and keep a health check on it to determine the potential areas for improvement. Through evaluating your sales pipeline, it becomes easier to understand what happens at every stage of the pipeline, the number of prospects who move away or forward in the sales pipeline, etc.
Here are a few vital sales pipeline metrics that are crucial to track.
Number of deals in the pipeline: It determines how many potential deals are present at different stages of the pipeline. This pipeline metric can be used to forecast sales and revenue.
Conversion rate: It identifies the number of potential leads who are converted into opportunities. You can use this metric to determine how many leads are qualified and engaged by your sales team.
Average deal size: This indicates the average revenue generated by every deal that is closed by the sales team during a specific period. It helps you determine which products sell easily, if the product prices are justified by the customers, and how much you have earned from these products in a specified time, etc.
Average win rate: This is the percentage of sales opportunities that are successfully closed. This metric is important for evaluating if your business is growing in the right direction.
Sales velocity: It is the average time taken by the sales pipeline to convert a prospect into a customer.
Number of qualified leads: It indicates the number of leads that are a good fit for your business and have a high potential of converting into paying customers.
Age of lead: It indicates the amount of time for which a lead remains engaged with your business. Knowing the age of your leads in the pipeline helps you determine the chances of lead conversions.
Pipeline coverage: This indicates the potential revenue that you can earn from the deals that are currently in your sales pipeline. You can determine how much dollars you can earn from the deals if they close successfully.
Lead source: This term refers to the source of origin of a potential lead. It indicates the marketing channel from which the lead came to know about your business for the first time. It helps you determine which marketing channels are generating more leads for your business.
Average client acquisition cost: It indicates the average amount of money you spend on acquiring a new customer and helps you evaluate your marketing efforts.
Number of closed deals per month: It is the number of total deals or sales acquired per month. Only those deals for which the customer has made the payment are considered closed.
Sales cycle length: It indicates the time it takes to traverse a lead through all stages of the pipeline to deal closing. If the average sales cycle length extends over a week, it indicates serious trouble that should be addressed.
Customer churn rate: This indicates the number of your existing customers who discontinue taking your services after a certain time. It helps service-based businesses to determine if they need any improvement in their business model or should make effective strategies for customer retention.
Sales-to-support ratio: This is the number of times a lead asks for your support regarding your product or service. If they can’t understand the usage of a particular product, there are high chance that the product needs improvement.
Revenue growth by product line: This metric helps when you are offering multiple services and products and want to know which service or product is performing better and attracting more leads. It also helps you analyze which service/product is underperforming and requires improvement.
Lost deals: It is the total number of deals that are lost throughout. You should determine the reason for the deal loss and try to resolve it to minimize any deal loss in the future.
Deal drop-off by stage: This indicates the number of deals that are lost at a specific stage of the pipeline. It is very important to keep a close eye on this metric to analyze if a large number of deals drop off at a certain stage.
Common Sales Pipeline Mistakes
If you want to build a healthy pipeline, it is important to avoid certain mistakes, including:
Longer sales cycles
If a sales cycle takes too long, it means that prospects are not convinced enough to close the deal and also, it negatively impacts the performance of a sales rep. For the health of a sales pipeline, shorter sales cycles are necessary which you can achieve by providing quick support to the prospects regarding their issues.
Not spending enough time on prospecting
Your entire sales pipeline depends upon finding the right prospects and this is why it is important to prioritize prospecting and thoroughly research your prospects. Most of the time, a sales pipeline fails because the sales reps don’t spend enough time in lead researching, and eventually the unfit leads create trouble down the line.
Poor coordination
As the prospects move through the pipeline stages, they are managed by different sales reps. Since the entire sales team approaches the pipeline, they need to communicate properly with each other. Poor collaboration or lack of communication leads to losing the deals and complicates the prospect transition from one stage to another.
Focusing on only one stage
To build a healthy pipeline, you should pay enough attention to each stage of the pipeline. Focusing on only one stage and ignoring others results in losing opportunities. Allocate the right time and resources to each stage of the sales pipeline to effectively close more deals.
Clinging to leads who won’t convert
After you have put efforts into generating and qualifying leads, it’s hard to let them go. Sometimes, sales reps cling to those leads who are not interested in converting and are afraid to push them out of the pipeline. Wasting time on such leads makes you lose the opportunity to invest time in high-converting leads.
Tips to manage your sales pipeline
Here are some essential tips you should consider when managing your sales pipeline.
Use sales automation: Automate the early stages of the sales pipeline to save time and minimize the potential errors caused due to manual intervention. You can utilize the automation tools to distribute leads among the sales team members, track lead activities and score them, remove dead deals from the pipeline, schedule follow-ups, etc.
Keep your pipeline up-to-date: By keeping your pipeline up-to-date, your sales team can make accurate sales forecasting, and based on it, you can make better decisions. Keep adding new leads to the pipeline and streamline their passage from one stage to another.
Keep the length of your pipeline short: A lengthy sales pipeline indicates a potential problem so it is important to reduce the length of a sales pipeline and improve its efficiency. Gather comprehensive information about your prospects, address objections as soon as possible, and close the deals faster by offering a smooth e-signature platform.
Don’t forget to follow up: Do you know that 80% of leads require up to five follow-up calls after the first contact? Most leads slip out of the pipeline when the sales reps don’t follow up with them. A sales team should be aware of high-potential leads and nurture them through the process so they end up closing the deal. Try to reduce the time between the follow-up messages to ensure that the lead does not forget about you.
Unclog the pipeline by removing dead deals: It is better to not cling around the dead deals and remove them from the pipeline. Allocating resources and time to the inactive deals is a waste so it is better to remove the deals that are clogging the sales pipeline.
Make reviewing your pipeline a habit: You can maintain the health of your sales pipeline by reviewing and monitoring it quite often. The state of a pipeline varies from stage to stage so the sales team should be reviewing the key metrics to evaluate how the pipeline is performing.
Equip and train your sales team: When you are guiding your sales reps about closing a deal, provide them with the right tools so they can successfully implement the changes required at every stage. You may also assign team members to specific stages of the pipeline. When the team members have to handle a large number of customers at the same time, it negatively impacts their productivity. However, by assigning each team member a particular segment, they will be aware of their responsibilities and the criteria they should follow to progress the lead in the pipeline.
Bottom line
A sales pipeline is a critical part of your sales and marketing efforts that, when implemented the right way, maximizes sales revenue for a longer period. While today, the competition is sky-rising, the prospects have no time to spend on unguided sales. Having a sales pipeline can bring significant difference by guiding your prospects throughout the sales process. From initial inquiry to final deal closing, every lead is given due consideration to help your business achieve target revenue.
FAQs
Are the sales pipeline and sales funnel the same?
Sales pipelines and sales funnels are often used interchangeably, but they are not the same. A sales pipeline represents the sales process from the perspective of the sales team. It depicts how a lead moves through different stages of a pipeline until closing the deal. The sales funnel, on the other hand, illustrates the sales journey from the buyers’ perspective. It analyzes the actions taken by a lead from initial inquiry to converting into a paying customer.
What are the stages of a sales pipeline?
A sales pipeline comprises multiple stages, including prospecting, qualifying prospects, contacting leads, nurturing leads, sending proposals, negotiation, lead closing, and retention.
What is the role of CRM in a sales pipeline?
CRM plays a vital role in a sales pipeline by storing and organizing the leads’ data and tracking the leads, opportunities, and customer interactions at every stage of the pipeline.
How can I keep my sales pipeline updated?
You can keep your sales pipeline updated by accurately specifying the criteria for the leads and opportunities, frequently validating data, periodically reviewing the cold leads, and removing the leads that are not likely to convert at all.
