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What is a Sales Pipeline and How to Build It?

Ajay Jay
January 31, 2024
5 min read

In the dynamic world of sales, one term you'll often come across is 'sales pipeline'. But what exactly is it, and how can you build an effective one for your business? Hang tight; we're about to break it all down for you.

Understanding Sales Pipeline

Let's start at the beginning.

The term "sales pipeline" refers to the systematic process that a company follows, tracking the journey of a potential buyer from the first point of contact through to the final sale.

It's a visual representation of where prospects are in the sales process. Each stage of the pipeline represents a step towards conversion - from a simple inquiry to a successful deal.

"A sales pipeline is essentially the heartbeat of your sales process"

An effective sales pipeline offers transparency, allowing you to see whether your sales process is on track and if any prospects are stuck in a particular stage. It's a mighty tool that can help businesses of all sizes understand their sales process better, increase efficiency, and predict revenue growth.

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The Pieces of the Puzzle: Stages of a Sales Pipeline

While the number and definition of stages may vary depending on the business, a typical sales pipeline includes the following:

  1. Lead generation: This is where the journey begins; identifying potential clients who may be interested in your product or service.
  2. Lead nurturing: This involves establishing and developing a relationship with these potential clients, by understanding their needs and demonstrating how your product or service can meet those needs.
  3. Proposal or quote: Once the prospect is well understood, a quotation or proposal is given indicating how their needs can be met, usually in exchange for a specific price.
  4. Negotiation: If the prospect responds to your proposal, a negotiation process begins. This could involve adjusting the terms of the offer or price.
  5. Closure: This final stage is when the prospect becomes your customer. The deal is sealed, contracts sign, and payment made.

Constructing a sales pipeline may seem complicated, but with a systematic approach and a clear understanding of your sales process, you can build a comprehensive pipeline helping you close deals more efficiently.

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Sales Pipeline vs. Sales Forecast

Gearing the discussion towards understanding the difference between a sales pipeline and a sales forecast, it's of utmost importance to clarify right from the start that although these terms are often used interchangeably, they differ fundamentally in their nature and function.

Sales Pipeline, as we have already explored, is a visual representation of your sales process, breaking it down into various stages. It's your battle plan, a tool that records and follows the buying journey of a potential customer, highlighting which stage they are at and what action is needed from your end to advance them further. It’s about putting perspective to numbers.

On the other hand, the Sales Forecast is an estimation, a projection of future sales revenue. It is calculated based on the deals in your sales pipeline, considering their probabilities of closing, and usually over specific time frames such as a quarter or a year. It helps in setting realistic sales goals, planning budgets, and risk management.

We could liken the sales pipeline to a road map—delineating the route, pointing out the landmarks. The sales forecast can be viewed as your GPS, predicting your time of arrival based on the current speed and traffic situations. Both have their own unique importance and functionality - one outlines the process, the other predicts the outcome.

  • Sales Pipeline: Tracks the progress of individual deals, providing insights into how many prospects are in the system, what stage they are at, and what actions should be taken to push them forward
  • Sales Forecast: Utilizes the data from the sales pipeline to predict sales revenue for a predefined time period.

In a nutshell, while the sales pipeline emphasizes process and progression, the sales forecast focuses on prediction and profitability. Both tools when used in unison, can significantly enhance the effectiveness of your sales strategy.

Measuring the quality of a sales pipeline

Having a sales pipeline is one thing, but ensuring its quality is a completely different ball game. It's crucial to measure the efficiency and effectiveness of your pipeline to ensure your sales efforts are not in vain. So, let's dive into the ways to measure the quality of a sales pipeline.

1. Conversion Rates

Arguably, the most important metric for assessing the quality of a sales pipeline is the conversion rate. Conversion rates measure the percentage of prospects that progress from one stage of the pipeline to the next, and eventually become customers.

Make sure to monitor how many leads are moving through the funnel from each stage to the next. It's one of the best ways to see if there's a blockage or slow point where potential consumers are dropping out.

2. Average Deal Size

Another useful sales pipeline metric is the average deal size. This measures the average value of the deals that are currently in your pipeline. A rising average deal size could mean that your sales team is targeting larger accounts, or offering upsells and cross-sells effectively.

3. Sales Velocity

The sales velocity metric offers insight into how quickly potential deals are moving through the pipeline. Sales velocity can be calculated by multiplying the number of opportunities, the average deal size, and the conversion rate, then dividing by the length of the sales cycle.

4. Pipeline Value

The total value of all opportunities at each stage of your sales pipeline represents the pipeline value. It can give an excellent overview of your potential revenue targets, but it's important not to rely too heavily on this figure - not all opportunities will turn into sales.

Building and maintaining a high-quality sales pipeline isn't always easy, but it's a crucial task for any sales team looking to increase revenue and achieve sales targets. By keeping a close eye on these key metrics, you can ensure your pipeline is healthy, productive and moving in the right direction.

Step-by-step Process to Clean Up Your Sales Pipeline

Cleaning your sales pipeline is vital for maintaining a clear picture of your potential sales opportunities. An overcrowded or outdated pipeline can lead to ineffective forecasting and hinder your team's decision-making capabilities. Here are some steps you can take to keep your pipeline clean and streamlined.

1. Review Your Pipeline Regularly

Start by setting a regular schedule for reviewing your sales pipeline. This could be weekly, bi-weekly, or monthly, depending on your business operations. During these reviews, analyze the status of each deal, identify any bottlenecks, and determine if any opportunities should be moved forward, paused, or removed from the pipeline.

2. Prioritize Opportunities

Next, prioritize your list of prospects based on factors like their engagement level, potential deal size, or how well they fit your ideal customer profile. Focus your attention and resources on high-priority opportunities while keeping lower-priority ones on the back burner. This not only reduces clutter but also helps you close deals more efficiently.

3. Set Clear Criteria for Each Stage

Ensure that there are clear, objective criteria to move deals from one sales stage to the next. This minimizes ambiguity and helps avoid keeping deals in the pipeline for longer than necessary. For example, a sales lead might move to the 'proposal' stage only after a successful product demo or a confirmed budget from the prospect.

4. Remove Stale Opportunities

As hard as it may be, it's crucial to remove opportunities that have gone stale from your pipeline. These are deals where the prospect is unresponsive, has been stuck at a stage way beyond the average sales cycle length, or has clearly indicated they're not interested. Clearing out these leads gives you more clarity and helps maintain the health of your strong sales pipeline.

Remember, a clean and efficient sales pipeline directly impacts your sales productivity. Regularly cleaning up your pipeline can help you focus on promising opportunities, make accurate forecasts, and ultimately, boost your bottom line.

What tools do you need to build and maintain a pipeline?

Building a robust sales pipeline involves more than just strenuous effort and strategy. It also requires the right sales tools. The proper utilization of modern-age technology can work wonders for your sales process, making it more organized and efficient. Here are some essential tools that you might find beneficial:

1. Customer Relationship Management (CRM) Software

A CRM software is an essential tool in building your sales pipeline. CRM systems organize and manage all your customer data, track customer interactions, and provide a centralized platform for your team to access and update needed information. Most CRMs also include tools for pipeline management, making it easier to transfer leads from one stage to another.

2. Communication Tools

Effective communication is key to a successful sales pipeline. Innovative communication tools like Slack or Microsoft Teams help to keep your team connected, fostering better collaboration and faster response times, which all contribute to a smoother pipeline flow.

3. Marketing Automation Tools

Tools like HubSpot or Marketo can automate your marketing efforts, freeing up valuable time for your team. They can automatically email leads, track their engagement with your content, and move them to the next stage of the pipeline when they are ready. Additionally, these tools can provide valuable analytics to help optimize your process.

4. Analytics Tools

Understanding your sales pipeline's performance is crucial in order to make data-driven decisions and improvements. Analytics tools like Google Analytics or Power BI provide detailed insights into your pipeline, enabling you to see which stages are working well and which require improvement.

Remember: The tools you choose depend on your business needs, budget, and the complexity of your sales processes. Whichever tools you decide to use, ensure they align with your sales strategy, are user-friendly, and can integrate with your other systems to create a seamless workflow.

How can Preskale help?

Accountability and Transparency

With Preskale, you can instill unparalleled accountability and transparency in your sales pipeline. It enables you to map out every stage of your pipeline, providing crystal clear visibility into every element of your sales process. So, rest assured, there won't be any more grey areas causing confusion or conflict among your sales team.

Performance Tracking

Every sales process needs consistent evaluation and adjustment, and Preskale facilitates just that. It helps you track your sales performances, identify bottlenecks and gaps, and derive constructive feedback and action items. Auditing your sales pipeline has never been easier!

Proactive Approach

In the fluctuating landscape of sales, being reactive won't get you far. With Preskale, you can shift towards a proactive approach. The solution's predictive analysis feature allows you to forecast sales trends and adapt your strategy in advance, giving you a competitive edge.

Enhanced Customer Engagement

At the end of the day, it's all about pleasing your customers, isn't it? Preskale can help you augment your customer engagement. By aligning your sales process with customer expectations, you can generate stronger leads, cultivate relationships and boost customer loyalty. Say hello to happy customers!

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