How to Manage Sales Pipeline: Best Practices for Sales Pipeline Development

Ask any sales manager their most important job, and they’ll likely answer, “Hitting target.”

The smart ones will answer by adding, “Securing the sales pipeline to hit the target after that.”

In sales, the hard reality is that a successful salesperson is also a successful sales pipeline manager, although there’s no award for best pipeline generator at the annual sales kick-off.

At its core, sales pipeline management is an insurance policy for sales reps that’ll help maximize their chances of hitting a target, earning good money, and even keeping their job.

  1. What Exactly Is a Sales Pipeline?
  2. The Stages of Sales Pipeline
  3. What’s the Importance of a Sales Pipeline?
  4. How to Enhance Your Sales Pipeline
  5. Best Practices for Sales Pipeline Management

What Exactly Is a Sales Pipeline?

A sales pipeline is the salesperson’s list of suspects, prospects, leads, and opportunities that will hopefully translate into deals with the care and attention of your sales reps. Some of these will come from leads generated by marketing campaigns. Others will come from existing or past customers, with a fair selection coming from cold calling by the sales team or even chance conversations with contacts.

To be clear, not all the elements of a sales pipeline are equal. Sales reps need to go through their sales process and the sales pipeline stages for each of their opportunities to see which need developing further as possible deals and those which need qualifying out at an early stage.

Qualifying the opportunities in a sales pipeline fully can take minutes, weeks, or even months, depending on the complexity of a customer’s needs and the complexity of a possible solution.

Sales management will apply the principles of sales pipeline management as the art and science of assessing and prioritizing opportunities to help assure the achievement of a sales quota. They’ll challenge their sales teams to ensure everyone has a good understanding of the sales process and the sales pipeline stages, so they can be fully confident that opportunities are realistically qualified and that their sales pipeline is adequate to hit their sales quota.

Managing a sales pipeline clearly matters to the salesperson, the sales manager, and ultimately the business.

So, let's explore all this in more depth.

The Stages of the Sales Pipeline

The stages and sequencing of the sales pipeline process are the foundations for effective selling. The key point is that all the sales pipeline stages need to be completed in the correct sequence and to the same high standard. Taking shortcuts can mean qualifying in opportunities that don’t play to your products' strengths, which ultimately distracts you from the deals that are a good fit. For a salesperson, a healthy sales pipeline is having a sales funnel filled with qualified opportunities that’s three times their target.

1) Prospecting

The first stage of building a pipeline is somehow finding the prospects to engage with that have problems you can potentially solve. The marketing function will help significantly with this by running lead generation campaigns. Incoming inquiries from customers, leads from events and webinars, and opportunities from existing customers and contacts will also be added to the list. Finally, there’s the classic cold calling effort made by sales reps themselves, which can make a significant contribution to a vibrant sales pipeline.

2) Qualification

The next step in developing your sales funnel is the qualification process, where you assess whether a deal is viable for your business.

The qualification model commonly used is BANT:

Budget – Has it been allocated, or is this an unplanned spend?

Authorities – Is it clear who the final budget authority is? Do you have access to them? Are they even aware of the project?

Needs – What needs does a customer have, and how close a fit is your solution? Are these needs sufficiently compelling to justify the costs you may potentially propose? What’s compelling them to work with any company, not just yours?

Timings – What timescales is your prospect working to? What’s driving these timescales? What happens if that timescale is missed? Are there penalties for the customer?

This qualification process is essential – you want to qualify out unviable opportunities as early as possible so that you don’t waste time pursuing deals that won’t yield results. This qualification process will be a constant throughout the sales process and can help give you an early warning of problems should the competitive situation change.

3) Needs Analysis

Once you have a basic understanding of the fundamentals and you can see there’s a potential opportunity for your product, take care to understand the needs of your prospects. Understand all the aspects of the problem they’re trying to solve. Is it affecting their ability to manage their costs, raise their prices, or build their market share? Is it affecting their ability to launch products or manage their reputation? Are there regulatory or compliance implications? It would help if you also explored the professional motivations of those involved in the project too.

Once you’ve completed this stage, requalify, using BANT to ensure it’s still a viable opportunity.

4) Presenting Your Value Proposition

With a solid grasp of your customers' needs, issues, and business implications, you can present your solution to their problems.

This is the stage where you build on the relationships you’ve built up, and, hopefully, you become your prospect’s preferred choice.

5) Identifying Your Decision Makers

We’ve already touched on the importance of authorities. In some sales situations, the decision-maker and budget holder will be the person you’re working with directly. However, in larger, more complex enterprise deals, there’ll likely be a network of operational, technical, and commercial buyers within the business. Mapping these relationships and then going through the same qualification process with each of them will help ensure that the opportunity remains viable and you remain competitive.

6) Competitive Analysis

As you go through this sales pipeline process, you’ll likely pick up hints of who your main competitors are. It may not always be obvious. There will likely be your direct competitors who will take a similar approach to you in solving your customers' problems. Sometimes your main competitor will be the status quo, as the customer seeks ways to make their current operations more efficient and sees your offering as a viable option that could help them. This ongoing competitor analysis will be part of the ongoing qualification process that’s core to your sales pipeline management. Understanding who your competitors are will help you differentiate yourself away from them as your sales campaign proceeds.

7) Proposal

With an understanding of your prospect’s needs and how your solution can help address them uniquely and compellingly, you’re well placed to put forward your final proposal in a way that’ll be competitive. At this stage, the qualification process should mean that you’re sending proposals out where you feel your sales reps believe they have a better than a 50/50 chance of winning them. There’s little point in proposing to customers if members of your sales team are thinking, “Well, let's see what happens, finger crossed!” Time spent preparing a proposal you won’t likely win is time wasted that could be better spent on opportunities you’re more likely to win.

8) Negotiation

In parallel to your own efforts, your prospects will have been going through their own sales pipeline, qualifying proposals in or out based on how well companies engage with them, how realistic or practical their proposals are, and how they view their experience or reputation. Customers typically rank proposals and engage with the top two or three to select their final choice. Generally, whoever is leading the procurement project will have a preference and will seek to build a consensus with the rest of the buying group. Collectively, they’ll devote most of their negotiation effort to their first-choice bidder.

In this case, the buyer’s second and third preferences become a mix of insurance policy and bargaining chip. Approach your negotiations based on generating win-win options, as highlighted in the framework detailed in the famous book on negotiating “Getting to Yes,” by Ury and Patton. Lay out your options, backed up by the issues that legitimize your position, and encourage your customer to do likewise to get the best outcome. This is the most effective way of making sure your competitors don’t get a look in at the very end.

9) Sealing the Deal

Getting the informal nod of approval is a great feeling, but this only increases the pressure on sales reps, as they move toward completing the sales process by negotiating the final terms and the package of options the customer actually buys in the end. By this stage, trust will have been established so both sides can advance in good faith. Nonetheless, there’s the potential for pitfalls that can prevent a deal from being signed, followed by the engagement of the second or third-placed vendors.

What’s the Importance of a Sales Pipeline?

Having explored the various stages of a sales pipeline, it’s obvious that its value lies in it being an excellent indicator of the pulse of any business's sales and marketing operation. It provides a real-time measure of a company's ability to engage with its target market and how well it converts that engagement into opportunities and, ultimately, revenue. A sales pipeline demonstrates how well sales teams are applying the sales process, and it offers sales management the ability to see what’s working well and what needs more effort or support.

Given its significance, how can you best focus your efforts on enhancing how you manage your sales pipeline?

Let’s explore in more detail.

How to Enhance Your Sales Pipeline

Every organization will have its own approach to sales pipeline management. However you choose to tackle this issue, the key question is whether it helps you consistently hit your sales targets. With staff turnover and new products and services coming on board almost constantly, sales managers must work out how to optimize the way they manage the sales process, and the sales funnel they’re ultimately responsible for.

So, let’s consider some areas you can focus on to enhance your sales process and your sales pipeline so that your sales teams make the best use of their limited time.

1. Begin with the User Experience and the Buyer Journey

Sales managers are rarely short of sources of input when looking at how best to improve the performance of their sales team. There are many sales courses, sales strategy models, and sales consultants happy to offer their advice about what they could do.

Despite all these options, time spent thinking about the customer's needs will be time well rewarded. But don’t fall into the trap of confusing your needs and preferences with theirs. Try to understand how you can better solve their problems, rather than simply asking, “How can we sell them more?”

Investing time and money to understand the needs and preferences of your customers and prospects will be amply rewarded. Work with your marketing function and maybe even external consultants to speak with your customers to understand why they bought from you. Find out what was good about working with you and what wasn’t – the answers may surprise you. Engage with previous prospects to find out why they didn’t select your products. Was it the way you engaged with them? Was your proposal unrealistic? Speak with industry practitioners about the main issues and challenges facing your target audience. What are their top three issues? If they aren’t problems you can solve, you may need to go back to the drawing board. Ask people how they buy from vendors and appreciate the differing needs of economic, operational, and technical buyers. A good description of this approach is offered by the Pragmatic Institute, whose framework will help you better understand your customers' needs and how they buy from vendors like you.

2. Identify the Stages of Your Sales Cycle

With a detailed understanding of how your customers buy from vendors like you, you can clarify the different stages of your sales cycle. Companies often use a percentage model to identify the different suspect, prospect, proposal, upside, forecast, and close phases. These fit well with CRM systems that can provide standard and weighted forecasts to senior management.

The key is ensuring that everyone understands and follows these rules so that your senior management has a realistic view of their pipeline. Individual reviews and reviews with sales teams will help with this process.

3. Develop a Sales Strategy for the Team

Your sales strategy is where the “rubber meets the road.” It needs to capture all aspects of your understanding of your customers' needs and how they buy. And it needs to align with your standard sales cycle.

The optimal sales strategy comes from identifying which target sectors, segments, and personas have the greatest propensity to buy from you. Use your vast array of business data in your finance systems, your marketing systems, and your CRM systems to identify the areas that offer the best opportunities to develop your business in a way that meets your objectives. Use external data sources to fill in the gaps in your own data sets to identify those companies, demographics, and segments that can take your business forward.

Use AI capabilities to capture and synthesize this data and present it in a way that’s easily understandable to sales teams, sales managers, and teams outside the sales function. This data, allied with your own hard-won experience, offers you the chance to maximize the impact of your sales effort this year, next year, and beyond.

4. Set Your Performance Objectives and Your Incentive Plan

With a solid grasp of the opportunity open to you and the needs of your business, you’re in an excellent position to set revenue targets and sales quotas that maximize your growth and help you achieve your objectives. You can use the same data to design your incentive compensation management plan, so it aligns your sales teams' behavior with the needs of your business.

5. Make Use of the Most Advanced Tools and Technology

The use of comprehensive data analytics as part of the sales management process will likely come more easily to some than others. In fairness, no one ever went into sales with the ambition of being their own data scientist.

In recent years, the rapid growth in data has fortunately been mirrored by the equally rapid growth in tools that allow non-scientists to capture and analyze the data to get the key insights they need to deliver the results the business expects.

SaaS-based capabilities allow sales managers and sales operations teams to capture multiple data sources quickly and easily. They help them interrogate data to provide insightful and timely revenue intelligence. This insight can help in the design of sales quotas and territories and the incentive compensation plans that drive success. AI capabilities can also be applied to capture insights and opportunities while sales managers focus on their job.

Best Practices for Sales Pipeline Management

1. Pressure-test your Sales Pipeline to Eliminate Sales Pipeline Risk

Pressure-testing your sales pipeline is a great exercise for sales managers and sales reps to perform in good times and bad. The idea is to review every sales opportunity in your sales pipeline and put them into one of these four categories:

  1. What's closed-lost
  2. What's at risk
  3. What's stalled
  4. What's still moving forward

Once you've put each sales opportunity into a category, you'll have a clear idea of where sales pipeline risk is and where you need to focus your efforts.

Reviewing your pipeline might be intimidating, but it’s essential if you are to be successful. Start with closing out all the sales opportunities that haven't been alive for weeks or months and should be closed-lost. Your sales pipeline coverage number will take a hit, but you weren't going to win those deals anyway – they were just clogging up your pipeline and distracting everyone.

Next, identify the opportunities at risk or stalled so sales reps can focus on getting them back on track. There are many indicators to tell you if a sales opportunity is at risk, but the biggest indicators we've seen are recent sales activity and the age of the sales opportunity.

If there hasn't been any activity on the opportunity recently, say the past 14-days, that’s a pretty good indicator that it could be at risk. Similarly, if the age of the opportunity is far beyond your historical average, either in its current stage or overall, that’s a great indicator of a stalled sales opportunity.

There are over 30 indicators we've got listed out in detail in our free Deal Health System eBook.

2. Track the Health of Sales Opportunities to Help Sales Reps Develop Better Habits

One way to improve sales pipeline growth is to be more efficient with what you have. The best way to do this is to keep your sales reps accountable for their sales opportunities so they can build and maintain a sales pipeline full of healthy deals.

As a business, there are several indicators you can track on each open sales opportunity to tell if it’s healthy or not, but here are the top five that every company should be tracking today:

  1. The age of the sales opportunity
  2. The most recent sales activity
  3. If there is a next step on the sales opportunity or not
  4. If there is a close date set on the sales opportunity
  5. How many contacts there are associated with the sales opportunity

Once you're tracking the condition of your sales opportunities, you need to make sales reps accountable for taking the action necessary to keep deals on track. To do that, you need to make the indicators above visible and actionable. And to make bigger changes quicker, we recommend setting up alerts based on your indicators that encourage and remind sales reps to act before the sales opportunity is lost.

For a list of 20+ indicators with full definitions, examples, and why you should be using indicator alerts – check out our free Deal Health System eBook.

3. Rethink How to Nurture Sales Leads

When people think about nurture, they often think about nurturing marketing leads with things like a weekly/monthly newsletter, but there’s an entirely different stream of qualified sales leads that can be nurtured so you can have a continuous stream of qualified leads being fed back into your sales pipeline.

Success for marketing leads is about getting them educated about the value of your business and excited enough to show a buying signal. But when you're thinking about how to nurture sales leads and moving them back into the sales funnel, it's about timing and overcoming their objections.

To get those qualified sales leads recycled and back into the sales funnel, it's important to nurture sales leads in a 1:1, task-driven way that runs off specific nurture reasons – like when a lead wants to re-engage on a specific timeframe or if they have a specific objection they need to overcome.

Having clear, defined sales nurture reasons means you can design sales nurture programs that your sales team can use to remove objections and keep qualified sales lead warm until they’re ready to buy.

4. Concentrate on the Best Leads

It’s worth reiterating this because it’s all too easy to waste time on leads that’ll go nowhere. Sometimes deals will slip a quarter because of other customer projects. And sometimes they slip because a customer's pet project that you’re caught up in isn’t really that important to their overall business. It costs them nothing to engage with you, but it costs you a great deal. So, qualify hard.

5. Keep Your Pipeline Up to Date

Sales pipeline management is impossible if salespeople don’t keep their pipeline information up to date. While constantly chasing salespeople to update their sales forecast is the bane of a sales manager's life, it’s essential. Some companies penalize their salespeople if they aren’t constantly on top of their pipeline. An alternative approach might be to encourage them to keep their forecasts up to date by, in return, providing them with revenue intelligence information that can show them how they can be more successful.

6. Keep Track of Your Pipeline Metrics

Your sales pipeline metrics can also provide you with a sense of the health of your sales pipeline and your overall sales process. While sales pipelines will vary between businesses, there are some fundamental metrics you may want to think about, including the overall level of your pipeline and whether it is three times your target. You may also want to look at how long it takes for suspects to become prospects and how long it takes for leads to become opportunities. How long are deals in your pipeline, and what’s your average pipeline duration? These metrics highlight the dynamics of your sales process and will help you identify those areas and individuals that may need additional support.

7. Reduce the Length of Your Sales Cycles

As well as having sales target coverage, you want a picture of your overall sales process so that you begin to reduce your sales cycle.

There are several approaches to reducing your sales cycle. Firstly, try and keep the cost of your offering below your customer board-level spend limit. In broad terms, the lower the initial cost, the lower the approval level, and the fewer procurement rules – such as the number of competitive vendors needed in a bid – will apply. Another example is reducing the level of other services needed to support your product's use. A classic example is SaaS applications that use cloud-based computing capabilities that remove the need for costly computer hardware to support software applications. This approach takes the IT function out of the picture. It also allows you to charge a subscription license, which takes the investment out of a firm's CapEx budget and places it in the OpEx budget, which typically has a less demanding sign-of model.

To learn more about improving the health of your pipeline, we recommend downloading our free eBook, The Measurable Lead Model.