Sales Pipeline: A Comprehensive Guide

Picture of Dan Bruce
Product Marketing Manager, Varicent Lift

In previous Varicent articles, we’ve talked at length about sales pipelines and what they mean to your sales team. Now, we’re delving a little deeper with some sales pipeline analysis, so you can better understand the sales pipeline and its benefits and be clear on how it differs from the sales funnel and sales forecasts. We’ll also look at sales pipeline management best practices and how the right pipeline CRM software can help you manage and measure your pipeline in a way that heralds sales success and growth.

 

What is a Sales Pipeline?

So, let’s start by getting the definition and purpose of a sales pipeline straight. The perfect sales pipeline covers every stage of the sales process, from the first contact with an opportunity, prospect, or lead through the proposal to aftercare and repeat business. This whole customer journey can be captured in your business's customer relationship management (CRM) tool.
 
A manager, using pipeline dashboards and reporting, should be able to accurately pinpoint where the customer is and predict revenue for both the business and the sales rep. For the latter, that means accrued commission on top of their salary. There should be a set and finite timeframe for a sales pipeline and, along the way, multiple touchpoints to view real-time and historical data on dashboards that capture the sales pipeline reports that reflect the stage and success rate thus far.
 

Sales Pipeline Stages

While there are endless variations of the sales pipeline, the most straightforward and widely recognized model is this one, often represented by an inverted pyramid:
 
The typical sales pipeline


Benefits of a Sales Pipeline

This pipeline methodology wasn’t dreamt up just to give analysts something to do. A study carried out by Harvard Business Review showed that companies with an effective pipeline management system had an average growth rate of 5.3 percent. That’s a 15% higher rate of growth than companies without an effective sales pipeline management strategy.
 
In short, a well-managed sales pipeline, in tandem with supporting sales software, potentially provides the following advantages:
 
  • More streamlined sales
  • The ability to forecast business results
  • Clarity on how to allocate resources to support sales
  • An analysis of whether the sales strategy is working for your business
  • An overview of current fiscal and territorial progress
  • Insight into where you are in terms of your KPIs and targets

Sales Pipeline vs Sales Forecast

Hold on a minute... sales forecast? That’s not a stage, is it? No, it isn’t. And is that an alternative name for the sales pipeline? Again, that would be a no. Within the sales community, there’s been much debate about the differences and similarities between these two terms. To really understand and appreciate the robustness of a sales pipeline (and to make sure that you win that debate the next time someone quizzes you), it’s worth splitting it out from a sales forecast.
 
Quite simply, while we know that a sales pipeline represents the long game and covers the entire process, a sales forecast focuses on the deals that are most likely to close in a specific time period.
 
Behind that snappy definition is also a difference in purpose. In the case of the sales pipeline, a sales rep is constantly using their CRM dashboard to gauge where a customer is in the sales process. They can then utilize the analytics to plan their next move. A sales forecast has a specific purpose—it represents how close an individual or team is to achieving their target and, therefore, what further actions need to be taken to get there.
 
It’s fair to say that the sales performance management software that supports your sales pipeline should contain forecasting capabilities, as early evidence of a possible “miss” allows you to shift quotas, reassign territories, and any other factor that may be a barrier to hitting sales goals.
 

Sales Pipeline vs Sales Funnel

The term sales funnel gets confused and conflated with sales pipeline even more often than sales forecast. Again, it’s a part of the sales pipeline, but by no means the full picture. In fact, visualizing an actual funnel is a smart way of separating this concept into stages.
 
Picture a siphon, the sort of thing you use to transport dishwasher salt into your machine. In the same manner that wide opening quickly narrows to control the amount going in, the sales funnel represents the big number of initial leads and prospects as these reduce to more likely customers and actual conversions in the qualification stage of the sales pipeline.

Sales funnel - from leads to customers

Let’s be realistic. Not even the most skilled, fortunate, and determined sales reps can maintain all those original prospects without some losses or leads tailing off. That would most likely create an unmanageable quota. In short, the sales funnel is no longer relevant past the qualification stage, but much of the really hard work goes in at this point. It’s the wisdom of understanding which lead has “legs” (i.e., answers your calls, sets up a meeting, shows some intent to purchase) versus the leaden leads that will drop off that take a sales rep beyond the funnel and into negotiation.
 

How to Build a Sales Pipeline

Now that we’ve established what a sales pipeline isn’t, let’s consider some of the key considerations when modeling and navigating your sales pipeline.
 
1. Know your Potential Customer
 
Like preparing for a marathon, the training and build-up are as important as the race itself. Identifying prospects and getting lead generation going in the right direction involves the same care and attention. Think about:
 
  • Who is your product designed for?
  • What does that customer look like, and what are their needs?
  • How do you secure and find the right type and number of prospects?
  • What Are Your Customer Interested In?
What’s your Customer Interested in?
It’s also worth bearing in mind that a potential customer is carrying out their own purchase analysis, most likely using their CRM tool to answer queries such as:
  • Does this product meet my customer demographic?
  • Is it affordable/useful/marketable?
  • Does this clash with a similar offering?

Whether you’re in the business of selling directly to your customer or are reliant on a distributor or retailer to get your product to market, the research and analytics count in equal amounts.
 
Getting these customer metrics accurate is the key to forming a solid layer to that upside-down triangle. Sales performance management (SPM) software is often seen to be more about tracking the trajectory of the sales rep, but there’s a good deal of supporting software that is rich with metric reports reflecting the performance of a product, as well as custom fields that help you break down the demographics of potential prospects. By creating customer personas before the meetings and negotiations kick in, you’ll come closer and faster to those more likely to be interested in what you’re selling.
 
The other areas of rich data and analytics that you should be considering at this early sales pipeline stage are the wider state of the economy (in other words, is this the right time to be launching and reaching out to new customers?) and if you’re mining in an area that’s already been stripped of its assets.
 

2. Know the Winning Numbers for your Sales Pipeline

A sales pipeline process isn’t something that’s thought up overnight, nor does it exist in isolation. Backing up every stage are your company’s wider objectives and carefully defined key performance indicators (KPIs). Everyone working to complete a part of the sales pipeline needs a very clear idea of:
  • How many deals need to be achieved per month, quarter, or year?
  • Do warm-up conversations count toward compensation pay-outs as much as closing a deal?
  • How long will it take to move through the pipeline stages?


The common truth, as we saw when concentrating on the sales funnel, is that not every prospect gets to the negotiation stage, and even those that do may be lost before a deal is closed.This is where the right software can really shape and support your sales conversations and decision-making. Automated compensation calculations take the guesswork out of figuring out how much more you need to achieve to close, while quota management and territory planning tools ensure everyone in the sales team has the amount of customer, product, and area that they can manage. These metrics reports are the key to having an informed, incentivized team that can refer to real-time information on easy-to-read dashboards. They are also what give your sales pipeline shape and fluidity as your team progresses through the stages.

3. Know Your Sales Pipeline Stage Markers
 
Once you’ve built up some momentum beyond prospecting, what’s keeping those deals from derailment? Although there is an amount of organic movement, there should be a constant set of factors and variables that dictate if you’re good to move on. Some of the key elements are:
 
  • Be certain you’re talking to the right people at the right time: Whether this is having a conversation with the person that controls the purchasing budget, a booked call or meeting post-proposal, or the official opening of negotiations, you can’t pop the champagne cork arbitrarily.
  • Decide and agree on the event or activity that heralds the beginning of the next sales pipeline stage: Make sure that you have the analysis and metrics to back up this development.
  • Offer an integrated information platform: If you’re navigating a whole team from stage to stage, this is where your field staff needs to be feeding their results into an integrated platform that’s available to all. They can then see where they are with the rest of the team, and you have the evidence of progress or stalling for any performance management review situation.

 

4. Know your Process for Sales Success
 
As we’ve already recognized, no two sales pipeline journeys are quite the same. Also, there may be some back-peddling involved before you hit sales pay-dirt.
 
A progressive pipeline and sales success, even with automation, software, and dashboards, are often about the number of calls, emails, and scoping you do in the early stages (or sales funnel). It’s just as much about the amount of value-rich contact and follow-up you have with someone you’ve sold to before. Even with an established customer, you can’t ever take for granted that they will be an easy up-sell. The more diligent you are with the habitual stuff, the smoother the cool, edge-of-your-seat negotiations and deal-making will be.
 
For some sales professionals, that means setting aside a day a week purely for admin, calls, and research. For others, that routine ritual is monthly training or team check-ins. These are all the parts of the job that oil the wheels and ease the flow of the greater sales pipeline.
 
To keep a spirit of competitiveness alive and well during these routine stages, add in some custom fields to your supporting software that keep track of the number of calls made or training modules completed. Good software means that you can show off the high achievers on a company-wide dashboard presentation.
 
5. Know your Intended Outcomes and Benefits
 
As you and your team reach the end of a sales pipeline cycle, this is the perfect time for some sales performance management review. This should be considered on an individual, team, and even campaign level. Of course, plucking out one example of data from many won’t provide as much material for analysis as looking at several metrics and reports. Utilizing all the tools, data, and dashboard information allows you to understand which leads resulted in pitches and which pitches went on to become a negotiation and deal.
 
Swapping sales tips over the water cooler is not a recipe for success. A good business practice that comes from establishing a trusted sales pipeline process is, however.
 
Studying the solid evidence and metrics provided across the sales pipeline via sales performance software leads to a more holistic picture of whether your current model is working or in need of tweaking. Used effectively, it also displays whether it’s your sales team personnel that may not be working or may need tweaking.

 

How to Successfully Manage a Sales Pipeline

In an ideal sales environment, your team is ready and able to sail through each stage, securing the fruits of a successful deal in a timely and financially rewarding manner. Without implementing the right tools, you’re exposed to the dangers of sticking midway or even going backwards.
 
If you want to follow sales pipeline management best practices, investing in a watertight SPM tool is a sensible choice. The best pipeline CRM software can help your teams move forward without having to fight through a thicket of spreadsheets, unreliable data or lose focus and drive due to poorly directed resources and a lack of adequate compensation.
 

An SPM You Can Believe In

A sales rep needs to trust the analytics, know they are negotiating in a territory not previously visited and feel assured a good result will net a fair and just reward – which is all there for the taking with an exceptional SPM. The difference between that and an adequate data-gathering tool is like asking someone to stick their finger in the wind and guessing which way the cyclone’s coming – it removes the guesswork. It also serves as a way of moving past the first three pipeline stages into the arena of sealing the deal.
 
Strip out spreadsheets littered with human error and an incomplete picture of your lead’s needs and replace them with easy-to-read, accurate dashboards, and your team can progress much quicker to the next stage, without the fear that they may be wasting each other’s time by peddling a past purchase or a product that doesn’t quite fit.
 

Right People, Right Place, Right Result

It’s not just unreliable analytics that can be a blocker for sales reps. A perfect product launch plan can live and die by how well quotas and territories are managed. Put too few people into an area that’s full-to-bursting with leads, and the result is missed opportunity due to under-resourcing.
 
Flipping this on its head, an overload of field reps is more damaging than a bit of toe-stepping – it can result in the team jumping on each other’s leads or approaching the same people more than once, often the killer blow for keeping a healthy Loyalty/Account Management relationship.
 
All of this can easily be avoided with an SPM that sets realistic territories and manageable quotas while tracking the past and present purchase history of a business that’s being approached. Throw in the ability to configure market potential for a territory and potentially what further support staff may be required along the way, and you’ve got yourself a far more reliable management system plus a much better-utilized sales team.

 

Motivate to Compensate

One thing that keeps the sales pipeline buoyant is a motivated, enthusiastic team that can happily and honestly claim the compensation they have earned.
 
When a compensation plan comes undone, the fallout is epic. Any sniff of unfairness, whether that’s underpayment or a slack colleague collecting more than they deserve, can at best result in demotivation or at worse, dissent and desertion to a competitor. Losing your best people at any stage of the sales pipeline is a problem, but the chances of this occurring can be greatly reduced with a finely tuned commission scheme.
 
Onboarding a responsive, fully robust software tool is good as employing a whole team of number experts – only better value and more reliable.
 
Everyone receives customized targets but with inbuilt flexibility, so there is room to respond to change. These figures, together with current and past results, can be constantly reviewed on dashboards by both the sales rep and their managers. Strong performers can be celebrated and weak links identified while applying metrics against objectives is so much clearer.
 
With the right tools in place, you can appreciate the fiscal constraints and bandwidth of local territories, determine team strengths and ultimately reliably know who a valuable team player is, enriching but not clogging your fast-flowing sales pipeline.

 

Sales Pipeline Metrics You Should Track

There are a couple of sales metrics that give you a measure of a team’s performance.
 
Essential Metrics
 
Many businesses fail to recognize what can be the best sales pipeline for them. This is because there are numerous ways to measure performance. However, if you accurately assess your business’s nature, targets, and the functionality of your sales team, it removes much of the guesswork. If you wish to enter a particular market, then the market penetration metric is a good choice for you. Or, if you prefer to see how sales teams are faring in their bid to reach a revenue goal, revenue metrics by product line can be used.
 
Sales leaders understand the importance of regularly updating their pipeline metrics and frequently run these checks on them to ensure everything is going to plan, including:
 
Qualified Leads to Sales Ratio
 
Attracting the most appropriate and best-quality leads to your business makes sense, and a good sales rep should understand how to convert a potential lead into a consumer. A metric we recommend to measure a rep’s performance and conversion rate is the Qualified Leads to Sales Ratio.
 
Deal Size
 
Understanding your own range of products and identifying which customer to attract always makes good business sense, as does understanding a product’s pricing, performance, and potential benefits. This all becomes much simpler when you apply a Deal Size metric while providing the added bonus of helping your team to shortlist the most suitable customers for both now and the future.
 

3 Things That Can Support Your Sales Pipeline

Here are our top three pieces of advice for ensuring your sales pipeline underpins your business’s sales success and continued profitability:
 
1. Focus on and follow up the strong leads, nurture these customer relationships, and know when to let go. You no longer have to just rely on a phone call or meeting to check in with customers. Ensure you are on board with a retention and acquisition email strategy. Deliver alternative communication through engaging content and offers.
 
2. Utilize the data and metrics in your pipeline CRM software. There is no guesswork in sales. With current, live data on sales about to close and the number in your pipeline, you can act accordingly.
 
3. Keep on reviewing and keep on updating your sales pipeline process. That inverted triangle has room to grow and plenty of opportunities for an interception.
Visit Varicent’s website to learn more about sales pipeline management best practices and more. If you need further information on the best CRM pipeline software to support a successful sales pipeline, book a demo with us and speak to one of our knowledgeable team members.

Tags: Revenue Intelligence

Picture of Dan Bruce
Product Marketing Manager, Varicent Lift

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