Businesses that consistently exceed their revenue goals have an effective sales process and a growing sales pipeline. Their pipeline is always full, and they turn data into valuable insights.
Despite this, more than 40% of businesses fail to meet their revenue targets. If you are one of them, you need an effective sales pipeline management system. You will miss crucial insights if you don't have visibility into the sales pipeline. You will learn how to build and manage a sales pipeline to exceed your revenue targets in this guide. But first, what is a sales pipeline?
The sales pipeline shows how a prospect moves through each stage of the sales process. In your CRM, prospects move through their sales pipeline by completing specific actions.
There are different sales processes for every company - and even within the same company for different products. As a result, you'll need a sales pipeline that reflects a typical buyer's journey.
Prospects move through the sales pipeline at different rates based on their level of interest, urgency, and amount of research they have done. It is even possible for some prospects to skip stages. For example, suppose a buyer contacts you through a referral and introduces you to the budget authority before you ask. If so, you'd move straight from "initial connect" to "meeting with the decision-maker".
Using the sales pipeline, reps and managers can forecast revenue by identifying where prospects are in the sales process and predicting how many will close within a particular time frame.
Sales Pipeline vs. Sales Forecast
There is a difference between a "sales pipeline" and a "sales forecast."
- The sales pipeline includes every opportunity a salesperson handles (no matter how new or mature). It helps sales reps determine the most effective way to proceed with prospects based on where they are in the sales process.
- In a sales forecast, opportunities are estimated to close within a given timeframe. This helps your sales team prepare for what's ahead by letting them know how close they are to reaching their goals.
For example, if a sales forecast anticipates missing your quota, you should double down on selling activities. However, if it estimates a 150% increase from last month, you should scale back your efforts to prepare for an equally successful month in the future.
You can use sales forecasting software like Sales Hub to create a forecast once you've started tracking your sales pipeline.
Sales Pipeline vs. Sales Funnel
"Sales pipeline" and "sales funnel" are also often used interchangeably. The sales funnel suggests, however, that the number of prospects you're working with will decline consistently over time.
As a result, you believe that you need three times as many prospects at the top of your funnel as at the bottom. To close 100 deals, a sales manager would ask his rep to connect with 300 buyers.
Sales educator and expert Jeff Hoffman clears this misconception by calling a sales pipeline a wide-mouth cocktail glass instead of an evenly shaped funnel.
Many prospects enter your pipeline, but the vast majority drop off after qualification. The majority of prospects should become customers once they have passed the critical point.
How to build a sales pipeline
What is the average time it takes to build and develop a sales pipeline? Depending on your product, base, sales team, and marketing resources, the answer will vary. To build a sales pipeline, follow these steps.
1. Define the stages of your sales pipeline
The quickest way to define your sales pipeline stages is to copy a template, but creating your own is more valuable. To track progress and predict revenue effectively, pipeline stages must match your prospect's buying journey. Typically, customers go through the following steps:
Awareness - The buyer realizes they have a pain point or opportunity.
Consideration - The buyer defines their paint point, develops evaluation criteria, and researches potential approaches.
Decision - The buyer has finalized their strategy and compares vendors/specific solutions.
Here is an example of a hypothetical buyer's journey:
Therefore, your sales pipeline might consist of the following stages:
- Connect - The buyer engages with your company through an email from a salesperson, a webinar, or a piece of content.
- Appointment set - The buyer agrees to a meeting to learn more about how you can help them.
- Appointment completed - They attended the meeting, and you confirmed the next steps.
- Solution-proposed - The buyer wants to use your product to solve their pain point or capitalize on their opportunity.
- Proposal sent - The buyer reviews your proposal or contract.
In general, the more complex your product, the longer your sales cycle will take - and the more sales pipeline stages there will be.
2. Identify how many opportunities continue through each stage
In terms of closed/won deals, you should know how long prospects spend at each stage. The average prospect may spend two weeks in the demo stage, while those who eventually buy spend three.
The percentage of opportunities that advance to the next stage should also be known.
It is crucial to establish yield probability (or conversion rate) per stage. In the demo stage, prospects are 75% likely to buy, while in the negotiation stage, they are 90% likely to buy. Estimates of revenue can be developed monthly or quarterly once you've assigned these percentages to each stage.
Your reps and sales managers can predict which opportunities will close based on these benchmarks.
3. Calculate the opportunities you need to hit your goals
By working backward, you can determine how many opportunities you need in each pipeline stage. Divide your target monthly or quarterly revenue by your average deal size, so you know how many deals you need to close.
Dividing your target deal number by your yield probability per stage will give you your yield probability per deal. If you need to win 135 deals, and your reps typically close 90% of deals in the negotiation stage, 150 opportunities must reach that stage in a month.
This process should be repeated for every stage. Divide the total milestones by salesperson once you have the total milestones. Here's an example from LevelEleven CEO Bob Marsh. Let's say that you need to book 2,000 deals per year in order to reach your target.
2,000 deals/year = 167 deals per month
8,000 proposals/year = 667 proposals per month
32,000 meetings/year = 640 meetings per week
64,000 calls/year = 256 calls per day
For a 100-person team, that means:
167 deals per month/100 reps = 2 deals per month
667 proposals per month/100 reps = 7 proposals per month
640 meetings per week/100 reps = 7 meetings per week
256 conversations per day/100 reps = 3 calls per day
These benchmarks can help salespeople track their progress.
Every rep will have a different conversion rate based on their stage of the campaign. A salesperson who struggles with prospecting but has a high demo-to-close rate will need fewer meetings to meet the quota than their peers.
4. Understand the commonalities between opportunities that convert
Next, identify the common characteristics of opportunities that convert at each stage. Rep actions (such as sending a follow-up email) and prospect responses (such as agreeing to a demo) are included.
You can optimize your sales process by knowing these patterns.
5. Create or adapt your sales process around this data
Create a sales process based on these actions and numbers or update your existing one. Having a proven framework to follow helps sales reps consistently close deals.
When you incorporate sales pipeline data into your sales process, you can move prospects and opportunities closer to closing.
6. Continuously add leads to your pipeline
However, establishing a sales process isn't enough. Once you build a sales pipeline, it's easy to end up with a dry one since many reps aren't big on prospecting. Often, sales teams focus more on closing deals than prospecting, so by the time the next month arrives, they're way behind schedule.
The prospecting part of your sales pipeline should always have more opportunities than the closing part. This is due to the fact that the number of prospects in each stage gradually decreases while the probability of closing increases. In order to keep adding new leads for the upcoming months, you should have a diversified prospecting strategy.
Reps can try multiple strategies, not just traditional ones like cold calling. According to HubSpot research, 56% of sales professionals use social media to generate new leads.
By aggregating potential leads and tracking their status, lead generation and prospecting tools can also help. By doing so, you'll always know how many leads you have and what stage they're at.
7. Maintain the health of your pipeline
60% of prospects say no four times before saying yes. Yet, nearly half of the salespeople never follow up. If you do not establish a five (or more) step follow-up process throughout your sales funnel, you will definitely lose leads.
Make sure your team follows up with leads according to a specific schedule, cadence, and method. Expectations should be clear, such as:
- We contact every inbound lead within six hours or less.
- Over the course of one month, every lead receives 10-12 touches.
- Every lead receives various email, phone, and social media touches.
- Every touch includes new information or resources.
By telling your reps when to disqualify prospects, a uniform follow-up strategy helps them maintain clean pipelines. Prospects who have not responded by the last touch should be removed from the pipeline.
8. Clean your sales pipeline regularly
If you want an accurate sales forecast, you must clean up your pipeline. Most forecasts use the opportunity's stage rather than its age to determine how likely it is to close.
A month ago, you sent the buyer a proposal for a $2,000 deal. You haven't heard from him since then, which suggests you aren't getting his business.
However, since opportunities in the negotiation stage have a 90% close rate, your sales forecast would count this deal as $1,800 in potential revenue in the next month.
That means your sales forecast is $1,800 off. Similarly, every stale deal will further widen the gap between expectations and reality.
How to clean up your sales pipeline
1. Identify prospects in your sales pipeline longer than your average sales cycle
Decide whether to remove a prospect based on your judgment.
You wouldn't want to miss out on that opportunity, for instance, if you are working with your champion to get the deal through their unusually complex legal review - it might take longer than expected, but it is likely to close.
2. Before completely giving up on a prospect, send them a sales breakup email
There are three possible responses: They are still interested, they are not interested, or they don't respond.
If either of these scenarios occurs, remove them from your pipeline. The contacts can always be added to a new list in your CRM, such as "Call back in one year."
3. Make sure your data is up-to-date and accurate
Eight out of 10 deals are lost because decision-makers were changed. Your job as a sales representative involves keeping track of your prospects' business changes and personnel changes.
Let's say a critical stakeholder leaves the company before the deal is closed. It might be necessary to move the deal back to the qualification stage until you identify the next decision-maker. Make sure close dates match your instincts by verifying them.
Make sure you double-check opportunity dollar values as well. Overly optimistic sales forecasts will result if these are too high. Too low, and you'll think you're further from your goal than you really are.
4. Periodically review your sales pipeline
Identify prospects who have gone radio silent, deals that have been stuck at one stage for longer than usual, and opportunities where progress has stalled.
You're better off purging these than keeping them in your pipeline "just in case." Your sales forecast will be more accurate - which will help you plan - as well as easier to focus on the deals that have a chance of closing.
Depending on your sales cycle, you should do this exercise every week or every month.
Sales pipeline management
Sales pipeline management estimates how much money you will make from current sales opportunities. Using it, sales reps can track their monthly, quarterly, and annual goals, as well as organize and monitor prospects.
In order to calculate this, you will need to know the following:
- How many opportunities your sales reps are actively working.
- Which stage is each opportunity in.
- How many opportunities typically pass from one stage to the next.
- The average deal size.
- Average sales cycle length.
If you have more historical data, your predictions will be more accurate, but it's okay to make informed guesses.
Let's say you just moved upmarket. Your new sales cycle might last five months based on preliminary research, early sales, and conversations with other companies selling similar products.
A CRM can calculate these metrics for you and provide greater visibility into pipeline activities.
Sales Pipeline Analysis
Sales Pipeline Metrics
To determine whether your pipeline is healthy, you should know some baseline metrics. You can use these metrics to measure the health of your sales pipeline - and, from there, the health of your team, department, and organization.
Your sales cycle should decrease as your salespeople become more knowledgeable, your marketing team becomes more adept at attracting the right prospects, and your business becomes more well-known.
Overall, your pipeline value must increase. There needs to be an increase in average deal size, number of deals, and conversion rates. Therefore, measuring pipeline velocity allows you to determine your pipeline's health.
Sales Pipeline Visibility
Pipeline visibility provides salespeople with an overview of their sales pipeline. Reps can determine how pipeline activities are tracking towards overall goals using this CRM feature.
For more accurate sales forecasting, reps can adjust pipeline volume and budget expectations based on pipeline visibility. Each of your salespeople can be analyzed individually and compared to previous months, quarters, or years.
You might need to coach one of your salespeople on negotiation if they have an impressive connect-to-qualification rate but a poor close rate. In the meantime, if another salesperson has difficulty identifying and contacting potential customers, you should teach them how to do so.
Sales Pipeline Reviews vs. Sales Forecast Reviews
Your team's success depends on both forecast reviews and pipeline reviews, but don't do them both at the same time. Deals likely to close in a given time period should be the focus of a forecast review. Managers use this meeting to predict whether their teams will achieve their quotas.
In order to move deals through the sales process efficiently, a sales pipeline review is necessary. Fresh sales opportunities are examined in an effective sales pipeline review.
When sales managers jump in at the end of the sales process, it is usually too late for them to influence the outcome. They should help reps strategize while the opportunity is still fresh if they want to make an impact.
Sales Pipeline Review Agenda
Choose a cadence based on the size of your team, the length of your sales process, and how frequently new opportunities enter your reps' pipelines.
A sales pipeline review should last approximately 30-60 minutes. If your team and structure work best, you can either focus on the most important deals or review all opportunities at the beginning of the process.
An Easy Sales Pipeline Template
You can set up your sales pipeline in a spreadsheet using a sales pipeline template. Plug in each deal, its expected value, and the probability of closing, and you'll get the weighted average.
There is also a column for the assigned salesperson, the prospect's contact information, and the next steps in this sales pipeline template.
Using a CRM is much easier than managing your sales pipeline in an Excel spreadsheet. With HubSpot CRM, you get an up-to-date view of your sales pipeline, multiple ways to sort your deals, automatic activity tracking (so you won't have to manually log calls or emails), and detailed contact records for every lead.
Sales Pipeline Report
The next step in managing your sales pipeline is creating reports. You can predict when opportunities will close using reports and get a clearer picture of the pipeline's health. What should your sales pipeline report include?
- The number of opportunities in the pipeline. Pipelines with sufficient opportunities to meet revenue goals and quotas are excellent indicators.
- Opportunity sizes. How much value will a closed opportunity provide to the sales team?
- Close date for each opportunity. You can use this to determine when an opportunity might close. And it allows salespeople and managers to forecast expected revenue.
- An overview of the pipeline over time. Is your pipeline growing? You can find the answer by zooming out and looking at the pipeline history.
Build Your Sales Pipeline Today
You'll master your results when you master your sales pipeline. If the entire organization is aligned around revenue goals, the sales pipeline benefits everyone - not just the sales team. Use this sales pipeline template and these tips to forecast your deals when your business is disrupted by a new competitor, a major opportunity, an industry shift, or an internal strategic change.