What exactly is a sales pipeline?
In its most basic form, the sales pipeline simply shows the stages a prospect goes through as they become a paying customer.
A sales pipeline helps you track your sales prospects throughout the sales process and outlines the stages a prospect goes through as they move from potential buyer to paying customer. It also shows the recommended actions that sales representatives should take at each stage of a sale and how many deals they will need to reach their sales goals.
The importance of the sales pipeline
The sales pipeline gives sales reps an accurate idea of how to progress deals and increase the company’s overall revenue. This is both good for the company, who is bringing in more money, and the sales representative who is earning a commission.
The sales pipeline can also help sales reps find potential problems within the progression of a sale so that it can be addressed before it is too late.
The seven stages of the sales pipeline
Following a deal’s progression from potential prospect to paying customer, there are seven key pipeline stages:
- Prospecting is when a potential customer discovers your business, potentially through promotional activities, ads or even public relations. Most of the time this is done by targeting and raising awareness among potential buyers who fit the profile of your ideal customer.
- Lead qualification. This process determines whether the prospect is likely to want to know more about your product or services. It can be done by offering a type of lead magnet (something to capture their email address!) such as a webinar, e-book or white paper.
- Demo or meeting. Introduce a potential buyer to your services by setting up a demo or meeting. It is here that you will begin to figure out if there is a business case for the potential buyer and if it’s worth sending them a proposal.
- Proposal. How can you help the potential customer? The proposal is all about showing that you have a better solution/product than any other business. Ensure that the potential customer knows your prices are worth it.
- Negotiation and commitment. Adjust prices, manage expectations and adjust the size and scope of the job to fit the prospect’s requirements. Find an agreement that mutually benefits all parties involved and stick to it.
- Opportunity won. Finally, the sale is closed, and all that’s left is to fulfil the order.
- Post-purchase. After your sales reps have provided exceptional service and the deal is closed, monitor the account. At the right moment, introduce customers to new services and premium solutions (this is called cross selling). Let them know if their contract is about to expire and remind them about renewal options. If a customer is especially pleased with your service or a regular user, ask them to refer their friends and family.
Sales pipeline management
How to manage your sales pipeline
Depending on your product, sales team and resources, the time it takes to build a sales pipeline varies. Here are the steps you will need no matter how big or small your team is:
1. Plan out the stages of your sales pipeline
To maximise sales performance, the stages of your sales pipeline should reflect your prospects’ buying journey.
Consider your customer’s typical buying process:
- Awareness: The prospect realises they have a recurring problem or a job they need some help with.
- Consideration: The prospect thinks about what they need to solve their problem and researches potential solutions.
- Decision: The prospect knows what they want and is now comparing vendors or specific solutions.
Using this buying process as a guideline, the stages of your sales pipeline could be:
- Connect: The potential buyer comes into contact with your company through an email, downloadable content, a webinar, or a salesperson.
- Appointment set: The potential buyer agrees to learn more about what you can do for them in a meeting.
- Appointment completed: They went to the meeting and are happy to confirm the next steps.
- Solution-proposed: The potential buyer is interested in using your product to solve their problem.
- Proposal sent: The potential buyer reviews the proposal or contract.
2. Map out how much time a potential customer spends at each stage
You should identify the amount of time prospects are spending at each stage of your sales pipeline, both in won and lost deals. As an example, the average ‘lost deal’ prospect might spend only one week in the demo stage, whereas a prospect that actually buys something spends two weeks in the demo stage.
Understanding these patterns will help your team predict which prospects are most likely to result in a closed deal.
It is important to understand exactly where sales are converted in the sales pipeline. If you know that 20% of prospects result in a converted sale in the demo stage but 50% of prospects result in a converted sale in the negotiation stage, you will be able to develop estimates for your quarterly revenue based on the deals you have in your pipeline and the stages that those deals are at.
3. What do you need to hit your sales goals?
Now that you can estimate your quarterly revenue, you can use that data to work out how many deals you need in your pipeline to reach your sales goals.
To do this take your target quarterly revenue and divide it by your average deal size.
Next, take your target number of deals and divide it by your yield probability per stage.
So if your target was 150 sales and your sales representatives on average close 50% of deals at the negotiation stage, you would need 300 potential deals to reach the negotiation stage in that month.
Repeat this for each of the seven stages. You now have clear targets for your sales team to work towards in order to achieve your target quarterly revenue.
4. Identify common characteristics of converted deals
Understanding the common actions that sales reps take with deals that have been successfully converted allows sales reps to optimise how they are working to convert more sales in the pipeline. These common actions could be things like sending a follow up email or agreeing to a meeting/demo.
Doing this at each of the seven stages of the sales pipeline will enable you to streamline and optimise your sales processes – and over time, you will be able to build the perfect sales formula to maximise sales conversions.
5. Using data to adapt to your sales process.
Using the data we have gone through, especially within step 2 and 3, optimise your sales process and targets to reflect your learnings. By giving your sales representatives a proven framework based on data, they can prioritise their time and efforts to get maximum results.
Incorporating insights from sales pipeline data into your sales process makes it much easier for sales reps to convert prospects into sales.
6. Keep adding leads to your pipeline
Don’t forget to keep generating new leads! Even with an amazing sale process, only 5 out of 100 prospects close deals within the lead stage. Likewise, within the demo stage only 2 out of 10 prospects on average will make a purchase. Because of this, you should always maintain your focus on capturing new leads.
7. Maintaining your pipeline.
A common mistake people make when using a sales pipeline is not following up with leads. If you don’t establish a follow-up process throughout, it will inevitably end in leads going cold and lost sales.
Providing your team with a set of robust followup strategies and a well planned out prospect engagement flow is a good solution to this.
For example, adding guidelines to define how to best manage the sales pipeline, such as:
- Every inbound lead will be contacted within 6 hours or less.
- Each lead will get 10-12 touches throughout a month.
- Every lead will be met with a variety of phone calls, emails and social media touches.
- Each touch will include a new piece of information or a new resource.
To keep the pipeline clean, you should also ensure that your sales representatives are removing prospects that have not responded by the last touch, from the sales pipeline.
8. Cleaning your pipeline.
If you want an accurate sales forecast, you should clean your pipeline regularly. This is because sales forecasting uses each opportunity within the pipeline to determine whether it will close, but it doesn’t note the length of time it has been in that stage.
For example, if you sent a deal proposal to a buyer one month ago and despite several follow-ups, you have not heard back, then most likely that deal will not go through.
Now say that deal was in the negotiation stage and was supposed to be for £2,000. The sales forecast would still count this deal as having a 90% close rate and add an additional £1,800 to the estimated revenue for next month.
With each stale deal that the forecast is counting within its data, the gap widens between sales expectations and reality.