What is Sales Pipeline? [How To Build a Perfect One]

If you are juggling between hits and misses in sales, your sales pipeline is calling for help!

Once you explore the nooks and corners of your sales pipeline, you can learn a lot about the health of your business. 

Here’s your guide to the several aspects of a sales pipeline. Dive right in and learn valuable insights about building and measuring the perfect sales pipeline.

What is a Sales Pipeline?

A sales pipeline enables tracking all potential deals you’re working on in an organized way. In other words, it illustrates how potential buyers move through the sales process and helps you track where they are in their journeys. 

According to Pipedrive’s definition of a sales pipeline, “a good sales pipeline visualizes your sales process and makes goals easier to achieve by breaking the sales process down into small trackable tasks and shows you where in the sales funnel all your deals are and where deals are stalling.”

Sales Pipeline vs. Sales Forecast

A sales pipeline is all your deals at various stages, of which some may be successful and others not. Whereas a sales forecast predicts the number of deals, your business will likely win for a specific period. 

Pancho Mehrotra, CEO of Frontier Performance and Sales & Communication Expert, says, “forecasts are deals expected to close in a quarter. They are usually opportunity rated, the likelihood of closing and dollar amount and a pipeline is everything outside of that quarter.”

Author & Sales Strategist,  Colleen Francis, says, “a sales pipeline is a view of all of your opportunities. As such, it must show everything – from a newly identified opportunity to opportunities ready to close. A forecast, on the other hand, is only that smaller segment of your pipeline used to forecast expected revenue in a specific time period.”

All in all, the sales pipeline is the broader area of which sales forecast is a part. According to Norman Behar, we can forecast sales accurately with an accurate sales pipeline. So, it is important to include only active opportunities in the pipeline and eliminate the opportunities that are stalled out. The better the sales pipeline management, the more accurate your sales forecast. 

Sales Pipeline vs. Sales Funnel

A sales pipeline may be similar to a sales funnel, but they aren’t the same. While a sales funnel broadly represents the steps in a buyer’s journey, a sales pipeline represents the sales process. It covers everything salespeople go through – from leads to sales. 

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Here are a few key differences between a sales pipeline and a sales funnel. 

Perspective – A sales pipeline is a sales rep’s view of the deals they need to move to the closing stage. On the other hand, a sales pipeline is a customer’s view of their buying journey – from the awareness stage to purchase. 

Structure – A sales pipeline has a linear structure that tracks potential buyers from qualification through initial contact to post-purchase. In this structure, a prospect moves forward and never backward. On the other hand, a sales funnel is more flexible, which means prospects can move back and forth between the stages – from awareness to interest and then move forward to the evaluation stage. 

Insights - A sales pipeline is a process-oriented tool. Sales reps can use it to track the buyer’s journey - from open deals to wins. You can analyze revenue at each stage, number of leads, conversion rates, etc. On the other hand, a sales funnel is a visualization-oriented tool that can provide you with insights like where your leads are coming from, what products they are interested in, and where they are in their journey. 

How to Build a Perfect Sales Pipeline?

Building a healthy sales pipeline that helps you seal more deals faster can be done in six steps. Though it involves efforts, several sales pipeline tools are out there to help you build the perfect pipeline. 

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Step 1: Create a List of Your Prospective Buyers

Before building your pipeline, take stock of the buyers who want to purchase your product or solution. If you have too many prospects, you need a tool to manage the contacts and the interactions. 

Using a spreadsheet tool like Excel or Google Sheets is a good option if you are just starting out and your prospects are no more than 15. You can also use spreadsheet templates before getting a tool to manage them. 

However, if you have more prospects, get advanced tools like Salesforce, HubSpot CRM, Pipedrive, etc., to manage your sales pipeline well. 

Step 2: Identify Your Sales Pipeline Stages

A sales pipeline has several stages a prospect must go through before making a purchase decision. The stages may vary depending on certain factors. So, to create your sales pipeline stages, you must identify the milestones your prospects must accomplish to convert into paid customers. 

Here are the basic sales pipeline stages that commonly exist.

Step 3: Set Activities for Each Sales Pipeline Stage

If you do not want to overwhelm your sales reps with huge annual goals, break down the sales activities they need to perform to seal a deal. Focusing on completing the sales activities will make your sales reps more likely to achieve their sales goals. 

Though the sales activities may differ from deal to deal, assigning sales activities at each pipeline stage provides clear visibility of the journey to the salespeople. 

For example, if your first sales pipeline stage is initial contact, think of the activities related to it. Creating email copy, sending emails, tracking email metrics, creating promotional content for emails, etc. It may also be connected with leads over phone calls.

Step 4: Define the Length of Your Sales Cycle

The movement in your sales pipeline depends on the length of your sales cycle and how slow or fast your salespeople close deals. Also, your sales cycle length can vary depending on the complexity of the product, customization requirements, and the source of prospects. So, to control the average sales cycle length, fine-tune your lead sources, product delivery, and engagement. 

Step 5: Decide Your Perfect Pipeline Size

If the volume of leads in your sales pipeline exceeds what your salespeople can handle, you may lose out on leads. In fact, an estimated 24% of forecasted deals die out. So, do the calculations to find your ideal pipeline size. 

• Work on your sales targets and revenue goals.
• Find out how many wins you need to achieve the annual revenue or sales goals.
• Identify the average number of stagnant deals in a month.

For example, your salespeople pursue 70 leads, of which 12 to 15 may become stagnant over a period of time. So, if you want to achieve your sales goals of 80 sales, target 100 leads.  

Step 6: Eliminate the Stagnant Leads from the Pipeline

Unlike wine, stagnant leads do not get better with age. They rot and their chances of converting into a successful sale reduce. So, track the age of your deals. Remove the deals that exceed your sales cycle length. 

Step 7: List Sales Pipeline Metrics

Sales pipeline metrics help you maintain a healthy sales pipeline. Also, you can monitor them to track the performance of your sales team. Once you have set clear sales goals, tracking metrics help you identify the targets achieved, the number of deals required to meet the target, and earn the forecasted revenue for the year. 

Bonus👇 – A Kanban Sales Pipeline Example

This is the most common sales pipeline example (created using Salesforce Essentials) – a horizontal pipeline tracking each prospect using an opportunity card with the deal terms and contact information. You can move the cards from one stage to another as deals progress. 

Important Sales Pipeline Mistakes to Avoid

All set to create the perfect sales pipeline? But before you kickstart your efforts, here are a few common sales pipeline mistakes to avoid. 

According to Lisa Earle McLeod, A Sales Expert & the Founder of McLeod & More, Inc., three common mistakes can ruin your sales pipeline. 

❌Chasing Unicorns – By “chasing unicorns,” she means “going after something that’s never going to close.” 

Lisa says you can avoid this mistake by asking clarifying questions like,

• What action has the customer taken to indicate it’s moving forward?
• Who needs to be involved? 
• Have they ever done anything like this before? 
• What would cause them to act now when they haven’t in the past?

❌ Neglecting Nurturing – Lisa says, “lead nurturing is the first area sales teams neglect in the rush for daily business.” Without nurturing, even warm leads go cold. Hence, lead nurturing is obvious, be it in the form of sending emails or sharing interactive product demos, teams must spend time each month qualifying and nurturing leads.  

If you need help with creating product demos, check out Storylane. The platform lets you build stellar personalized demos within minutes.

❌ Ignoring your Base – “Acquiring new customers can cost up to 15 times what it takes to keep an existing customer.” So, neglecting your existing customers isn’t a good idea. Spend significant time with current customers to ensure you spend less time wading out semi-qualified leads. 

Besides these, there are a few more sales pipeline mistakes that you should be careful about. 

❌Choosing the wrong sales pipeline metrics. To avoid this mistake, consider your business and product type to choose the metrics to track. 

❌Losing pipeline balance. An extensive pipeline never means a healthy pipeline. Focus on maintaining pipeline balance by setting a threshold for each stage. For instance, how many days should a lead stay in a specific stage, and when should they be considered stalled?  

❌Not tracking data. Leverage data visualization platforms to track your sales pipeline. Without tracking, you may lose out on key opportunities.

5 Tips to Manage Sales Pipeline

No matter how perfect your sales pipeline is, you may only get the desired results with proper management. So, here are a few tips to help you manage your sales pipeline in the best possible way. 

1. Follow-Up No Matter What

It’s interesting that 60% of customers say ‘no’ four times before saying ‘yes’ to a product or brand. 

That’s why following up on prospects is crucial. Though it isn’t easy, ensure you include follow-up in your lead nurturing process. Also, remember to communicate the right messages based on their choices to convert them into paying customers. 

2. Shorten the Sales Cycle

Though B2B sales cycle tends to be longer, try to eliminate the friction points to make it seamless. The more hassle-free your sales cycle is, the faster prospects can move through it. With more friction,  there is a high chance of prospects changing their minds and trying to find an alternative solution. 

3. Add Value to Your Prospects Through Content

Emails and phone calls are the core of sales communications, but leveraging the power of content can never go wrong. Share relevant and helpful content like blog posts, newsletters, eBooks, case studies, and more with the prospects to keep them engaged.

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Learn more about the marketing funnel stages and the content type relevant to each stage here.

4. Identify and Focus on the Best Leads

Take a closer look at your sales process and identify the most sales-ready leads. Make these leads a priority and try closing them faster. You can also observe your sales activities to identify which leads are the most engaged with your activities. Thus, you can focus on them and speed up conversion.

5. Review your Pipeline 

A sales approach that works today may not work tomorrow. So, it is crucial to monitor your sales pipeline and keep making improvements at all levels. The best way to do it is to review the sales pipeline at regular intervals (weekly, monthly, or even daily) and fine-tune it maximizes efficiency.

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How to Measure Sales Pipeline Success Level?

Measuring the success level of your pipeline will require sales pipeline analysis. Your marketing team, sales team or sales managers should consistently run sales pipeline reports to get information about the pipeline’s health, your team’s progress toward the sales goals, and how you can effectively take the deals forward. 

Here are key metrics crucial to measuring your sales pipeline's success or health. Track these to improve your sales pipeline.

Average Deal Size - This metric helps salespeople understand if they focus more on smaller deals. You can calculate the average deal size using the following formula:

Average Deal Size = Total Revenue/ Total Number of Deals in the Pipeline

Average Win Rate – Out of all the opportunities that found way to your sales pipeline, how many converted into a sale? This metric helps you answer this question. It measures the average rate of successful sales. 

Average Win Rate = (Qualified leads/ Opportunities) * 100

Number of Opportunities – This metric indicates the number of qualified deals that are being pursued by your sales team. This sales pipeline metric lets you see if your pipeline has enough qualified opportunities.

Wrapping Up

Everything we covered here will help you build and maintain a healthy sales pipeline. And with a healthy pipeline, you can ensure more wins and fewer lost sales.  

So, kickstart building your ideal sales pipeline to give your sales team a bird’s eye view of the sales pipeline. Moreover, you can also monitor the team’s progress and work towards achieving higher productivity.  

FAQs

What are the steps in a sales pipeline?

The seven main sales pipeline stages are- prospecting or lead generation, lead qualification, initial contact, building relationships (product demos or meetings), needs analysis (to structure the closing strategy), closing the deal, and post-purchase or follow-up. 

What are the benefits of a sales pipeline?

There are several benefits of a sales pipeline. A few of them include getting a clear picture of the sales process, tracking team progress in achieving the target sales quota, increased productivity and efficiency, and faster closing of deals.

How do you build a strong sales pipeline?

To build a strong sales pipeline, there are a few steps to follow – design your sales cycle, identify your target accounts, identify internal contacts at targeted accounts, move qualified leads to the sales pipeline funnel, and leverage CRM tools to create an efficient sales pipeline. 

How do you evaluate the sales pipeline?

There are certain important metrics that help to evaluate the sales pipeline. For example, the number of qualified leads, win rate, average deal size, average sales cycle, MQL to SQL conversion rate, and more.  You can also measure the sales pipeline using the pipeline coverage ratio.