Turning leads into customers is not as easy as it may seem. Imagine trying to find your way through a new city without Google Maps. It would be almost impossible, right? That’s exactly where the concept of a sales pipeline comes into play. It outlines each step necessary to move a lead closer to becoming a customer.
Today, we will walk you through everything you need to know to create a sales pipeline that works. Let’s start building a path that leads to more successful sales!
Main Takeaways
- A sales pipeline is a blueprint for your business’s specific sales process. Each stage is usually managed and tracked using a CRM (Customer Relationship Management) system.
- Building a sales pipeline should be a team effort. Involve your sales team in the process and make sure everyone is on board with the project.
- Equip your sales team with the necessary tools and knowledge to improve their performance. Regular training and access to sales enablement resources can lead to better deal closure rates.
- When building a sales pipeline, you should pay attention to key metrics such as conversion rates, average deal size, and pipeline velocity.
- Be ready to adjust your sales pipeline strategy in response to changes in the market or your product line. Staying flexible allows you to capture new opportunities and minimize risks.
What Is a Sales Pipeline?
A sales pipeline is a roadmap for turning potential customers (leads) into loyal customers. You can think about it as your blueprint to success in sales. Sales pipelines are a visual way to track where a prospect is in the sales process and what needs to be done to move them closer to making a purchase.
A healthy sales pipeline keeps moving, meaning prospects continuously progress from one stage to the next until they eventually make a purchase.
To keep the pipeline flowing, sales reps need to regularly bring in new leads, ensure they are a good fit (qualify them), nurture the leads to build interest, and close deals by making sales.
Building a strong sales pipeline involves several stages. Your sales team’s efforts in these stages can be customized based on your specific product or service. For instance, selling software might include a demo stage, while real estate deals could have a house viewing stage.
Why Bother with a Sales Pipeline?
A well-structured sales pipeline isn’t just about pushing sales through. It’s about managing and improving relationships with potential and existing customers across various stages. It includes everything from the initial contact and qualification to negotiation and closing, as well as following up on leads that didn’t initially result in a sale.
Stages of a Sales Pipeline
Here’s a breakdown of the seven main stages in a sales pipeline.
1. Prospecting
This is the first step in the pipeline, where you locate and contact potential customers. When prospecting, you will use online research, networking events, or social media to search for leads that fit your ideal customer profile.
For example, if you sell educational software, prospecting might involve searching for schools or educational institutions on LinkedIn and then cold emailing them to introduce your product.
2. Lead Qualification
Not all prospects are a good fit. In this stage, you’ll determine whether a lead has the potential to become a customer based on their need for your product, their budget, and their decision-making power.
To continue on our above example, after contacting a school about your educational software, you discover they’re currently looking for new software solutions and have the budget for it. This qualifies them as a strong lead.
3. Demo or Meeting
Here, you arrange a demonstration or meeting to showcase your product or service to the lead. This is your chance to demonstrate how your solution meets their specific needs.
4. Proposal
After the demo, if the lead is interested, it is time to send them a proposal. This will generally be a document outlining your offerings, including pricing, terms, and how your product or service solves their problem.
5. Negotiation and Commitment
As always, in business situations, you should expect the lead to want to negotiate the terms of the proposal. This stage involves discussing their concerns and adjusting your offer to reach an agreement that works for both parties.
For example, the school asks for a discount for purchasing a multi-year license. You negotiate and offer a discount that fits within your pricing structure.
6. Opportunity Won
Congratulations, you’ve closed the deal! This stage marks the successful conversion of a lead into a customer.
7. Post-Purchase
The sale isn’t the end. In this stage, you focus on providing excellent customer service, helping with any issues, and ensuring the customer is satisfied. It can lead to repeat business and even referrals.
Step-by-Step Process For Building a Sales Pipeline
Building a sales pipeline involves several key steps to consistently turn leads into paying customers. So, now that you understand the stages of a sales pipeline, let’s dive into what you actually need to do to create one.
Step 1: Outline Your Sales Pipeline Stages
The first step in building a sales pipeline is to lay out its stages. Think of this as drawing a map that shows how a stranger (lead) becomes a friend (customer).
Your sales pipeline stages should mirror the journey someone takes from realizing they need something (awareness) to deciding they’ll buy it from you (purchase).
Step 2: Determine Progression and Conversion Rates
Now, you need to understand how leads move through your pipeline stages, how long they stay at each stage, and how likely they are to move to the next stage. This helps you predict sales and understand where you might need to improve.
Step 3: Calculate Required Opportunities
In this step, you need to know how many sales you want and then work backward to figure out how many leads you need to start with. It involves some math, considering your conversion rates at each stage of the pipeline.
Step 4: Identify Characteristics of Successful Opportunities
Here, you’re playing detective, looking for clues that make a lead more likely to buy. By examining past sales, you can spot patterns or actions that helped close the deal.
It will help you focus on the right leads and actions that increase your chance of success.
Step 5: Develop or Adjust Your Sales Process
Based on everything you’ve learned so far, you might need to tweak your approach.
If you find that customers are getting stuck at a certain stage, you might introduce new steps or resources to help them move forward. It’s like adjusting your recipe slightly to get the perfect cake.
Step 6: Consistently Add New Leads
Keep adding new leads to your pipeline. If you stop adding new leads, your pipeline will dry up, and sales will slow down.
Use various methods to find new leads, such as social media, networking, and marketing. Or, you know, Growth List!
Step 7: Maintain Pipeline Health with Follow-ups
Staying in touch with leads is crucial. Set up a system to regularly check in with leads, offer them value, and keep them engaged. It includes sending emails, making calls, and using social media to stay on their radar.
Step 8: Regularly Clean Your Pipeline
Remember, you need to remove dead-end leads from your pipeline. It will keep your forecast accurate and ensure your team focuses on leads more likely to bloom into sales.
Regularly review your pipeline to remove leads that are no longer engaging or have chosen a different solution.
How Does a Sales Pipeline Help Your Business?
Building an effective sales pipeline can be the difference between an unsuccessful and a successful business. Here’s a breakdown of the benefits of managing your pipeline effectively.
1. Better Sales Predictions
A sales pipeline helps businesses look ahead and estimate future sales. It shows you how many deals you’re working on and how likely they are to close.
It also makes it easier to guess how much money you might make in the coming weeks or months, which can help you plan for hiring new staff and investing in your business.
2. Smarter Work on Leads
With a sales pipeline, you can see which leads are hot and which are not. You can spend more time on leads that are more likely to become customers.
It’s all about not wasting time on leads that won’t go anywhere and focusing on the ones that will help your business grow.
3. Keeping in Touch with Customers
Building an effective sales pipeline also lets you keep track of where each customer is in the buying process.
You can talk to them in a way that makes sense for where they are at the moment. If someone just learned about your product, you wouldn’t talk to them the same way you would if they were about to buy.
It helps make sure you’re sending the right messages at the right time.
4. Turning More Leads into Sales
By understanding what works and what doesn’t in your sales process, you can generate more leads that can be converted into customers.
You can look at your sales pipeline to see which strategies help you sell more and which don’t.
5. Making Sales Work Better
Another major benefit is that you’ll be able to make the whole process of selling more clear.
A sales pipeline helps everyone on the sales team know what they should do and when. It also makes the whole process run smoother, like a well-oiled machine.
6. Putting Your Team Where They’re Needed Most
Knowing which part of your sales process needs the most help lets you allocate your resources accordingly. This could mean hiring more people to follow up with leads or spending more money on advertising to generate more leads.
7. Speeding Up Sales
Managing and monitoring your sales can allow you to close more deals faster.
You will be constantly moving leads through the process, from first contact to closing the deal. The faster you can do this, the more deals you can close, which ultimately means more money for your business.
8. Growing Your Business
A good sales pipeline not only helps close more deals but also helps your business grow.
By finding and fixing problems in your sales process, you can make your business more successful, generate more revenue, and have a better chance of hitting your business goals.
9. Keeping Customers Happy After the Sale
The sales pipeline helps you stay in touch with customers even after a sale, which is important for repeat business and referrals.
Happy customers are more likely to come back and buy again or tell their friends about your business.
Differences Between a Sales Pipeline and a Sales Funnel
A sales pipeline and the sales funnel are two important concepts in sales strategy. But we don’t blame you if you get them confused. So, what are the differences between them?
Sales Pipeline
As mentioned, a sales pipeline is basically a visual representation of your sales process from start to finish. It is used by salespeople and managers to track and manage the progress of potential sales across various stages.
The pipeline focuses on actions and stages from the sales team’s perspective, helping to prioritize tasks, forecast revenue, and understand where each deal stands.
A well-managed sales pipeline can prevent leads from being forgotten and help identify which deals are most likely to close.
Sales Funnel
On the other hand, a sales funnel represents the buyer’s journey from the customer’s perspective. It visualizes how potential customers move through different stages of the decision-making process, from initial awareness to the final purchase.
The funnel’s shape reflects how the number of prospects decreases at each stage, focusing on conversion rates and identifying where prospects drop out or decide to make a purchase.
Key Differences
Here’s a detailed table that outlines the differences between a sales pipeline and a sales funnel, combining all of the information we’ve discussed:
| Feature | Sales Pipeline | Sales Funnel |
| Definition | A visual representation of the sales process from initial contact to closing the sale. | The customer’s journey from learning about the product or service to making a purchase. |
| Focus | On the steps and actions taken by the sales team to move a lead through to a sale. | On the customer’s decision-making process and how potential leads decrease in number as they move through the stages of making a purchase. |
| Perspective | From the sales team’s point of view, tracking the progress of deals. | From the potential customer’s point of view, showing how their interest and commitment change over time. |
| Stages | 1. Prospecting 2. Lead Qualification 3. Demo or Meeting 4. Proposal 5. Negotiation and Commitment 6. Opportunity Won 7. Post-Purchase | 1. Awareness 2. Interest 3. Evaluation 4. Decision 5. Purchase |
| Goal | Manage and close deals by guiding the sales team on what actions to take at each stage. | Optimize conversion rates at each stage, understand where potential customers drop off, and improve marketing strategies. |
| Use | For sales teams to manage their sales activities and forecast sales. | For marketing teams to understand and improve the efficiency of converting leads into customers. |
| Measurement | Focused on actions and outcomes, such as the number of deals in each stage and the success rate of moving deals from one stage to the next. | Focused on conversion rates and drop-off rates at each stage of the customer journey. |
How to Analyze Your Sales Pipeline Using Metrics
There are several metrics you should pay close attention to when crafting your pipeline and ensuring it is effectively converting leads.
1. MQL to SQL Conversion Rate
The MQL to SQL Conversion Rate is important for assessing the efficiency of your marketing and sales teams. This metric basically looks at the percentage of Marketing Qualified Leads (MQLs) that turn into Sales Qualified Leads (SQLs).
This figure directly shows how good the leads from marketing are and how well the sales team is turning these leads into real sales chances. A strong conversion rate means your targeting is right on, and your sales team is good at turning interest into real sales opportunities.
2. Customer Lifetime Value (CLV)
CLV predicts the total money a business expects from a single customer over their entire relationship. It’s key to knowing how much spending on getting and keeping each customer makes sense.
High CLV shows customers that are more valuable over time, guiding you to spend more to keep such customers or find more like them.
3. LTV to CAC Ratio
The Lifetime Value to Customer Acquisition Cost (LTC to CAC) ratio compares the expected value a customer brings to your business against the cost of getting them. This ratio makes sure your marketing and sales strategies are cost-effective, keeping your business model sustainable.
A 3:1 ratio is generally seen as healthy, meaning the customer’s value is three times the acquisition cost.
4. Sales Pipeline Velocity
This metric measures how quickly leads go through your sales pipeline and become revenue. It’s found by multiplying the number of deals in your pipeline by your overall win rate percentage and the average deal size, then dividing by the sales cycle length.
A high pipeline velocity means your sales process is efficient and effective.
5. Lead Response Time
Lead Response Time tracks how quickly your sales team gets back to new leads. Fast response times often go hand-in-hand with higher conversion rates, as potential customers feel valued and engaged.
This metric highlights the importance of quick follow-ups to maximize the conversion of leads into sales.
6. Pipeline Coverage
Pipeline Coverage compares the total value of opportunities in your pipeline to your sales goal, shown as a ratio or percentage.
It lets you know if you have enough in your pipeline to meet your targets, pointing out the need for more lead generation or better conversion rates if the coverage is low.
7. Opportunity Age
Opportunity Age tracks how long leads stay in your pipeline before they turn into customers or drop out.
Long-standing opportunities might show kinks in the sales process or problems with lead acquisition.
8. Deal Velocity
Deal Velocity is another metric that focuses on the speed at which deals move through the sales stages to close. It can reveal stages where deals tend to slow down or stop.
9. Win/Loss Ratio
No, we aren’t talking about sports here. The W/L ratio is a sales statistic that compares the number of deals won to those lost. It helps in understanding how practical your sales approach is and where there might be room for improvement.
This is a pretty simple metric to understand. A high win/loss ratio shows a strong sales process, while a low ratio might mean you’ll need to tweak your process.
12. Deal Age
Understanding how long a deal has been active in the pipeline is a great way to find deals that may require intervention to progress. A prolonged Deal Age might suggest the need for re-evaluation of the deal’s viability or adjustments in strategy to address any hurdles preventing closure.
This metric allows your sales team to focus their efforts on moving deals forward more efficiently.
13. Sales Rep Activity Metrics and Sales Team Productivity
Monitoring individual sales reps’ activities, such as the number of calls made, emails sent, and meetings booked, alongside productivity metrics like revenue generated per sales rep, offers valuable insights into the sales team’s performance. These metrics can highlight areas where sales reps excel and identify opportunities for improvement or additional support.
This approach can create a culture of excellence and high achievement within the sales team.
A Sales Pipeline Is Your Key to Success
Let’s face it: selling isn’t easy, but it can be much simpler with a sales pipeline. This approach helps you track your leads at every stage, making sure no opportunity slips through the cracks. It’s like having a secret weapon that guides you on where to focus your efforts for the best results.
The bottom line is that a sales pipeline sets you up for success. So, organize your sales process with a pipeline and see your results soar!
References
https://blog.hubspot.com/sales/sales-pipeline-stages-visual-guide
https://www.salesmate.io/blog/sales-pipeline-vs-sales-funnel/
https://clickup.com/blog/sales-pipeline-metrics/