The sales pipeline is one of the more common terms used in marketing.
It focuses on a company’s ongoing sales, and how well they’re converting.
Similar to when you use a pipeline to send resources from one place to another, the sales pipeline shows whether or not a sale is “traveling” to the intended location.
The tracking sales process is especially important for big companies with lots of orders.
As the orders start multiplying and become more complex, numerous things could go wrong. For this reason, you need to be in control at all times.
With a sales pipeline, you will have a breakdown of all the deals your sales team is making. Also, you will know how many they will close within a month or a year, and how much money they need to reach the sales quota.
Main benefits of the sales pipeline
Keep in mind that a sales pipeline can vary from company to company. The process can be modified to depict the inner processes within an organization better.
Like with any other financial or marketing analysis, it all comes down to improving the company’s growth and profit potential. You can use it to dissect various parts of the process and to check what’s working and what’s not to achieve higher sales volume and conversion.
Here are some of the main things the sales pipeline can help you with:
- Analyzing current processes
- Modifying processes, so they bring better yield in the future
- Changing your marketing strategy on the fly
- Allocating resources to achieve better results
- Detecting salespeople who are overachieving or underperforming
- Checking how you’re performing compared to the overall expected results
- Analyzing conversion rate and why it’s so low or high
According to data, companies that have introduced a proper sales pipeline analysis have seen their sales go up by 20%!
With this method, you will be much more meticulous. It considers various areas of the sales process from finding the leads to closing them, and finally delivering the product or service.
Sales pipeline phases
As already mentioned, every company sets up a pipeline according to their particular needs.
This is great as it allows you to focus on certain factors while completely neglecting the rest. Still, you need to be very strict when defining the steps and parameters as things shouldn’t be left to chance.
In order to summarize, the process should go from market and customer research and analysis to decision making. Always remember that control isn’t necessarily a part of the process. If any changes were to be made, they are not part of the sales pipeline but are instead performed afterward.
Although it is hard to define the exact steps (due to the fact they might vary), here are some of the processes that always remain the same:
Like in any other industry, prospecting refers to a step during which you are finding potential leads. Various factors affect prospecting. A crucial phrase used during this step is creating the ICP or Ideal Customer Profile. It is used to help determine who is your ideal buyer. Of course, potential customers will vary from industry to industry and from product to product.
In general, the best way of profiling your ideal customers is by tracking and analyzing historical trends. People and companies that continuously buy from you are the best examples of ICP. It is only logical that individuals and organizations with similar needs will also give you a chance. If your firm is relatively new and has no track record, it is best to start the analysis by using your competitors’ data. You can also go wider when prospecting, but this means that you will waste a lot of time.
Now that you’ve finished prospecting, you should have a better understanding of the market and its participants. But the fact you have gathered ideal leads doesn’t mean you will close them. There might be specific issues standing in the way and preventing you from making a deal. This is why additional qualification is needed. At this point, you should already be able to answer specific questions.
Nevertheless, you will have to learn more about the company’s budget, needs, long-term ability to buy from you, special needs (if they exist), and so on. If the qualification phase is going well below your expectations and projection, there is a good chance that you have made a mistake during the prospecting period. Keep in mind that prospecting and qualification are similar in many ways; however, during this step, you will make direct contact with a potential buyer.
3. Presenting an offer
At this stage, you should have a better understanding of your clients’ needs and how you can help them out. It is time to present them with an offer. Here, you will need to give them a quote, pricing, and all other information regarding your products and services. This phase goes two-way: your sales representatives have to find a solution that will be suitable for both sides. While you should squeeze as much as possible from this deal, you should also allow clients some leeway.
Always keep in mind that if your offer is too steep, they will give advantage to your competitors. There are lots of factors that will affect your offer. In particular, they might be affected by your company’s size, age, and long-term as well as short-term goals.
4. Last considerations
Now, even if a company has accepted your offer and it seems they want to work with you, that doesn’t mean you are fully secure. Often, deals fall apart at the last second, and only experienced salespeople understand what went wrong. For example, there are situations where a company is putting you on hold while they are finalizing a deal with another entity.
There might be specific budget issues, patent problems, payment trouble, or something else that might affect the deal. No matter what, it is up to you to try and realize if everything is alright and whether or not the other side is ready to proceed. During this phase, you also need to finalize the price and prepare documentation.
5. Closing the deal
This is the final stage of the sales pipeline. A customer will sign the document according to the predetermined conditions. This is more of a legal matter, and you should have a good lawyer nearby who can confirm everything and give their approval.
When you finish this step, you can consider that the sales pipeline is complete and that you have closed the client. This is also the final step of your analysis.
With a proper pipeline, you can tell where things went wrong and where you need to make adjustments. Still, even the analysis can go wrong, and you might keep on missing opportunities. This is why you need to surround yourself with people who have experience working in marketing and sales of this particular industry.
Specific figures and situations may look bad on paper, but you need the experience to read them and understand whether you’re underperforming or overachieving compared to your competition.
Common misconceptions with the term sales pipeline
While sales pipeline is a common term for people working in sales, there are a lot of beginners who don’t fully understand the concept. In fact, some professionals see sales pipeline interchangeable with some other processes.
This is mostly because there are lots of similar concepts in sales. Furthermore, the pipeline is often used for the quantitative part of the sales process.
Most of these concepts and methods have certain similarities, but they might differ in a few crucial points.
Let’s start with a term that people commonly use in the same breath as the sales pipeline: the sales funnel.
- Sales pipeline and sales funnel
The most common misconceptions come between these two popular terms. Funnel is a graphic depiction of a pipeline, showing each stage of the process with a V-shaped cone.
In the first stage, prospecting is the widest one becoming narrower and narrower as it goes downwards, towards its end. Between the two terms, one has to give a clear advantage to the sales pipeline due to its analytical and meticulous nature. The funnel focuses on general conversion rates without overthinking specific deals or performance. Instead, it uses the data to showcase quantity and not necessarily quality.
The sales funnel, as a concept, is more of a generalization that doesn’t always give you a decent picture of the process. For example, you can have high conversion rates or improve your conversion each year without making a significant improvement in terms of profit. This is because your sales representatives are closing a lot of deals at lower rates or are offering clients more than they should.
The sales pipeline is especially significant in helping you analyze individual performance and areas where your team could improve.
- Sales pipeline and forecast category
The best way to explain these two is by saying that the forecast category is a broader category of the sales pipeline. In fact, the latter is oftentimes used as a forecast category.
Forecast categories, including things such as best case, pipeline, and commit. They are primarily used to determine whether or not you should include individual cases in your sales forecast. Different companies have different policies regarding forecasts and pipelines and how they’re using them against each other.
- Sales pipeline and revenue forecast
Like with sales funnel, there are lots of misconceptions between a sales pipeline and revenue forecast. Both categories are used to analyze the deals that your sales team is making. But, unlike the sales pipeline, the revenue forecast is much more complex, taking into account various other factors that might better indicate your ability to make money. Similar to the forecast category, the revenue forecast is a more extensive section. It relies on various subcategories, one of which is the sales pipeline. The main reason why you use it is to find out what your revenue will be at the end of a specific period.
While these terms usually have to do with sales, they are much more common for finance departments. Nevertheless, if you are a salesperson with a certain number of years under the belt, you must understand them. In fact, you can use this data to your advantage to improve your own game.
How to utilize sales pipelines properly?
Although the sales pipeline may seem like a static category that people use for analysis, you can learn various things with it.
All this data can help you improve your performance. So, whether you’re a company manager or you’re just a sales rep who wants to up their game, these are certain things to consider: Place focus on ideal leads
I don’t have to tell you that ideal leads are the ones that are easiest to close. The whole sales process usually takes the same time for each company. However, there is no reason for you to invest the same amount of time for a bad lead as you would for a good one. Instead, you should take that extra time to research ideal leads and prepare for these particular meetings. That doesn’t mean you should neglect the lower quality leads as they can be closed as well. However, it is necessary to prioritize if you want to boost your numbers at the end of the year.
1. Stop using dead leads
This tip relates to the previous one. There is no need for you to invest too much time in leads that are dead. This might be hard from an emotional standpoint and is also something that might affect your ego. Most experts will tell you that the best salesmen are prepared to go the extra mile. They will also tell you that the majority of the deals are closed after several meetings, not during the first one. But this doesn’t mean you should continue working for a client if there is no interest on their side. In such situations, recognizing that a person is not interested in your offer is perhaps the hardest thing, but like everything else, it is the knowledge that comes with experience.
2. The process has to be standardized
As you have already figured out, based on the previous two tips, time is of the essence for people working in sales. This is why it’s necessary to have a standardized process, given how much time this can save you. While I have mentioned that it’s better to invest more time in good leads, that doesn’t mean you should invest that much time in each lead. If you think about it, ideal leads are already ideal, and they don’t require that much work to close. As such, it should be easy to figure out the average time necessary to close such a client. When you figure out what the optimal time for selling a product is, it will be much easier to standardize the whole process. This will make it more predictable, but at the same time, it would eliminate all the steps and minor processes that don’t yield results. Standardization is also crucial for scaling the whole process and reducing overhead costs that incur when a process isn’t optimized.
3. Sales cycles should be as short as possible
Depending on your customers, sales cycles can be long or short. No matter what, it is up to you to keep these cycles as short as possible. This is especially true when it comes to B2B sales, where cycles can take a long time.
According to stats, 75% of all B2B sales take at least 4 months. In many cases, the sales cycle can last for more than a year. There are lots of different reasons why this is a problem, but let’s focus on the most important one: inefficiency. Sometimes, the length of the process can even be counterproductive as it can lead to loss of clients.
Now, keep in mind that this doesn’t mean you should be overly aggressive with clients trying to close them sooner than you should. Instead, it mostly refers to having a more efficient process, which will make it easier for a company to choose you. They will have more information in advance, and you will have more channels of communication while reducing the number of contacts.
4. Emphasize sales pipeline
Let’s get back to the sales pipeline. If you want to be a good salesman, you should use pipeline metrics continuously. They are not only used to breakdown your periodic performance but can be used as a report showing you how you’ve done during specific sales.
The most important sales metrics include things such as the overall number of sales, the percentage of closed deals, the average time needed to close a deal, etc. The sales pipeline can be an excellent tool if used the right way. Still, you shouldn’t overly obsess about it.
5. Try to improve your sales techniques
Of course, all these metrics are useless if you don’t learn from them; if you can’t use them to your advantage. Sales pipeline metrics are especially beneficial in the long run. Like everything else, sales techniques and preferences change, and it is necessary to know what is no longer working.
There are also situations where you’re overdoing it with a certain method or cannot get the results you expected. By relying on metrics, you can figure out what is going well for you and what you can improve.
If there is something that has a terrible impact on your sales and negatively affects your ability to close clients, experts tend to call this a “blockage.” But, you don’t have to wait for the blockage to appear; metrics can also be used for continuous experimenting and tweaking your processes.
6. Your sales pipeline has to be updated regularly
Sales pipelines are very dynamic. In the end, they are usually used periodically and are meant to track various stages of sales as they go. This also means you have to be very meticulous and keep updating your sales pipeline all the time. Otherwise, things can get messy in no time.
Companies that are relying on pipeline data should update the information regarding every lead. You can make notes after every phone call; after every meeting or negotiation. This is especially important for companies that are working with a high number of clients and in particular, B2C companies.
7. Follow-ups are crucial
There is a good reason why companies put such a big emphasis on follow-ups. Sales are all about repetition and creating meaningful contacts. Furthermore, it takes a lot of time just to find leads and qualify them. Due to this, it doesn’t make sense for you to disqualify a company after making a single phone call.
Remember that certain owners will not have time for you at a particular moment or that emails may get lost. Follow-ups are especially crucial in these modern days as everyone is trying to sell something.
Organizations are investing heavily in marketing and has numerous teams dedicated to every step of sales. As a result, an average sale takes about 8 phone calls before closing. One of the best tips we can give you regarding follow-ups is to create a schedule. This is especially important during the initial sales phases, where you will have a lot of leads. You can easily forget all the phone calls you’ve made, so keeping track of them will definitely help out.
The sales pipeline is an essential concept that all companies should use.
Even if your firm doesn’t have one in place, such a system may give you a competitive edge.
Hopefully, with this detailed guide, you will know more about how sales pipelines work and what the optimal practices are.