Sales pipeline management is at the core of everything we do in sales. Your sales reps are staring at their funnels all day, everyday.
Mastering the sales pipeline is an extremely effective way to increase revenue because it allows sales reps to remain organized and focused on selling. This is undeniably a critical part of the sales process.
We’ll cover the following:
- What Is a Sales Pipeline?
- How to Build a Sales Pipeline
- What is Sales Pipeline Management?
- 6 Best Practices for Sales Pipeline Management
What Is a Sales Pipeline?
A sales pipeline is a visual snapshot of where prospects lie within a sales funnel. It outlines the stages a prospect goes through as they go from lead to customer, and the actions that sales representatives should take at each level. It shows how many deals a salesperson is expected to close soon relative to their sales goals.
In simple terms, a sales pipeline is a set of stages that a prospect goes through, as they progress from being a new lead and into a customer. It consists of seven basic stages:
Salespeople attract and engage prospects using marketing campaigns, targeted ads, and capture client information such as name and email address.
Involves follow-up on leads by maintaining a channel of communication between you, the salesperson, and the lead. The process involves offering the prospect relevant information, mostly done via email.
Marketing Qualified Lead (MQL):
This is a lead who is considered more likely to become a customer compared to others.
Sales Accepted Lead:
A sales accepted lead is one who has met the set criteria and is ready to be passed along to the sales team
Sales Qualified Lead (SQL):
A sales qualified lead represents a lead that has been vetted by a sales team and been deemed a potential customer.
This is a potential customer who makes a purchase and converts it into revenue.
It’s a collection of processes that occur after a closing sale with a customer. Post-sale includes billing and collections, returns, complaints, and customer support.
Sales pipeline vs sales funnel: What do they mean?
Many people use sales pipeline and sales funnel interchangeably; however these two terms have separate meanings.
While both terms are used to describe the flow of prospects through a sale, a sales funnel represents the quantity and conversion rate of said prospects through your pipeline stages. The sales funnel is a visual representation of your team’s open opportunities.
On the other hand, a sales pipeline focuses on the actions that salespeople take at each stage. This includes sales prospecting, lead generation, sales calls, outbound emails, meetings, and processes all come together to create the sales pipeline.
How to Build a Sales Pipeline
Now that we’ve established what the stages of a pipeline are, let’s shift our focus to how to build a sales pipeline. The process can be summarized into six steps.
1. Take stock of your prospective buyers and identify your target market
By identifying your Ideal Customer Profile, ICP, you get a rough estimate of how many customers your business will be able to cater to. The ICP is usually updated, preferably after a year for companies younger than three years.
The CEO, founding team, and other c-level executives are responsible for creating and updating the Target market and Ideal Customer Profile.
2. Identify your target companies
Target companies include corporations you intend to conduct business with and are derived from your ICP. The Company CEO, Chief Revenue Officer, and sometimes the Vice President of Sales usually preside over this process.
3. Do your research
Work through target contacts and create an internal list of target companies based on your ICP. Here are a few tips for optimizing this process.
- Find the names of your target contacts.
- Enrich those contacts with additional information such as email addresses or phone numbers.
- Conduct a bit more research to find out more personal information on both the person and the company.
There are two approaches to this process:
Buy the list: it comes with names, contact information, and other personalized details. This is the path of least resistance, but beware of list quality. Many lists are of poor quality, and even if the list vendors are diligent in keeping it up to date, quality declines very quickly as people change jobs, positions, or companies, taking their contact information with them.
Build the list: this involves the painstaking process which means manually looking for names and more personal information. This is the best way to ensure highest list quality — even if it takes more work.
4. Reach out to your targets
Includes channels of communications such as email, direct email, and even physical meetings. The general rule to reaching out to prospects is at least 3 contacts a month.
5. Find a routine
Divide your pipeline into segments by focusing on value-based selling. Make sure your sales representatives are good communicators, building authentic human relationships.
6. Build momentum as you progress further down the funnel
By moving your Sales Qualified Leads over to the Account Executive, you increase momentum and helps you meet your goals and stay true to your objectives. This process symbolizes the end of the sales process.
The Account Executive is charged with the role of following up with and evaluating a lead until it’s a closed or lost deal.
What is Sales Pipeline Management?
Sales pipeline management is the organization and tracking of prospects, goals, and quota – as well as understanding whether certain deals need special attention.
Effective pipeline management allows salespeople to keep track of deals by knowing exactly which stage the deal is in, and whether there are enough deals on the board to hit goals and quota.
Characteristics of Sales Pipeline Management
Before delving into the concept of pipeline management, we must first understand what makes up a sales pipeline. The first is metrics, which involves data collected regarding the sales pipeline that can be used to analyze your sales process.
Next, there’s optimization. A well-managed sales pipeline enables you to evaluate and optimize your process at every stage, assuring you increased revenue at the end of a sales cycle. As part of the pipeline management, sales forecasting is the process of predicting sales revenue and ways to increase it.
Sales team management alsoinvolves regular progress tracking and evaluations of your sales personnel. This is achieved by gathering vital information such as when and how your team makes the most of the sales process.
Finally, pipeline management tools and applications are designed to increase revenue and improve the performance of your pipeline and your sales team.
6 Best Practices for Sales Pipeline Management
1. Live and breathe sales metrics
Mastering the sales pipeline is all about understanding the numbers and components of the sales funnel. If sales managers know the averages they are able to better predict and create predictable revenue.
Here’s what you must know:
- New leads created per month by source
- Conversion rate of leads to opportunities
- Conversion rate of opportunities to closed deals
- Average Won Deal Size
- Average Sales Cycle Length
- Win Rate
- Total # of Open Opportunities
The right data matters! Inaccurate data can hinder any organization’s sales process.
Additional metrics may also include:
- Value of leads
- Deal close rate
- Sales Pipeline Velocity
Getting better data requires making sure reps are putting quality data into the sales CRM.
A Sales CRM is an incredible pipeline management tool that gives access to sales pipeline metrics. It conducts regular spot-checks that help recognize when a metric is inaccurate, gives you insight into correcting it, and evaluating the progress after implementing the changes.
Obviously sales managers need to make data quality a priority in order for this to work. History, solid data, and previous trends will help you better predict future results.
Let’s look at an example using the Pipeline Velocity metric. This formula can be interpreted as dollars earned per day by the sales team. The key point with pipeline velocity is to focus on each input not the final output metric.
The equation for Pipeline Velocity is:
Each of the 4 components of Pipeline Velocity is a lever that can be pulled to impact business results. Below is an example that illustrates how improving any 1 of the 4 metrics can lead to sales growth.
Below are three ways you can keep your sales pipeline organized.
1. Identify cold leads
Evaluate your pipeline velocity metrics to identify leads where you have taken more time than average at specific stages.
2. Decide on a course of action
This process involves deciding whether or not to remove inactive leads.
3. Follow up and re-evaluate
Before permanently removing a lead, conduct a re-evaluation either by email, to establish if they are worth following up in future.
Staying alert to under-performing metrics helps identify areas where your progress is stagnant and learn how to improve.
2. Execute regular pipeline reviews
The best way to increase Pipeline Velocity is through increasing the number of qualified, open opportunities.
This is partially due to the fact that the lead generation system, once well-defined, can be scaled rather easily. While increasing the win rate requires focusing on a variety of interrelated factors and activities that can be harder to systemize and improve.
Every Sales Manager conducts regular forecast meetings. Unfortunately, like most things in sales, forecast meetings only focus on opportunities that are expected to close by the following week.
Although forecast meetings can be helpful, Pipeline Reviews are more beneficial. Pipeline Reviews focus on opportunities that are at the top and in the middle of the funnel. In Pipeline Reviews:
- Sales teams can review the quality of opportunities recently added to the funnel
- Managers can have a greater influence on the outcome because these are newer opportunities
- Sales reps and managers have a more comprehensive view of the entire pipeline
According to Aaron Ross author of Predictable Revenue:
“In pipeline reviews or one-on-one coaching sessions, be merciless.”
Grill your reps on the quality of their leads, the decision-makers involved, and their sales pipeline management processes.
3. Focus on small improvements at each stage of the sales funnel
As you may have heard 🙂 sales is a numbers game, and teams using a Predictable Revenue system have high volumes of leads to take advantage of. This often causes reps to focus less on quality opportunities.
Limited focus on quality opportunities can be detrimental to their pipelines. Small improvements in pipeline management by funnel stage can lead to some promising results:
4. Keep that sales pipeline squeaky clean
If reps increase conversion rates by 5% in 2 macro funnel stages, there is a potential 50% increase in the number of won deals. Just like with a marketing funnel, a sales funnel must be optimized and measured. The evolution of the SaaS Sales Stack is making sales more like marketing each day. Know the apps, know the funnel metrics, and keep an eye on the pipeline conversion funnel.
Use Pipeline Reviews as an opportunity to eliminate weak sales opportunities. This is a critical component for effective sales pipeline management.
Salespeople are inherently optimistic. This can cause them to waste time on TOFU opportunities because they truly believe these new opportunities are “definitely in our strike zone.”
The reality is a percentage of the opportunities in your team’s funnel are WAY outside of your strike zone. According to Aaron Ross,
Predictable Revenue ensures steady lead flow. Steady lead flow allows your salespeople to focus on the best qualified opportunities that are in line with your ideal customer profile and strike zone.
5. Create a formalized pipeline management operations manual
Create case studies of specific opportunities from open to close. Give reps scripts and specific activities to do at each stage of the funnel. Sales Managers should ask themselves:
What does the buyer journey look like?
If an opportunity gets stuck in a specific stage what is the rep supposed to do? What has worked in the past?
What is the average conversion rate by each funnel stage?
All Sales Managers can do a better job of helping their salespeople manage their pipelines. Each sales team member plays a crucial role in building the sales pipeline.
Sales Development Reps are responsible for the number of opportunities, whereas Account Executives are responsible for win rates. But it is up to the sales manager to manage the machine that is creating the pipeline. Don’t work in the system, work on the system to create a Predictable Revenue pipeline machine.
6. Give your prospects more content
This involves providing your leads with additional information beyond the usual phone calls and emails. Consider your Sales Funnel and what type of information is provided at every stage.
At the top of the funnel, salespeople communicate with their leads through blogs, articles, and infographics, designed to capture their interest. You want your prospect to understand what exactly you bring to the table and how it will benefit them, but packaging the information in a fun and entertaining way.
In the middle of the funnel, sales personnel nurture leads by providing additional information via ebooks, case studies, and video tutorials. The goal is to transform the lead into a paying customer.
The bottom of the funnel consists of the action stage, where the prospect is now officially a paying customer. Salespeople at this level, conduct evaluations and further follow up so that the one-time customer becomes a long-lasting one.
Editors Note: Guest Post by Matt Smith creator of The Predictable Revenue Bundle. The bundle offers anyone the tools and training of Silicon Valley’s best sales teams. Post has been updated in 2021.