What Is a Sales Pipeline and How to Build One?
If you’ve spent any amount of time in a sales group, you’ve perhaps heard the term pipeline before. Whether it's about getting prospects into the pipeline or filling it up with leads, successful sales teams vouch for the sales pipeline strategy that gives them a visual snapshot of their sales process in its entirety.
Yes, a pipeline is not just a buzzword. It is, in fact, an old and proven sales tool that can significantly improve your bottom line when used correctly.
What’s a Sales Pipeline?
A sales pipeline is a visual representation of where your prospects are in the sales process. It shows you how many deals are in the pipeline and their value. A sales pipeline also helps identify the deals that require focus, the number of deals you’re expected to close to reach your sales quota, and how much you’re likely to earn in the coming months.
For instance, if you have a sales pipeline worth $500,000 in contract value and your conversion rate is 10%, you can expect to close new business worth $50,000 in the specified period. But if your sales target is $75,000, you’ll need to convert 1.5 times as many leads.
That’s how pipeline analysis helps you analyze your sales process and make better strategies to meet your business goals. In other words, a sales pipeline gives you a handy tool that provides you with:
- More insights into deals
- An overview of your team’s performance
- An estimate of the revenue you’re likely to earn in a specified period
Why Do You Need a Sales Pipeline?
We already mentioned how you could use a sales pipeline to get more insights into deals and plan your overall sales strategy better. A well-designed sales pipeline helps highlight growth opportunities and spot any leaks in the pipeline that need to be fixed.
A sales pipeline also enables you to collate the information you need for revenue forecasting and planning long-term growth, making it easier to make strategic decisions.
Sales Funnel Vs. Sales Pipeline
A funnel or a pipeline? Wait, are they even different from each other? Well, surprisingly, the answer to that question is a “Yes.” A sales funnel and a sales pipeline are two completely different concepts dealing with two different sides of the sales process.
Your sales funnel is a representation of your buyer’s journey. It comprises the different stages in the buying process – that is, the journey from being a lead to a paying customer and after. On the other hand, a sales pipeline is a visual representation of the various steps in your sales process. It highlights the steps a sales rep takes to move a deal from start to finish.
The Stages of an Ideal Sales Pipeline
1. Lead Generation
For many businesses, acquiring leads is one of the most challenging tasks at hand. Subscription forms are one of the best ways to do it. Create a simple form with two required fields (email address and name) and several optional fields if needed. Too many required fields can take time to fill so users may not want to do it.
Also, you can use Forms – a functionality that allows you to integrate with forms built on Wix and other site builders or create your own forms :
- Integrate with external forms;
- Create no-code forms in the editor;
- Collect different contact info;
- Send automated email confirmations;
- Send automated welcome and onboarding emails, and more.
You can also leverage artificial intelligence-driven chatbots to automate and boost their lead generation process.
Chatbots use natural language programming to provide contextual replies to your customers. Besides, they’re always active, which makes it possible to collect lead information even when your team is sleeping! You can also use a bot to simplify the next sales pipeline stage by asking pre-determined questions to qualify leads.
2. Lead Qualification
Not every lead that enters your pipeline will convert. At this stage, you collect user information to understand their intent and identify opportunities in the form of potential customers.
3. Initiate Contact
This is the stage where your sales reps attempt to contact pre-qualified leads to understand their business and requirements. By gathering this information, it becomes easier to tailor your business services to the lead’s requirements.
4. Schedule Meeting or Demo
Once contact is initiated, and the lead is convinced with your services, your rep will try to schedule a demonstration or an in-depth call to help them understand your product or service better.
5. Building Relationships
It’s not enough to simply sell your product. Your reps must nurture potential buyers and build trusting relationships to win over the potential competition when closing the deal. Because as per a study, 83% of companies lost a customer or missed a major deadline due to a communication issue in 2019
Of course, you don’t have to continuously call or email potential customers to annoy them. Instead, try to discuss their requirements and present genuine solutions to convince them of your offering. Building a rapport with the team will also help you negotiate various aspects of the contract before the closing stage.
6. Closing the Deal
This is the final stage in the sales pipeline when a lead finally turns into a paying customer. However, it may happen that a lead is interested in your product or service but not ready to purchase due to some reason. In such cases, when the buyer isn’t prepared to buy yet, you can move them to your sales funnel for nurturing and then check on them later.
How To Create A Sales Pipeline?
If you’re operating without a sales pipeline, you’re driving blind. Here’s a five-step approach to building your sales pipeline.
1. Research Your Audience
Who is your audience? Perhaps your business is targeted to a larger market but do your customers share some common traits? Do they all fall under a particular age group or role?
Understanding what drives your customers makes it easier to complete your sales pipeline and make it more effective. You can find user information at the following places:
- Your CRM
- Demographics and interests report from your analytics software
- Conversations with service agents
- Customer surveys and feedback
- Social media insights
Once you have this data at hand, you can consolidate potential customers into your sales pipeline and place them in different deal stages according to their position in the buying journey. For example, if a lead downloaded your whitepaper in return for their contact information, you may place them in the “initiate contact” stage of your pipeline.
2. Assign Sales Activities for Each Stage
Making phone calls, creating and sending emails, tracking metrics, and following up with leads – several sales activities need to be taken up in the various stages of the sales pipeline. That's why it's better to assign sales activities for each stage of the pipeline to prevent any confusion. This will help in setting responsibilities for various teams, so your system works more efficiently.
3. Define Your Sales Cycle Length
Your sales pipeline is closely connected to your sales cycle because it will move according to the pace at which your salespeople close deals. However, the length of your sales cycle depends on various factors.
For instance, complex products often take longer to close because more people tend to get involved in the decision-making process. Additionally, if your product requires customization, the deal might take longer to materialize as you’ll need to tailor your product accordingly. Your lead generation also impacts the sales cycle length. If you’re cold calling, you can expect it to take longer to close the sale, but if your leads are pre-qualified using a chatbot, the sales process could be shorter as your leads are already warm.
4. Remove Stagnant Deals From The Pipeline
Nobody likes a clogged pipeline. That’s why you need regular housekeeping to keep your sales pipeline moving. Typically, the older a lead gets, the lesser are the chances of conversion. Therefore, it’s best to keep track of the age of your deals and remove them from the pipeline once it exceeds your sales cycle length. Of course, it might not be possible to manage this manually, but your CRM can inform you of stagnating deals, so you maintain a fast-moving pipeline.
5. Choose The Right Metrics
While a sales pipeline is a handy tool to track the performance of your salespersons, you also require proper metrics to track your pipeline’s health.
Some of the important metrics to consider include:
- New opportunities gained – This is the key metric that fuels your pipeline. If you know this figure, you can calculate the other vital sales pipeline metrics.
- Leads qualified – From stage one of the pipeline to the second, how good is the flow in your pipeline? Generating leads isn’t adequate for success. It would help if you categorized them into hot and cold to rationalize your sales cycle length.
- Win rate – The number of wins divided by the opportunities gained will give you your win rate. For instance, if you gain 100 new business opportunities and achieve 40 sales from them, your win rate is 40%. Now, you can work backward with this figure to determine the number of leads you’re required to generate to gain a specified number of new customers for your business.
- Conversions - The conversion rate will vary between different stages in the pipeline, but it should increase substantially by the time you reach the latter stages. If you find the conversion rate low at specific points in the pipeline, analyze the reason and implement changes to prevent future losses.
- Deal size - Having hundred small deals in your pipeline or ten large deals with significant revenue in your pipeline – which one are you targeting? It’s essential to consider the revenue brought in by each deal and what kind of effort is required in scaling bigger deals. This will help you in building a better sales strategy and achieving your revenue goals efficiently. You should also measure the average order value to understand the overall quality of your leads.
- Sales Cycle Length - A healthy sales pipeline should have a shorter sales cycle. This doesn’t mean you’ll convert a lead immediately, but dragging a lead through a long sales process could be detrimental to success. Additionally, you can also measure your sales velocity, which tells you how much revenue your team generates daily. While this metric isn’t attached to your sales pipeline as such, it helps determine if your sales team is working efficiently.
A sales pipeline is crucial for the success of your sales team. However, refining your sales pipeline regularly to keep it robust is as important as building a new sales pipeline. Remember, sales is a continuous process. Therefore, refining your sales pipeline is a constant task as well. We recommend that you keep tracking your results, monitor where most customers defect from your pipeline, and accordingly take steps to optimize the pipeline.