Mastering the Sales Pipeline

The term sales pipeline is often used interchangeably with sales funnel. While they both refer to the process by which sales leads move from discovery to close, there are subtle differences between the two. A funnel naturally brings to mind an object with a wide opening at the top. So it’s more applicable to a sales strategy that relies on a large number of initial leads that eventually get whittled down. That works well for SaaS companies selling relatively inexpensive software licenses. A pipeline brings to mind a simple flow from lead to close and is more suited to businesses with a smaller number of higher margin deals, like an art gallery. That being said, many salespeople choose to use sales pipeline or sales funnel simply because they’re more comfortable with one term or the other.

Whatever term you use, a pipeline or funnel is primarily used for sales forecasting. Your company’s sales management will want to know how much sales revenue they can expect each quarter and a sales pipeline will help you set expectations. Pipeline reporting allows you to easily understand the rate at which prospects move through the pipeline’s various stages, how far along an individual prospect is in the pipeline and whether or not your sales team is likely to meet quota.

Sales Pipeline Stages

Every company has a slightly different sales pipeline. For example, the point at which a prospect is turned over from a junior sales representative to a more experienced account executive may change. However, all pipelines have the same general stages: qualification, meeting, proposal and close. Qualification involves understanding whether a sales lead has a use case for your solution and whether they have the budget to afford it. Once a lead has been qualified you can work on getting a meeting set up where you’ll have a chance to understand more about the prospect’s specific use case and showcase your solution.

The proposal and close are the final two steps of any sales pipeline. During the proposal stage you’ll negotiate the conditions between your company and the prospect. What services will you provide? How much will it cost? Once you’ve agreed on the details you can send your prospect the final paperwork. At the close stage your prospect will sign and officially become a customer. From here you want to keep them happy and look for opportunities to cross-sell and upsell.

Sales Pipeline Management

There are four primary metrics to focus on for successful sales pipeline management: the number of deals in your pipeline, your average deal size, your close ratio and your average deal lifetime. Lead generation is the primary responsibility of a company’s marketing department, so if you don’t have enough leads you know you need to change the way your marketing team operates. Your average deal size will tell you how large your deals are and give you an idea of how many deals you’ll need to meet quota.

In order to get a more accurate picture of whether you’re on track to hit your goals you’ll need to take into consideration your close ratio as well as the number of leads in your pipeline and their average size. While “close ratio” may sound complex, it simply refers to the percentage of deals that can realistically be expected to close at each stage of your sales pipeline. Finally, you need to bear in mind your average deal lifetime, which will tell you the average amount of time it takes a lead to go to from introduction to close. As you can see, good sales pipeline management is critical to managing expectations and hitting quota. There are few things that a salesperson pays more attention to than their pipeline!

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