What is a sales pipeline?
A sales pipeline is a visual method or systematic approach for tracking where prospects are in the sales process. It shows how many prospects are in the sales journey and where they are in the process. Sales pipelines allow sales teams to track and manage their leads effectively.
Sales pipeline vs. sales funnel
The main difference between a sales pipeline and a sales-funnel is that a sales pipeline details what the seller needs to do at every stage of the sales process to help move the prospect down the sales funnel.
What are the stages in a sales pipeline?
Prospecting
During the prospecting stage, the goal is lead generation. Depending on the company, sales and marketing teams may be responsible for building brand awareness and sourcing potential leads for the sales process.
Qualifying
The qualifying stage focuses on identifying prospects in your pipeline that align with your ideal customer profile (ICP). Prospects that match your ICP are more likely to purchase, or purchase at a higher value.
A key activity at this stage is lead scoring — identifying high-value prospects and ranking them in order of priority.
These questions assess the quality of prospects:
Do they have the right budget?
Are they the decision-maker?
Are they ready to purchase?
Do they match your ICP?
Are they engaging regularly?
Does my product meet their needs?
A prospect who’s a “yes” for all of those questions would be a top priority for sales teams. A prospect that doesn’t qualify as a high-value lead might be valuable at some point in the future. For that reason, sales teams may track “cool” prospects through their customer relationship management (CRM) software, and automate reminders to reassess their value.
Contacting
In the contacting stage, a sales representative engages with the lead. They might reach out over the phone, email or social media, and will often try and arrange an in-person meeting. They want to understand the specific needs, challenges and goals of the prospect, so they can build a relationship and tailor their sales approach accordingly.
Nurturing
During the nurturing stage, sales reps build relationships with leads, without pushing for a sale. Leads may be in the nurturing stage for a while, so it’s important for sales reps to keep the communication going so they are top of mind as the prospect moves down the sales funnel and starts to evaluate options.
When the prospect is ready, the sales team can present a tailored proposal or solution. This proposal outlines how the product or service addresses the prospect’s specific requirements, the value it brings and the pricing or terms offered. This stage may involve delivering presentations, demonstrating products or writing proposals depending on the prospective customer’s needs.
Closing
In the closing stage, the lead either makes the purchase or decides not to. The deal is either closed-won or closed-lost. This stage includes all the steps required to finalise the transaction. From this point, the lead becomes a customer.
Retention
This stage focuses on maintaining and nurturing the relationship with existing customers to ensure their satisfaction, loyalty and long-term engagement. Sales teams may contact them periodically to check in, provide customer support, offer additional products or services, and address any concerns they have.
The goal for the sales team is to increase the customer’s lifetime value through cross-sell or up-sell, as well as to reduce churn and help generate referrals.
How do you create a sales pipeline?
Review your prospects
Create a list of prospects that match your ICP and have a need for your products or services. The list should include:
names
contact information
job titles
company names
company industries
first point of contacts
pain points / specific needs.
If you have a lot of prospects and a large sales team, you’ll benefit from using a CRM to manage your sales cadence.
Document your sales process
A sales process is a set of repeatable steps your sales team can take to consistently close deals. Document your sales process with instructions for each stage of the pipeline. If you don’t already have a pipeline, create one as you document your sales process.
Define your sales targets
Set sales goals for the entire team and for individual sales reps. Sales targets can define the number or value of deals you want to close each sales period. You can determine monthly or quarterly sales targets for team members, according to what suits your company or industry.
Calculate how many opportunities you need
Once you know your standard conversion rate and your sales targets, you can determine how many prospects you need in the pipeline. An estimated 24% of forecasted deals never close, so keep that in mind as you set benchmarks.
Consider your revenue goal and work backwards. If you want to close $10,000 in deals each month and each deal is worth $1,000, your team needs to close 10 deals per month. If you have a conversion rate of 20%, account for only 1-in-5 leads purchasing. This means you need 50 prospects in the pipeline to hit your monthly sales quota.
Set your pipeline stages
Define your pipeline stages and each step within them to ensure your sales team understands your sales process.
Assign activities for each pipeline stage
Sales activities at each pipeline stage are actions that nurture leads through the sales funnel. Some activities, like lead nurturing, take place during multiple stages. Others, like booking a meeting or product demonstration, only happen during one or two stages.
Your sales team should have tasks at each stage of the sales pipeline. These tasks each may have multiple activities. For example, an “initial contact” task may encompass:
writing and sending an email
tracking email opens
following up with a phone call if there’s no response.
If you’re using a CRM, you can automatically assign activities as prospects move to different stages of the pipeline.
Once your sales pipeline is in motion, you can begin collecting and analysing data to assess which activities are most effective in closing deals. This information can help you further refine your sales process.
What can your sales pipeline show you?
Conversion rate
Your sales conversion rate is the percentage of leads that convert. It’s an essential part of sales forecasting, which tells you how many deals you can expect to close in a certain time, and it helps you anticipate revenue and cash flow.
The conversion rate is a key performance indicator (KPI) that helps you assess how effective your sales process is. It’s also a good indication of whether your marketing efforts are attracting high-quality leads that match your target audience.
Resource gaps
When tracking your sales pipeline, you may find that some salespeople put energy into leads unlikely to convert while neglecting high-intent prospects. This scenario could mean you haven’t defined your lead-scoring process sufficiently or given your team enough direction on prioritisation.
Sales pipelines can also provide insight into the performance of individual team members. You can see who closes the most deals and at the highest values. Equally, you can also see who may need extra training or support. This information can help you provide your team with the training and support they need to succeed.
The length of your sales cycle
The length of a sales cycle varies from business to business and industry to industry. It may take a few weeks to close a deal, or several months for significant investments.
To gauge the length of your sales cycle, you can track your prospects through the sales pipeline to see how long it takes for prospects to move from contact to purchase.
Bottlenecks
Bottlenecks can disrupt your sales cycle and cause lost deals. Analysing your sales pipeline can help you identify and resolve bottlenecks.
You may discover, for example, that scheduling separate meetings for a product demonstration and a pricing discussion delays the sales process. Or you may find that salespeople are losing time explaining something about your product that could be better addressed through a piece of content.
Manage your customers with MYOB
Using a customer relationship management (CRM) system can help you increase the lifetime value of your customers by delivering them a superior customer experience and motivating follow on purchases.
For best results, choose a CRM that integrates with your business management platform. MYOB is a business management platform that brings together all your core workflows - customers, suppliers, employees, projects, finance, accounting and tax - enabling you to manage your entire business in one place. And when your business runs smoothly, your customers always benefit.
With MYOB, you have Tall Emu, a CRM designed specifically for goods-based businesses, or you can choose from a range of third-party integrations to get the tech stack you’re looking for.
Try Tall Emu FREE for 14 days!
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.