The condition of your sales pipeline says a lot about your business. A detailed sales pipeline reveals how close your reps are to meeting their sales quotas, how much revenue you can expect over the next quarter, and whether you have enough new leads to sustain your current level of success.
But, what is a sales pipeline exactly? And how can you build a sales pipeline that helps your business track leads and visualize your sales cycle?
What is a Sales Pipeline?
Let’s start with a simple definition of a sales pipeline – it’s a step-by-step overview of your sales process.
It’s comprised of the various steps your sales reps take to land a new customer, including initial contact, qualifying new leads, meeting to demo the product, creating a proposal, and closing the sale.
Now that we have a basic definition, let’s dive in a little deeper. This post will cover:
- How to define your sales pipeline stages
- What a sales pipeline for SaaS looks like
- The five stages of a typical sales pipeline
- Pipeline metrics you need to track
- How to improve your sales pipeline
- Tips for better pipeline management
Setting Up Your Sales Pipeline: How Do You Decide Which Stages to Include?
The first step in setting up a sales pipeline is choosing which stages you should include.
Your sales pipeline stages should align with the typical buying process your ideal customers follow. Match up your sales pipeline to your customer journey and your reps will gain a better understand the buyer’s mindset and be able to tailor their sales activities to provide value at every stage.
We recommend between four to six stages for a sales pipeline (plus closed-won/closed-lost deals), but the ideal number of stages varies from company to company.
A well-defined pipeline keeps your sales activities organized and makes it easy to recognize how quickly your opportunities are advancing. So, whether you have four stages or eight stages, each one should have clearly defined entrance and exit criteria.
For example, downloading a white paper, responding to a cold email, or expressing interest in negotiating a price can indicate that the prospect is moving along the pipeline - but only if those behaviors are meaningful to your business and sync up with your pipeline stages.
What Does a Sales Pipeline Look Like?
A sales pipeline is a linear depiction of the stages in your sales process. As new opportunities enter the pipeline and move through each stage, the progress along the pipeline from left to right.
Many companies use a CRM platform to create a visual representation of their pipeline. This makes it easy to find out at a glance how far along each prospect is in the sales process, the size of each deal in the pipeline, and how many opportunities are currently ongoing.
The 5-Step Sales Pipeline Template You Can Steal
Though specific sales processes may differ from business to business, there are five main sales pipeline stages that most sales teams focus on. If you’re building a B2B sales pipeline from scratch, you can use these five stages as a sale pipeline template.
Sales Pipeline Stage #1: Initial Contact
A new lead enters the sales pipeline when they are first contacted by your marketing or sales team. This often involves cold calling or cold emailing a contact in the hopes that they’ll be interested in learning more about what your business has to offer.
Sales Pipeline Stage #2: Lead Scoring and Qualification
This stage can be further broken down into marketing qualification and sales qualification. While a marketing qualified lead (MQL) has shown interest in your product and is ready to speak to a sales rep, a sales qualified lead (SQL) is further along in the buying process and might be ready to talk details.
Every business should develop its own lead scoring model to help separate sales qualified leads from those who aren’t yet ready to make a purchase. One example of a simple lead scoring system is the BANT framework, which considers the lead’s budget, authority to make the buying decision, need for your product, and timeline to purchase.
Sales Pipeline Stage #3: Scheduling a Meeting
After qualification, one of your sales reps should contact the lead to schedule a sales demo. Thorough preparation and research are a few of the keys to successful product demos. This is your chance to really sell your product or service as the perfect solution, which will hopefully lead into negotiating a deal.
Sales Pipeline Stage #4: Submitting a Proposal
Once the lead has expressed interest in paying for your product or service, your team needs to come up with a quote and send the prospect a final proposal. If your deals often involve a lot of a back and forth before closing, you can include negotiation here as an additional step in your pipeline.
Sales Pipeline Stage #5: Closing the Deal
The deal is signed, both parties are satisfied with the outcome, and a new customer relationship has begun. Once the opportunity has officially transitioned into a paying client, your team’s focus should shift to keeping your customer happy and extending their lifetime value.
Keep in mind that it could take you several repeated follow-ups to move your opportunities to this pipeline stage. In fact, sales statistics show that that most sales require five follow-ups to reach the closed-won stage!
How to Measure Your Sales Pipeline: Important Sales Metrics to Track
In order to effectively manage your pipeline, you need to know which sales metrics to track. These will help you stay organized, better predict sales revenue, and ensure you always know how your sales reps are performing.
Average Deal Size
The more high-value deals you have in your pipeline, the fewer deals you’ll need to close to meet your quota. Keeping a close eye on average deal size gives you a better idea of how much your sales reps should be pulling in and whether your closing ratio is acceptable or unsustainable.
Sales Pipeline Coverage
Your sales pipeline coverage (SPC) ratio is key to maintaining a functional pipeline. It measures the value of the current opportunities in your sales pipeline to determine if you have enough new business coming in to meet your quota and continue growing at a healthy pace.
You can calculate SPC using the following formula:
Pipeline Forecast / Sales Forecast = (Average Sales Days / 90 Days) * (1 / Close Rate)
Sales Pipeline Length
This is the average time it takes for a new lead to become a customer. Tracking pipeline length make it easy to recognize how long a deal should take to close. If you notice a bottleneck or leak in the pipeline, you’ll know which stage needs to be improved so you can streamline your sales cycle and close more deals quickly.
Customer Conversion Rate
Converting leads into customers is the only way your business can make money, so it’s vital to track what percentage of leads become paying customers. As you gather more conversion rate data over time, you’ll be able to estimate the probability of a deal to close at each stage of your pipeline and develop a weighted pipeline to help you forecast sales more accurately.
Your sales velocity is a simple calculation that tells you how much revenue you’re likely to close every day. It factors in the number of opportunities in your pipeline, your average deal size, your win rate, as well as your sales pipeline length. The higher the velocity, the faster deals are passing through your pipeline. You can use sales velocity to check that your pipeline is flowing at a healthy pace.
How to Manage Your Sales Pipeline More Efficiently
Once you’ve defined the stages of your sales pipeline, you can optimize how you track each active opportunity. There are a few different ways you can simplify and optimize your sales pipeline management. This includes:
- Automating repetitive tasks and follow-up reminders to save time and increase efficiency.
- Clearly defining each stage of the pipeline and communicating expectations to your sales team. Everyone on your team should know exactly what actions are required to move an opportunity from one stage to the next.
- Capturing more prospect data so you can tailor your sales pitch to meet their needs. The more you learn about your prospects early in the sales process, the better you can understand their goals and pain points. You can research your prospects and their companies using prospecting tools, their social media pages, the “About Us” section on the company website, and their blog.
- Using a CRM platform to track and visualize how far along each lead is on their customer journey. A CRM like Propeller makes it easy to manage your sales pipeline, so you can focus on selling, not updating your spreadsheet.
- Analyzing and reflecting on your sales process using sales pipeline reports to see how your customer conversion rate can be improved.
A Full Sales Pipeline is a Happy Sales Pipeline
The best way to manage your sales pipeline is to use a tool like Propeller CRM, which makes it easier for you to generate leads, manage your contacts, and track deals at every stage. Our platform helps you visualize your sales cycle and streamline your selling process, so you can close more deals, faster. Start a free trial now to see for yourself!