What is Sales Pipeline?

Sales pipeline’ is one of those sales terms that gets thrown around a lot: if you spend any time in sales circles you’ll hear a lot about ‘getting prospects into the pipeline’, ‘increasing your pipeline’, and ‘filling your pipeline with hot leads’. It can be easy to forget that ‘pipeline’ is more than just a buzzword. Instead, it’s an important sales tool for any sales management operations, and it can make a significant difference to your bottom line.

A sales pipeline can assist you in visualizing the sales process. It will show you where all of your deals are in the sales funnel, where deals are stalling, and which sales activities are bringing in the most revenue. By breaking the sales process down into small, trackable tasks, it adds a layer of accountability and makes goals easier to achieve. If you don't use a sales pipeline, you may be driving blind: you may have no idea how effective your sales process is or where your deals are. If that's the case, keep reading because this article will explain what a sales pipeline is, why you need one, and how to create one.

A sales pipeline is a logical, visual way of tracking multiple potential buyers as they progress through the purchasing process. In that sense, it's similar to other pipelines in various industries. The above definition of a pipeline, which is a method of tracking progress toward a goal through a series of specific stages, is what it is for businesses in every industry.

Pipelines are frequently depicted as a horizontal bar, or sometimes as a funnel, divided into stages of a company's sales process. Potential buyers are moved from one stage to the next as they progress through the sales process, such as when contact is made or a prospect is qualified. It depicts where prospects are in their journey from lead to (hopefully) customer; with a pipeline, salespeople can see exactly where their money, deals, and other sales efforts are at all times. It's an essential tool for salespeople, who are frequently juggling a large number of sales prospects and deals and can't afford to let one slip through the cracks.

It's also an important tool for sales managers who want more data on how well their sales process is working; because a pipeline tracks a salesperson's activities, it provides more visibility into which sales activities are providing the best return for a company.

"Companies have no idea what their options are," says Michelle Seger, a partner at Atlanta-based SalesGlobe.

How do sales pipelines work?

A sales pipeline, in some ways, aggregates individual customer sales funnels into a composite picture that assesses the health of all sales prospects. The sales pipeline also depicts the lifecycle of different customer prospects, from initial contact to deal close.

The four steps are as follows:

1. Incoming leads are being gathered

2. Qualifying prospects to become marketing-qualified leads (via methods such as lead scoring), and then sales-qualified leads

3. Developing a qualified lead into a sales opportunity

4. Whether the transaction is closed, on hold, or lost

What you'll need to get started with building your sales pipeline?

You can't just throw together a pipeline because it's such an important sales tool. Instead, before you can put one together, you'll need to make sure you have specific information about your company, sales team, customers, and product.

Before you can start building a pipeline, you'll need to have the following items on hand:

1. A list of potential purchasers

2. The sales process of your team

3. Your revenue goals

4. A meeting with coworkers is planned

"Looking at your activities, how long they've been there, and what your conversion rates are telling you where you are and what's not working."

How to Assess the Effectiveness of a Sales Pipeline?

The following four metrics are frequently used to assess the health of a sales pipeline:

1. The number of transactions in the works

2. The average deal size in the pipeline

3. The close ratio, or the average percentage of completed transactions

4. The average amount of time it takes to close a deal, or sales velocity

Let’s take a look at each:

1. The number of transactions in the works

The first thing you'll need is a list of potential customers (or a list of prospects you think might want to buy, at least). This list should be as comprehensive as possible. Names, contact information, their company, their position at work, and how they got in touch with you—or how you know they're likely to be interested—should all be included. If they're already talking to you, try to assign a rough pipeline stage to them: did a rep contact them, or have they been qualified? Don't be concerned. These stages can be changed later.

2. The average deal size in the pipeline

A sales process is a step-by-step formula that tells your team exactly what activities they need to complete in order to close a deal. When you have a good sales process in place, your reps will be able to win deals on a consistent basis simply by following the steps. If your team already has a defined sales process, you've already got the steps of your pipeline mapped out. Don't worry if you don't. The stages of your pipeline, which we will discuss in the following section, will assist you in developing your sales process.

3. The close-ratio, or the average percentage of completed transactions

Because your pipeline is a tool that will assist you in meeting your revenue goals, you must have them on hand in order to design a successful pipeline. Those figures will eventually help you answer an important question: how many deals do you need to add to your pipeline in order to meet your goals? You can easily calculate the number of deals you need in each of the early stages if you know how many of your leads convert into customers. You'll be able to see how your pipeline looks and how many deals you need to add to the top of the pipeline to meet your goals if you calculate your numbers.

4. The average amount of time it takes to close a deal or sales velocity

Your pipeline serves as a tool for the entire organization. Because everyone on your sales team will be using the same pipeline, you should include them in the decision-making process as you build. Also, having more than one set of eyes on a sales pipeline is beneficial; a second opinion can often help you spot flaws in your plan before implementation.