“It’s in the pipeline!” Business owners often hear this rather vague phrase, which may be good news in some cases or code for “don’t hold your breath” in others.
Your sales pipeline, however, is a very real thing. Simply defined, it identifies and quantifies the prospective deals in progress at various stages of the sales process. Properly managing your pipeline can help your business avoid losses and meet or even exceed its revenue goals.
6 commonly held stages
Many people confuse the sales pipeline with a sales funnel, but these are two separate concepts. A sales funnel is a visual representation of the sales process from the buyer’s perspective. It typically begins with someone becoming aware of a product or service and then moving on to interest, decision and finally action.
The sales pipeline also has several commonly held stages, but they’re a bit different. Most models identify them as:
- Lead generation,
- Lead qualification,
- Engagement with the lead,
- Relationship building,
- Deal negotiation, and
As you might suspect, volumes could be written and discussed about each stage of the pipeline. Suffice to say that effective sales pipeline management entails knowing precisely where each prospective deal lies among these six stages. Then you must push those deals, with appropriate pressure, through closing to become sales wins.
From data to done deal
Like so many other things, sales pipeline management in today’s business environment is data driven. Succeeding at this task generally begins with identifying, calculating and tracking the metrics that provide the best insights into how to efficiently and effectively run your pipeline. These may differ somewhat depending on your mission and customer base, but common ones include:
- Average deal size (the sum of total revenue achieved in a given period divided by the number of sales wins for the same period),
- Sales win rates (the total number of sales opportunities created in a given period divided by the number of sales wins in the same period),
- Number of deals in the pipeline (simply the number of vetted, bona fide leads in the pipeline), and
- Sales pipeline value (the total estimated value of all active, viable opportunities currently in the pipeline).
The purpose of these and the many other pipeline-related metrics isn’t to create data in a vacuum. Your objective is to channel this raw data into accurate sales forecasts that enable you to discern which customers and prospects offer the highest likelihood of success. From there, your sales team can devise broad strategies and specific tactics to move deals through the pipeline as quickly as possible.
And while your salespeople are out on the front lines doing their thing, management and company leadership need to be able to keep a close eye on progress. For this purpose, many businesses invest in software that provides real-time info and “dashboard” visuals. Dedicated sales pipeline management software is available. However, if you already have a customer relationship management system, it may offer suitable functionality.
Optimize, optimize, optimize
Your ultimate objective in sales pipeline management is optimization. By mindfully building, vigilantly monitoring and constantly improving your pipeline, you’ll improve the odds that your sales team will meet its goals and, in turn, your company will achieve its profitability objectives. Contact us for help reviewing your sales numbers, choosing the right pipeline-related metrics and analyzing the data involved.