Sales Pipeline 101: Maximize Sales Opportunities With Pipeline Management Software

A sales pipeline has been a common tool for sales teams for decades, but sales is changing. Despite what many think, sales is not what they show in the movies. The days of intense, hardball tactics, “sell me this pen” and “Always Be Closing!” in the sales office are behind us.

Modern, customer-focused sales teams are dedicated to offering value to their prospects, coaching team members to become better, and building repeatable and predictable business processes that drive growth and acquire customers. A key part of that trend is the nurturing and development of a sales pipeline, and all of the specific business elements that go along with it – including utilizing the right pipeline management software.

What is a sales pipeline?

The definition of a sales pipeline is the overview of active sales opportunities in various stages of a company’s defined sales process. It is a theoretical view of all of the known potential business deals that salespeople will try to close and turn into revenue in the near future. Both individual sales reps and entire sales teams have a sales pipeline, which is always evolving as new opportunities are discovered and existing opportunities close both won and lost.

When someone is referring to an individual salesperson’s pipeline, they mean all of the opportunities that salesperson is aware of and is working on to close in the future. References to a team sales pipeline or company sales pipeline describe all individual sales rep pipelines as a whole. That means all sales opportunities that are known and being worked on across the entire team or company.

Sales pipelines are a “living, breathing” part of the CRM that is subject to constant change. Buyers are unpredictable, so at any moment an opportunity can drop out of a pipeline or abruptly advance several stages and close. They can also become “stuck” and not advance at all for a significant amount of time, sometimes months. Sales pipeline management software gives teams key insights into the current state of their sales pipeline.

How is it different from a sales process and other terms?

Sales pipeline has many closely related terms that are mistakenly used as synonyms, including sales process, sales funnel, sales forecast, and more. The best way to differentiate the term sales pipeline from the others is to remember that a pipeline always describes the real, active opportunities that salespeople are working on at any given time. Every other term describes theoretical elements of the sales experience, but the sales pipeline is the only one that speaks to active sales opportunities.

Sales process is probably the most common term to be misapplied. A sales process means the planned steps a team repeatedly uses to move deals through the pipeline. These activities lead to outcomes that advance opportunities, and these outcomes are measurable, meaning that the steps can be tested and modified based on the data. Of course, pipeline management software assists with following sales process best practices as well.

Another very common term used interchangeably with sales pipeline is sales funnel. This is the term used to describe the visual representation of the sales pipeline – in theory each stage of the sales funnel has less opportunities in it as the likelihood of an opportunity to close increases. Visually, each progressing stage appears as a smaller section to represent this, leading to the ‘funnel’ name. Marketers use the term “funnel” more often than salespeople to represent the linear progress of opportunities, mainly because it also serves to describe many digital marketing strategies across b2b and ecommerce sales channels.

Other related terms

Sales forecast and revenue forecast: both refer to time stamping opportunities in the pipeline to predict when they will close for the purposes of revenue projections. The sales forecast is very closely related, but leans towards projecting exactly how much of the planned sales pipeline is expected to close and become revenue for the business. As a result, each stage of the sales pipeline is commonly assigned a number or percentage reflecting the deal progress through the pipeline. The later a deal is in the sales pipeline, the higher the percentage. This reflects both the deal’s progress through the pipeline as well as the potential likelihood of that opportunity to close.

Forecast category: a way of organizing sales opportunities, often reflected in the CRM. In many cases, sales pipeline is one of several forecast categories, including best case, commit, omitted, and more.

Sales stage: where an opportunity is in the pipeline based on its likelihood to close.

Forecast accuracy: the veracity of the planned closing dates assigned to different opportunities.

Sales cycle: this is commonly seen as another synonym for sales process, speaking to the recurring nature of the steps taken to close business throughout the buyer-seller relationship. In reality, it is the measurement of the length of time between opportunity creation and close.

5 Common Sales Pipeline Stages

Important to understand how each stage of the pipeline impacts individual sales opportunities. You execute different plays in each stage, so it is important to be accurate in how you define the stages so you don’t end up sending your sales team mixed messages about what to do for any given stage. If the team has clear, defined steps planned for each stage, they can reoccur on a regular basis, allowing you as a manager to measure and optimize these plays in a way that fuels measurable improvement over time.

In larger organizations, stages in the sales pipeline are owned by different roles within the company, and pipeline management software offers benefits for each role. For example, prospecting and qualification are generally given to more junior sales roles, often titled as sales development reps (SDRs) or business development reps (BDRs), whereas handling opportunities in the consideration, decision, and close phase of the pipeline are handled by more senior salespeople, commonly referred to as Account Executives (AEs). This is not always the case, however. In smaller companies, a single salesperson may handle the entire lifecycle of an opportunity from prospecting to close, in which case the sales person is considered a “full cycle rep” to denote that they handle all of the workload. This can commonly appear in smaller companies or even in larger companies where the time to close the business is short or the purchase pattern is more transactional.

Prospecting

This is the stage of the sales pipeline that is filled with target buyers, and sales reps must spend their time trying to connect with those buyers for the first time to present their pitch and give themselves or their team a chance to create a sales opportunity. In B2B sales, prospecting generally draws from exercises where teams develop “Ideal Customer Profiles” (ICP) and buyer personas that define who their perfect target buyer is, and what roles at a business play a part in a purchase decision. Then, these guidelines are used to create prospecting target lists with names, job titles, contact information, and any other relevant details about the company’s business that sales teams can methodically reach out to. Technically, prospecting isn’t part of the sales pipeline as the pipeline is made up of opportunities and during this phase of selling, there are not opportunities yet. But, it is an important consideration to include because this step is the method by which most sales teams use to fill their pipeline.

Qualification

The qualification stage is the first true stage of the sales pipeline. At this point, the salesperson who will be managing the sales opportunity throughout its lifetime will make a decision, based on information uncovered in the prospecting phase, whether or not to enter the potential deal into the pipeline. There are many, many methods of qualifying a b2b sales lead, but the most common is generally referred to as BANT, an acronym for Budget, Authority, Timeline, and Need. If a prospect is found during the prospecting phase, and has the budget to buy your product, the authority to make the purchase decision, a reasonable timeline that they need to purchase by, and a need for the solution you offer, by BANT standards you have a true opportunity that can be entered into the sales pipeline.

During qualification, sales reps are expected conduct discovery, which consists of strong open-ended questions designed to uncover everything the seller needs to know about the buyer’s situation.

Consideration

At this point of the sales pipeline, prospective customers are evaluating the solutions available to them in the marketplace. It is rare that a buyer in today’s world will go through a purchase process without evaluating multiple options. That means most of the time, salespeople are up against stiff competition when positioning their solution and trying to win a buyer’s business. Some other sales processes will call this the “meeting” or “relationship building” phase. During the consideration phase, salespeople are trying to build upon the rapport that was developed during the prospecting and qualification phases of the pipeline. During this time, common activities include product demonstrations or “demoing” of solutions to the customer, continuing to ask discovery questions to deepen understanding of the buyer’s situation, and positioning your solution as the valuable answer to whatever “pain” or problems that the buyer is looking to solve.

Decision

At the decision stage of the sales pipeline, sales reps are helping the prospective customer arrive at their final purchase decision. Some pipeline models will refer to this stage as the “contract” or “negotiation” phase. During this step of the process, discussions about pricing, volume, and any other relevant negotiations will occur. At the decision stage, deals are often assigned a percentage of 50% or higher, as many more of the deals that make it this far have a high likelihood of closing.

Close

The closed stage of the pipeline is every salesperson’s favorite stage. If a deal has entered this stage, generally referred to in a CRM or pipeline management tool as “closed-won,” and that means the prospective client has become a customer and made a purchase. While this usually represents the end of the pipeline as far as the lifecycle of the original opportunity, it isn’t the end of the road overall for the business. For many companies, opportunities continue to appear for upsells or cross sells, purchasing other products within the portfolio. At the closed won stage, the customer is often handed off from the sales rep to a customer success department or something similar.

Sales Pipeline Management

Since the goal of every salesperson is to close lots of sales, they should all strive to have a big sales pipeline, right? The answer is yes and no. Yes, a big sales pipeline can be promising, if all of the opportunities in that pipeline are valuable and have a reasonable likelihood of closing. On the other hand, a big pipeline can be negative. Your sales pipeline management software can give you more insight into your exact situation.

A sales rep is only one person with a limited amount of time. In other words, there is such a thing as a pipeline that is too big for one person to manage. The larger a sales pipeline, the more staff it takes to manage and effectively progress deals through the pipeline to close. A pipeline should only have as many opportunities as the rep can reasonably manage with the time they have available. Customer relationships are too meaningful and too valuable to spread a rep’s time thinly across so many that they can’t devote the proper time and care to closing.

Here are a few quick rules to keep in mind regarding pipeline management:

• A big sales pipeline sounds impressive, but it also could be a negative thing.
• Keep the pipeline lean and mean, quality over quantity.
• Filter it regularly and disqualify quicker than you qualify.

Criteria need to exist for sales teams to enter deals into the sales pipeline. Not just anything can be entered – and not everything a salesperson believes is an opportunity is truly an opp. Criteria also needs to be in place to ensure stale opportunities that are “stuck” do not sit there for extended periods of time.

Sales Pipeline Management Software – Key Metrics

A sales pipeline is only a valuable concept if sales leaders monitor it closely. Since many leaders are managing teams, the best method for keeping track of sales pipeline health starts with sales pipeline metrics. Here are some key metrics to track using sales pipeline management software.

Pipeline Value

This is what most sales leaders and salespeople mean when they speak about their pipeline generally, it is a dollar amount sum of every opportunity that is currently in the sales pipeline.

It is super easy to monitor this metric because it is as simple as adding up all of the projected revenue numbers for every opportunity in the pipeline. What can make it difficult to monitor is if sales reps are not disciplined about adding opportunity values to the CRM. This challenge often leads to incomplete data.

Pipeline Velocity

The pipeline velocity is how quickly prospects move through the pipeline over time. The actual pipeline velocity varies greatly by industry so this metric is not easy to benchmark, but what is important is how the velocity changes over time.

Speeding up your pipeline velocity is a great goal because it means your sales team can be freed up to work new opportunities more quickly.

Win Rate

Win rate is simply how many sales opportunities is a sales team able to close divided by the total amount of sales opportunities. This is a really important metric to monitor because, if your sales team has a low win rate and is losing many opportunities, it demonstrates a clear sign that something is wrong and needs to be addressed.

Average Sales Cycle Length

The average sales cycle length is the measurement of how long it takes, on average, to win one opportunity. This is a helpful baseline metric that can be used to identify top performers who close opportunities faster than other reps, and also provide insights into what parts of the sales process need to be improved to obtain a shorter sales cycle.

Average Deal Size

Average deal size means how much revenue, on average, results from a sale. Average deal size can be easily calculated by adding up the value of all won opportunities over a length of time and dividing it by the total number of won opportunities during that time.

Customer Acquisition Cost (CAC)

Customer acquisition cost is the total amount of money it takes to acquire a new customer. There are varying degrees of this metric that include different investments, but in most cases it is inclusive of employee salaries, advertising spend, and sales team-related expenses.

Customer Lifetime Value (LTV)

Customer lifetime value is how much revenue does the average customer generate for a company over time. This metric is especially common with subscription SaaS-based businesses that develop recurring revenue models and expect to receive income from customers over an extended period of time. Your pipeline management software can automatically calculate and track this for you so you don’t have to.

6 Ways To Build a Strong Sales Pipeline

Sales teams need a method for tracking sales opportunities that have a potential to close over time. Customer Relationship Management (CRM) software includes fields on opportunity records for tracking potential close dates. Tracking these close dates across all sales opportunities owned by a sales team are the building blocks of a sales pipeline.

Build A Sales Pipeline Management Software Tech Stack

Tracking a sales pipeline without purpose-built software in the present day is incredibly difficult. Although it is possible to draw on spreadsheets to track sales opportunities, that method requires a lot of customization and manual data entry to ensure the documents are kept up to date. Even the most well maintained spreadsheet-based pipelines leave sales teams without vital metrics and offer very little visibility into sales activities that have taken place to advance the sales pipeline.

As a result, the vast majority of sales teams adopt Customer Relationship Management (CRM) software such as Salesforce that is purpose-built for tracking and monitoring activities with prospects, opportunities and customers. Over time, deficiencies in CRM systems have led many sales teams to assemble “stacks” of pipeline management software that fit their needs the best, including data sources for contact information, sales dialers, and guided selling platforms. One of the critical ways these tools offer value is that they automatically log all activities that a salesperson does to advance an opportunity, allowing sales managers to optimize and measure their process using activity metrics.

Monitor Sales Activity Metrics

As mentioned earlier, a sales pipeline is tied to the sales process, and at different stages of the sales process, teams will have pre-defined “plays” to execute within that stage. For example, deals within the prospecting stage of the pipeline will be addressed with prospecting stage plays, such as outbound calling, sales cadence execution, and email drafting. On the other hand, the consideration stage may contain activities including direct mail gifts, or product demonstrations. All of these activities are measurable over time, and can be a leading indicator as to how healthy the sales pipeline really is.

Learning to read and diagnose a sales team’s activity metrics for each stage of the sales process is one of the most important skills of the modern sales manager. The latest generations of sales technology are making nearly every step of the sales process measurable, allowing sales leaders to accurately measure the health of every part of the sales pipeline with ease. From words said in a sales conversation to amount of dials a rep makes per week, managers now have nearly complete visibility that seemed unimaginable just a few short years ago.

Sales activity metrics inform every additional step of assessing sales pipeline health and sales management in general. Make sure you’re tracking the right metrics in your pipeline management software.

Hold pipeline review meetings

Pipeline review meetings are a fundamental part of the sales management process. This is generally where a sales leader and rep spend time together to review open opportunities, talk strategy, and consider ways to advance opportunities through the process. Many sales teams will hold weekly pipeline reviews, sometimes as a team, and other times in one-on-one settings.

It is easy for these sessions to become entirely tactical, peppered with advice on who to contact, what to say and how to format proposals. While this tactical work is important, best practices suggest that sales managers should invest in regular sales coaching sessions as well during this time, as these efforts are more likely to lead to improved outcomes across many opportunities over time, rather than just improving the single opportunity in the pipeline.

Review meetings are the first step in overall pipeline accountability – a critical function of successful sales management.

Build pipeline accountability

Over time, it becomes easy for a sales pipeline to become bloated and ultimately inaccurate. Incorrect close dates, over- or under-estimated revenue projections, or opportunities that have gone dark or are actually lost can cloud the information in the pipeline, making it difficult to manage.

The famous Peter Drucker management quote applies here – “what gets measured gets managed.” In the case of sales management, knowing what is truly an active opportunity, having a clear sense of where that opportunity is in the pipeline, and forecasting how much that opportunity is potentially worth to the business is crucial to accurately managing the team to successfully reach quota.

One of the common methods of doing this comes in the form of quality assessments. Simple checks on opportunities when they have reached a certain age, such as 30 or 45 days, to see how long it has been in the specific stage, ensuring it has a value associated, or even making sure that is still actively being worked on by the sales rep are crucial. Pipeline management software is instrumental in these efforts as well.

Although it can feel uncomfortable at first, being consistent about removing sales opportunities from the funnel that have signs of being dead (flushing the pipeline) is a valuable discipline for sales reps or managers. This activity brings immediate clarity of focus for sales reps, who immediately know where to focus their efforts and where to stop wasting time.

Embrace time management

Time is a fundamental resource for sales teams: the amount of time you have available to you as a sales manager is limited to the amount of reps you have on your team, and the remaining days and hours between now and the end of the quarter.

That relates to the sales pipeline in many ways. Early on in the quarter, reps need to be focused on filling their pipeline with fresh opportunities that they can then nurture throughout the following months, ideally closing them before the end of the quarter. Josiane Chriqui Feigon recommends 40% of your pipeline should be brand new in any given month.

As mentioned earlier, this is accomplished through sales prospecting, but this is not the only time that prospecting occurs. Reps should always dedicate some time of their day or week to prospecting activities, but frontloading a sales quarter with the “top of funnel” activities is a great way to clear up room in the final month of the quarter for “bottom of funnel” efforts that result in closed won revenue.

Know your team

Individual personalities and differences will affect how reps perceive the pipeline, the opportunities they enter, and more. This can go both ways – reps can overestimate their pipeline, or underestimate it (sandbagging) because of many factors.

Overestimating: reps who consistently pad the value of the opportunities that they are working can be demonstrating signs of several things. They could be over-optimistic in their own abilities to persuade a buyer. They may be insecure about a few down quarters and feel the need to pad the numbers to keep management happy while they search for another job. They could also just suffer from a lack of coaching and training, ultimately struggling to identify the true value of the opportunities that they are working.

Underestimating or sandbagging: reps, for a variety of reasons, may choose to under-list the value of opportunities in their pipeline. This may happen for reasons as simple as they don’t want to fall short of expectations that were set too high to begin with. On the other hand, the politics of territory or opportunity size distribution can come into play, and reps may be incentivized to keep the opportunity value artificially low to ensure they get to keep working on it and are not required to pass it off to other reps who are designated as the “enterprise” level reps.

Regardless of the reasoning, any time a sales manager identifies reps who are consistently under or overestimating the size of their sales pipeline, they have found a sign of something that needs to be addressed.

The sales pipeline management software that any team can use

The formula for building a sales pipeline starts with a simple spreadsheet. While we advise teams to use a CRM for tracking their pipeline and avoiding spreadsheet-based systems, mapping it out on a simple spreadsheet template can really help a novice sales manager wrap their mind around the concept.

Open up a new spreadsheet, and across the top row, label the columns with the words “opportunity name,” “opportunity revenue,” “create date,” “expected close date,” “close percentage,” and “opportunity stage.” If you use this very simple model and fill in the rows with every opportunity you are working on, and sort that spreadsheet by stage, you will have a very simple but conceptually accurate view of your own sales pipeline.

Of course, mature sales teams can’t function without proper pipeline management software. Book time with us to see how Revenue.io checks all the boxes.