What is a sales pipeline?
The sales pipeline is a systematic method of navigating the stages within a sales process. The sales pipeline shows you how much money you are going to make in a sales deal. The beginning of the sales pipeline begins with the initial contact with a future prospect and progresses through the subsequent stages of the sales process until the deal is closed. With a well-defined pipeline, companies are able to learn the amount of work needed at each step of the process to reach the end sales goal.
The Stages of a Sales Pipeline
Initial contact is generally fostered through marketing. A couple of questions that the marketing team needs to ask are: who is the target audience/what do they care about? Initial contact, however, is not just one and done. Many prospects are going to be long term, necessitating semi-constant attention to build relationships. Leads are filtered through a lead scoring process in order to prioritize marketing qualified leads (MQLs). Once the connection is made, the leads are passed from the marketing team to lower level sales reps who attempt to initiate more intimate contact and gauge readiness to buy.
The definition of a fully qualified lead needs to be established and understood by the entire sales department. In this stage the sales team answers the questions of: do they have a need/, can they afford to purchase, are they a right fit for the product, and so on. You must be able to solve the needs of the lead, as well as establish contact with a decision maker within the company. In this stage the lead transitions into an opportunity.
Once leads are qualified, the next step is to schedule a meeting with the qualified lead. This is generally done by an account executive or a senior sales rep who then takes over and owns the opportunity. During this stage, the sales rep will be going into more detail about the product to a decision maker through discussions, demonstrations and whatever else is necessary.
The lead has confirmed that they are on board and want to move onto the next step. This is the stage in which you send a final proposal with a dollar amount. Creating a quote for your prospect and sending them a proposal is a vital step in the process – it can leave a positive or negative impression on your company, depending on how well your proposal meets their needs and how fast you present them with a quote.
The sale has come to a close when both parties have signed the contracts and dates have been confirmed. The opportunity becomes a client and the goal shifts from selling to taking care of the customer to maintain or grow user adoption, keep them happy, and find opportunities for up-selling or cross-selling.
What Are the Most Important Metrics for the Sales Pipeline?
Number of deals in the pipeline
The number of deals entering the pipeline is important because it is the first variable that affects the overall amount of deals closed. The number of new opportunities is grown through the efforts of the marketing teams. If this metric shows that lead generation is not where a company would like it to be, they can solve the problem through increasing or changing its marketing activity.
Average deal size
This metric can be understood by using data of past deals that a company’s sales team has closed. Once the average size is calculated, the sales team will be able predict the likely hood of various sizes of deals being closed. One example of how the information can be applied is that too large a deal size is not realistic for a company that generally closes deals of moderate size.
The amount of qualified leads that enter the pipeline will not be the same as the end number of closed deals. Realistically a large number will drop out through the multiple stages. Once you know the close ratio, the company can begin attempting to improve it.
Average deal lifetime
Generally, the longer that the sale remains in the pipeline, the less likely a sales rep will be able to close the deal. If the sale velocity is increased, you can increase productivity without using more resources.
5 Signs That Show You Need to Improve Your Sales Pipeline Management
1. Spending too much time on administration
For sales teams to be efficient, they need to spend as much time as possible involved in the actual selling process. Excess paperwork and administration will draw sales reps away from selling and will be an impediment to revenue creation. A study from Pace Productivity Inc. found that average sales reps spend 23 percent of there time on administrative tasks. Only 22 percent of their time goes to the actual act of selling. Through better management of the pipeline, sales reps can drastically increase time spend on more productive enterprises.
2. Deals don’t move fast enough
As a result of the many different steps involved in the sales pipeline, there are many chances for the process to be delayed. There are various ways in which delays can come about, including excess administration. Each company will have its own causes of delay. These delays need to be improved upon in a timely fashion to allow sales reps to follow up on opportunities and facilitate progress down the pipeline. One strategy, outlined by Ken Krogue of insidesales.com, is to make sure sales reps are immediate when following up on leads. Don’t call a day after, call 5 minutes after.
3. No visibility into your open opportunities
Without an overview of a sales teams current opportunities, they will not be able to deem which are priorities (ready to buy) and which are not. A lack of visibility creates inefficiencies. It causes sales reps to spend unnecessary time on unqualified leads that lead nowhere.
4. No focus in sales forecasting
Accurate forecasting allows companies to anticipate problems that may arise throughout the sales pipeline. Without a reliable forecasting system in place, it becomes difficult to control and optimize the pipeline. Knowing what will perform best eliminates guesswork and creates a more predictable environment.
5. Your sales cycles are too long
Longer than necessary sales cycles are inefficient. There are many problems that could arise throughout the pipeline that lead to this, such as a large number of unqualified leads. Correcting these problems will directly lead to increased revenue growth.
How to Successfully Manage Your Sales Pipeline
Define your sales process
The sales pipeline stages are different from business to business, so it is important that each company defines each of there respective sales processes. This will help standardize the selling process and make sales goals more predictable. A couple of ways that you can help define your sales pipeline are: mirror your sales stages to your potential costumers buying stages, meet to discuss the process with the sales reps, incorporate that knowledge, and analyze the overall effectiveness of the pipeline every couple of months. Eliminating the variations and guesswork is key to increasing sale pipeline effectiveness. Also, limiting the number of stages to 4 or 5 is a good rule.
Invest time and resources to managing the sales pipeline
Once the pipeline has been defined for a company, it is equally important that they employ resources to manage how the sales reps implement the strategy. According to Forbes, companies surveyed that spent at least 4 hours managing their sales pipeline saw 14 percent greater revenue growth than those who spent only 1 hour a month.
Train sales managers in pipeline management strategies and techniques
Without effectively trained sales managers it will be very difficult for companies to manage the sales pipeline. According to SalesForce.com, 61 percent of executives say their sales manager have not gotten the necessary training in sales pipeline management. With managers that have received adequate training, companies can see 23 percent greater revenue growth than those that didn’t.
For each sales pipeline, the factors that create closed sales out of leads must measured. The improvement of a pipeline is a continual process. Without being able to separate what is working from what is having no effect, there will be no improvement. For example, what is the optimal number of initial calls that a sales rep needs to make a day that will eventually give you the number of closed deals that you desire? How many leads does the sales reps need to qualify in a given month? These results will help to understand what improvements are needed.
The sales pipeline represents each company’s sales process consisting of all the steps necessary to take an unqualified lead to a closed sale. The sale pipeline differs for each company, as each company’s customers have different buying processes. Throughout the process it is important to measure different metrics and manage the overall pipeline to understand how much work needs to be done to reach the end sales goal. Being able to understand what is necessary at each step in the process allows for a predictable model that can be used continually by the sales teams.