Sales Pipeline: What It Is and How to Build a Successful One

jacinto m.
Jacinto M.
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Having a definitive sales pipeline is the best way to structure a sales process and daily tasks for your salesforce. You can use it to define a prospect’s steps in the sales cycle, from the time you establish contact to the moment they make a purchase.

Yet, not all salespeople or managers know what a sales pipeline is, how to build one, and its importance in sales. This article will explain the meaning of a sales pipeline, the reasons you need one, and how to use it to nurture your leads.

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What Is a Sales Pipeline?

A sales pipeline is a roadmap that shows the steps customers go through before they decide to buy something. It helps sales teams define and understand what actions customers are likely to take next and allows for tracking their progress. This, in turn, enables us to create and optimize custom tasks for each step in the pipeline to move a prospect from lead to closed deal.

Sales Pipeline Example Hubspot

Sales Pipeline inside HubSpot’s CRM

Despite sales pipelines having different stages in a sales cycle, prospects may not strictly follow all of them from start to finish. Some go back to the middle when they lose interest, while others may skip multiple stages at once.

For example, you could expect every prospect to go from “first contact” to “lead qualification,” “meeting,” “proposal,” and “closing,” but some prospects make a purchase the first time they see your offer.

To ensure that no prospect is lost as a result of this flexible process, the pipeline helps to classify them according to their phase at any time. A sales rep moves each prospect from one stage to another until they get to close, discard, or hold the deal. By breaking down the sales process into small, easy-to-track tasks, a sales pipeline infuses accountability and makes it easier to achieve sales.

This makes it possible for sales teams to see where exactly their sales efforts are all the time. Thus, as they juggle with many prospects, sales reps won’t allow anything to slip out of place. So if you’ve just sent out a cold email to a client, their response will determine whether to move them to the next stage, and you’ll also know what your next course of action is.

Sales managers can further use sales pipelines to actively monitor, manage, and optimize the sales process. There are plenty of ways to visualize pipeline data and even predict sales based on your previous records.

Sales Forecast Hubspot

Sales Forecasting inside HubSpot’s CRM

Since it tracks the activities of all sales reps, managers get to know the activities and people resulting in the greatest returns.

Sales Forecast vs. Sales Pipeline

Speaking of a sales forecast, people often confuse the term with a sales pipeline.

A sales forecast provides an estimated projection of sales revenue for a given timeframe. It indicates how well a sales team is progressing toward their goals, guiding financial planning and strategy.

A sales pipeline includes all opportunities a sales team is handling, whether new or old customers. It helps in the tracking of the prospect’s position in the entire sales process to determine how best to proceed.

Sales Funnel vs. Sales Pipeline

Another source of confusion often arises in connection with the word sales funnel. The key difference is that a sales funnel focuses on the customer journey, whereas a sales pipeline focuses on the sales process.

Sales Funnel vs Sales Pipeline Illustration

Since a funnel is broader at the top and gradually becomes narrower at the bottom, the assumption is that prospects will drop consistently during the sales process. Thus, sales reps and managers could falsely believe that each part of the process has the same impact.

Instead of a funnel, think of a sales pipeline as a Martini glass. You might have many initial prospects, but most of them don't make it past the qualification stage. After clearing this key hurdle, the majority are on a path to becoming customers.

How Do Sales Pipelines Work?

For a sales pipeline to work, you need to track every individual’s actions, from a sales prospect to a purchasing customer. Based on that, the sales process is divided into different stages, which together build your entire pipeline.

Which and how many stages a prospect goes through depends entirely on you and your business. However, some stages are very similar among different types of businesses. For example, at one point, a car salesman will offer you a test drive, a real estate agent will show you a house and a software company may give you a demo of the product.

Since many sales stages have a similar purpose in most companies, it is common to start with a base set of stages that have been proven to work successfully across industries.

Basic Sales Pipeline Stages

The stages shown above are generalized and refer to their functions in the entire course of a sales process. Each individual company can rename, customize, and remove or add these stages based on their requirements.

The basic stages can be described as follows.

1. Prospecting (Lead Generation)

Lead generation, or prospecting, involves acquiring new leads and projecting sales based on them. This is about attracting the attention of the right prospects to collect their contact information (and possibly more).

Usually, it is done through advertising campaigns and organic website visitors who leave their contact information as part of a form submission or by gathering prospects through manual sourcing and cold outreach.

2. Qualifying

At this stage, prospects and cold leads are converted into qualified leads. The goal is to identify which leads are serious and likely to become customers. It often involves lead scoring, which can be done in a variety of ways.

Here are a few examples:

  • Sending a series of information materials
  • Collecting data through comprehensive forms with details such as budget, industry, company size, job position, etc.
  • Webinars
  • Discovery call

Depending on the nature and complexity of a product, you can even combine multiple qualification methods to score leads based on their interactions with your resources. It allows you to better filter out those that match your buyer persona without wasting any time. The best CRM software makes it easy to automate this entire process.

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A sales process needs to be smooth. Both being too straightforward and having too many qualification steps can ruin it. To find the right balance, it helps to keep it as short as possible first. Then, expand it over time when you notice a large portion of leads bounce off between your stages or if the quality of leads is not good enough.

3. Engaging

Once a lead has qualified as a potential customer, the next step is to move them closer to a purchase. The best way to achieve this is by building a personal relationship. In other words, you want to have a call or meeting with your leads, especially when your product or service is more expensive.

A call or meeting is used to learn more about the person/business, address potential pain points, discuss open questions, narrow down interests, and help potential customers understand how they will benefit from your product or service.

Depending on what you’re selling (e.g. coaching program), it can even lead to an offer and a closed deal just from this one call alone. A real estate agent, on the other hand, will initially only be able to discuss the needs and general business operations.

Besides calls and meetings, personal emails and webinars can also be used for the engagement stage, but they usually work best to bridge the gap to schedule a call. For example, you can use a link to schedule an appointment as the CTA for your webinars and emails.

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No matter what business you’re in, it’s important to act quickly once a lead gets warm. If you wait too long, the interest may already be lost, and your lead is cold again. As a rule of thumb, don't wait more than one day after qualifying a lead to get in touch in one way or another.

4. Proposing

After successfully engaging and understanding the needs of leads, the next step is to provide a proposal.

This is usually a structured document that outlines your product or service to summarize your offering and is often combined with a quote and contract terms. It should be highly customized to reflect the discussions and understandings gained during the engagement stage.

Here are a few elements often included in a proposal:

  • Executive Summary
  • Objectives and Scope of Work
  • Timeline
  • Costs and Payment Terms
  • Case Studies or Testimonials
  • Terms and Conditions

The proposal stage includes negotiations and revisions to your initial proposal according to the feedback received.

5. Closing

Once the proposal is accepted, you move on to the closing stage.

This is the point where the deal is finalized and the lead officially becomes a customer. Necessary contracts are signed, and initial payments are made.

Here are some elements often involved in the closing stage:

  • Contract Signing
  • Initial Payment
  • Onboarding Process
  • Finalizing Details (Delivery dates, training sessions, etc.)
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Sometimes, leads may get cold feet at this stage. Be prepared to alleviate last-minute concerns to ensure the deal closes successfully.

6. Retaining

After a deal is closed, the focus shifts to customer retention.

This involves continuously adding value and maintaining a strong relationship with the customer to encourage repeat business or upselling opportunities. Effective customer retention strategies include the following:

  • Regular Check-ins
  • Customer Feedback Surveys
  • Loyalty Programs
  • Special Offers and Discounts
  • Educational Content and Resources

You’ve probably heard it many times that the big money is not made with new customers but with existing customers. This is absolutely true, but only if you have something to offer your existing customers.

It's important to find out what customers need even after a purchase or what new problems could arise. For example, if you offer business coaching and the results are tremendous sales for the client, then the next thing you could offer is executive training or coaching for finding employees to help them grow further.

If customers are already convinced of your performance, it is obvious that they will continue working with you. And since you already know the customer is successful and they know your value, you can also charge considerably more.

Another example is subscription models. These have the advantage that you can generate recurring revenue with minimal effort as long as it provides ongoing value to the customer. And it's not just software companies. You could build a paid community for, let’s say, real estate agents, where members can help each other and exchange information. Active users will rarely leave a valuable network of like-minded people.

Get creative and see how you can provide even more value to your customers after the initial close.

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A loyal customer is not just a source of ongoing revenue but also a potential advocate for your brand. Keep them happy, and they might just become your best marketing asset.

How to Build a Sales Pipeline

Building an effective sales pipeline means tailoring your sales process to your business.

You can stick to the general stages, but you should always personalize and customize them. As briefly mentioned, it is better to start with a short and simple process before expanding it further.

Here are the most important steps in building a sales pipeline.

1. Analyze Your Current Sales Process (Skip if New Business)

If your organization has been selling products or services for some time, your first step should be to look at your current sales process. Map out each stage and task you take from lead generation to closing, identify bottlenecks, and examine the conversion rates at different points. This will give you insights into what's working already and what needs improvement.

2. Define Sales Pipeline Stages

Establish the stages of your sales pipeline, which could range from initial contact to final sale. Each stage should correlate to key activities your team must complete. Your pipeline stages should align with your customer's buying journey for accurate tracking and forecasting.

3. Set Up Your CRM

CRM software is indispensable for anyone that is serious about sales and pipeline management. Gone are the days of having to pay obscure numbers for tools that make you more work than taking away. Cloud-based solutions make it extremely easy to set up a sales pipeline and track everything along the way (plus a lot more). If you’re not yet using CRM software, make sure to visit our Best Picks and discover the best solutions on the market.

Once you’ve created your account it’s time to get familiar with the software and set up your sales pipeline using the stages you’ve just defined.

4. Prioritize Activities for Each Stage

Break down each stage of your sales pipeline into the essential activities or tasks that your sales reps need to perform. These could be things like making initial contact, setting up meetings, or sending proposals.

The more detailed you define which and how tasks should be handled by your sales team, the more standardized your sales process becomes.

This contributes to less variation in the quality of your sales process between sales reps and makes it easier to measure individual performance. It also reflects on the collection of data. If you define exactly what information you want your team to collect from prospects, you can use it in a more targeted way for further progress.

6. Define Metrics to Track

Identify key performance indicators (KPIs) for each stage to track. Understand the common characteristics of deals that progress from one stage to another. This helps in setting up realistic benchmarks for success and aids in resource allocation.

You can only optimize your processes in the long term if you know from the start which metrics matter in each pipeline stage.

7. Estimate Opportunities Needed to Hit Targets

Over time, you'll gain insights and numbers. Calculate how many opportunities you need at each stage to meet your sales goals. Use your established KPIs and conversion rates to achieve these numbers as an act of pushing for sales goals.

Hubspot Deal Stages Conversion Insights

Leads & Conversion Rates between Stages (Inside HubSpot)

By following these steps, you'll be on your way to creating a sales pipeline that's tailored to your company’s needs. And while this section focuses on the creation of the pipeline, remember that maintaining it is equally crucial.

How to Maintain a Sales Pipeline

It’s not enough to build a sales pipeline and forget about it. Most of its strength comes from maintenance which includes constantly optimizing the process. Performing periodic audits helps you better assess the status quo and align actions with your goals. Since you’re collecting a lot of data in your CRM along the way, it's not that hard either.

Basic maintenance should involve the following actions.

Continuously Monitor Your Pipeline

  • Real-Time Monitoring: Use real-time dashboards inside your CRM to track immediate metrics like conversion rates, deal sizes, and lead progression.

  • Long-term and Mid-term KPIs: Track KPIs on a monthly, quarterly, and yearly basis to gauge long-term effectiveness and alignment with business goals.

  • Routine Check-ins: Hold regular meetings to discuss both real-time and long-term metrics, and to identify any bottlenecks or areas for improvement.

Utilize Split-Testing for Continuous Improvement

You'll never know if another way works better unless you test it. Regularly incorporating new ideas can lead to large company growth.

  • Idea Generation: Encourage your team to come up with ideas that could potentially increase conversion rates or speed up the sales cycle.

  • Experiment Design: Prioritize promising ideas and design controlled tests to measure their impact.

  • Test Execution: Conduct tests on a significant sample of your pipeline, e.g. 50% of your new leads receive a different follow-up email.

  • Data Analysis: Examine the results to decide on the winning approach.

  • Implementation: Apply the successful variations to your full pipeline.

Take Actionable Steps Based on Data

  • Refine Messaging: Use data to hone your sales scripts, email templates, and other client communications.

  • Streamline Follow-ups: Leverage data to set up automated reminders and personalized follow-up systems.

  • Update Sales Training: Continuously refine your training materials to reflect the most effective techniques proven by data.

Update the Pipeline Based on Insights

  • Implement Changes: Actively modify your sales process based on successful bottleneck solutions or positive split-test results.

  • Document Updates: Keep a change log to record what changes were made, when, and why.

  • Retest: After implementing changes, run new tests to ensure that the updates have had the desired impact.

Conclusion

A clearly defined and well-oiled sales pipeline helps your team stay organized and makes the sales process seamless for everyone. It enables easy monitoring of leads and the performance of each sales rep to know where your sales team stands and what needs improvement.

Whether your business is new or long-established, being able to manage deals requires precision. A great CRM software can take a lot of the heavy lifting away from you by keeping everything in one place and providing you with all kinds of data and tools. But keep in mind that it starts with mapping a fitting sales process for your company and offerings, followed by continuous maintenance to make your sales pipeline a long-term success.

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Sales is what I did, CRMs are what I chose to master. I enjoy testing out scenarios and new approaches to maximize efficiency. In my free time, I play chess and go on hiking adventures with my family.