Basic Concepts: What is a Sales Pipeline?

Regardless of the kind of business you’re running, there’s bound to be common ground between almost all types of business. For instance, every capitalist business has to be profitable, meaning that in a generic point of view they need to sell (either products or services) – without revenue coming in, there can be no progression.

Considering this, having a sales pipeline in place to make sure that sales are actually viable in the targeted market in the first place may be a good place to start. Few to no businesses at all are lucky enough to have consistent customers falling on their lap through sheer luck and no strategy, it has to be managed and brought into the right context.

To do this, a sales pipeline has to take form as soon as possible. It is, without a doubt, one of the most clinical sign of progress and health in any business: a healthy company will have plenty of sales shooting through that pipeline whereas an unhealthy one will have blockages and problems in their planning.

An effective pipeline converts a fair proportion of the people who come to the business from start to finish, meaning they eventually end up making a purchase/hiring a service.

Outside an ideal reality, it’s not possible to get a conversion rate of 100% as there are just too many factors influencing purchases, as opinion and taste, but a stronger and well developed sales pipeline will definitely increase conversions.

How does a Sales Pipeline operate?

It is a systematic approach that looks to ascertain how your business operates when it comes to enticing customers through the front door. What’s the process? How do you get them from simply being interested in what you have to offer to parting with their hard earned cash? What are the steps they go through?

A sales pipeline operates by showing you where the money really stands within your processes – you’ll be using your pipeline to build up common ground for where any transaction may be. This lets you see where things are going right for you – and where things are going wrong in the process.

Using your business sales pipeline you’re able to identify specific points of the purchase process, such as where the largest portion of people get to and then either drop off entirely, or fulfill their order? You need to use the sales plan to work out what parts of the sales pipeline are letting you down and stopping you from converting more.

Studying the results presented by your sales pipeline you’ll be able to work on your approach and create new ideas and theories that could improve the performance in the specific parts that need improving to help you convert more. The operation of the pipeline, though, is not literal. You use the plan to take people on a destination that you have set, ensuring that all customers who turn up can be taken through a specific process that should, in the end, see them purchase your products or services.

Managing A Sales Pipeline Effectively

There is, naturally, a lot to be done when it comes to managing a sales pipeline. The first thing you need to look at is the overall metrics of the pipeline, ensuring that it is managing to bring people in who are spending as much as they possibly can.

It’s very important, however, to start looking at two very important metrics to ensure that success can be ascertained by your sales pipeline as you move forward with your plans in future.

The Averages

The first thing you want to know is what you’re aiming at, or what will you try to reach – you need to create a business average. Whilst there are pre-defined business averages out there that you can use as a general plan to follow, it can be hard to replicate average global results in specific businesses thanks to the diversity in everything from the targeted market to where the business is based.

Therefore the best way to proceed is to work out what the averages are for your business and how you can, at the very least, hit those averages.

This will be a vital factor in improving your business and a failure to do so can make it very hard to take your business any further. You are required, consequently, to think clearly about the averages for the following four metrics to begin with:

  • How much people are spending in an average deal
  • How many open potential transactions you have at any one time on average
  • The average customer conversion rate (the % of customers that actually end up buying what you’re offering)
  • The average time spent within the sales pipeline (i.e. from when they first discover you to when they make their first purchase)

Working this averages and having your metrics well sorted out is going to be vital to improving your sales pipeline on later stages of your sales planning.

The Stages of a Sales Pipeline

In every good sales pipeline, as in everything in the business world, knowledge is power and you need to make sure that it features quite heavily throughout the process. There are five main areas that you’re expected to have any good sales pipeline take your customers through, and these five stages can be categorized as:

  • Initial Contact – As the name itself defines it, is the first contact your potential customer has with your brand, product or service. It’s your first opportunity to make a good impression and attract customers further into the sales pipeline.
  • Qualification – When the customer comes across your business and actually feels comfortable making the next move and moving forward with the purchase process, or at least being open to see what you have to offer in comparison to your competitors can offer.
  • Meeting – The meeting stage happens when you’ve actually had some kind of dialogue with the client. It can be quite hard to judge if you’re running an online business, it can basically mean they looked at your site and thought about buying something. At the very most, it means they e-mailed you!
  • Proposal – Again, this is hard to quantify exactly. In an offline business, though, it means you actually given the client a price and guarantee for your work. In an online business, the “proposal” would be symbolized via the shopping cart or an email service proposal. However, you need to understand that getting the “proposal” accepted is the most important step
  • Close – This is the stage when the purchase is actually made concrete, meaning the client will agree to pay for it. You need to get used to this as it’s the last stage that you need to get the person through; once they agree with to the proposal stage, they need to present the payment method/receipt.

As you can see, managing a Sales Pipeline is all about managing the independent interaction stages your customer will go through as well as managing the conversion rates from initial contact to close, passing through all steps.

The higher your conversion rate from one stage to the next, the higher your final conversion rate is going to be and, consequently, the more effective – and profitable – your business will become in the future.

Free Sales Pipeline Template!

Try Pipefy’s Sales Pipeline Template, a step-by-step, easy to work with workflow developed to enhance your team’s focus and productivity.

This template will guide your team through all the steps of the sales pipeline, from the initial contact, to the qualification of leads to effectively closing the deal, helping them keep better track of the opportunities and always staying on top of their game.

Download a free Sales Pipeline Template

Written by Isabelle Salemme, Inbound Marketer/Content Manager @belsalemme