Best practices, tips, and action steps
A sales pipeline is an incredibly important tool when it comes to building a successful company. Unfortunately, not all businesses have a predictable sales pipeline they can trust and learn from.
In this guide, we will help demonstrate how to build a scalable and predictable sales pipeline you can count on month over month, quarter over quarter, and year over year.
What a sales pipeline is and why you need to design one
How to build an effective sales pipeline
The different stages of a sales pipeline
How to build a governance framework for your sales pipeline
How to map your sales process to your sales pipeline
Common pitfalls
Best practices, tips and action steps
A sales pipeline is a framework comprising a set of stages that are designed to lead to a sale. It provides salespeople with a visual representation of where prospects are in the buyer's journey. Each stage of the pipeline has its own set of rules and actions that salespeople follow to help manage and predict the flow of new sales opportunities. These clearly defined rules and actions are known as the sales process.
There is no one-size-fits- all ideal sales pipeline or sales process. Rather, your sales pipeline is a unique reflection of your typical buyer’s journey.
Sales Pipeline
A framework or set of stages to help track sales opportunities. It provides salespeople with a visual representation of where prospects are in the sales process.
Sales Forecast
A sales report outlining how much a salesperson, team, or company will sell over a defined period of time (week, month, quarter, or year).
Sales Process
A set of repeatable steps a sales team takes to move a prospect from one stage in the sales pipeline to the next; from a lead to a closed customer.
Sales Funnel
The number of prospects and conversions in the sales pipeline.
Sales opportunities have a lot of moving parts and it is critical that you have a clear vision of how much potential business your team is working at any given time. A well-designed sales pipeline helps keep track of the dozens, hundreds, A well-designed
sales pipeline helps
keep track of the
dozens, hundreds,
or thousands of
sales opportunities
your team is
working. or thousands of sales opportunities your team is working. Building an effective sales pipeline will require creating a standardized, repeatable sales process that salespeople can follow to make sure no opportunity falls through the cracks. If done well, it will also lead to sales process improvements and, perhaps most important, it is the leading indicator of opportunities that will eventually find their way into your sales forecast. By keeping a close eye on your sales pipeline, you can also improve your sales forecasting accuracy. Ideally, you should try to be within a +/- 10% variance of your sales forecast.
Identify the stages of your sales pipeline.
Think carefully about each stage and the steps that need to happen to move prospects through the pipeline.
Remember: the stages of your sales pipeline should mirror your buyer’s journey.
How many opportunities move through your sales pipeline?
Look at how many opportunities typically move from one stage to the next stage of your sales pipeline. You should know the percentages for each stage. If you don’t, you will need to make an educated estimate so you can measure and optimize your sales process and pipeline performance moving forward.
What does the ideal number of opportunities look like for your sales pipeline?
To find out, reverse-engineer the number of opportunities you need at every stage to hit your revenue goals. performance moving forward.
What governance will you implement to help build accountability?
This is really your sales process. Decide what defined tasks or actions (i.e., booking a meeting, sending an email) are required for salespeople to be able to move an opportunity forward to the next sales stage. Think of them as entry and exit criteria. These tasks or actions should be factual, inspectable, and buyer centric. If you don’t have a formal, standardized sales process or are looking to refine it, make sure you spend time defining or enhancing activities, tasks, or actions necessary to move your opportunities through your sales pipeline stages. This single focus can save you several hours each month as you work on your sales forecasting.
Since opportunities only happen when buyers need solutions, it only makes sense to base your sales pipeline on your unique buyer's journey. This will ensure you know where they are in their decision-making process. Hubspot describes the buyer's journey as consisting of three stages:
1. Awareness: A buyer may or may not realize they have pain or opportunity in front of them. During this stage, sales and marketing efforts should be focused on helping buyers discover that pain or opportunity.
2. Consideration: This is when buyers start to explore possible solutions and approaches to solving problems or taking advantage of opportunities.
3. Decision: Buyers are now comparing solutions and suppliers.
Many people are tempted to create several stages in their sales pipeline thinking that more is better. In this case, less is probably best. The goal is to think about building your sales pipeline with data in mind, so you can measure, iterate, change, and improve your sales outcomes.
This is why TeamRevenue emphasizes the following three guidelines when defining the stages of your sales pipeline:
Prevent gut-feel criteria from creeping into your sales pipeline or sales process. A verbal commitment from a buyer that they are going to read an eBook you’ve sent them is not proof they will. Whereas a customer attending a meeting or receiving your formal proposal is factual.
If you can’t measure it, it didn’t happen. A client who confirms a booked meeting for a discovery call in your calendar is measurable.
Every stage in your sales pipeline should reflect the buyer’s journey and be focused on helping them make their buying decision.
Connecting This stage is focused on identifying and connecting with potential buyers to add to the top of your sales funnel. Having a clear idea of who your ideal customer is, their buying journey and categorizing them according to where they are on that journey will help you know how best to approach them.
Discovery The objective at this stage is to determine if the prospect is a good fit for your solution. Depending on the technology/solution you’re selling, this can be quick or not. This stage involves research, meeting with a potential customer and asking the right questions to understand what the company is focused on, the problem they’re trying to solve and who is going to be involved in decision-making.
Proposal This stage is an opportunity for salespeople to make a case for your company’s solution and to give the potential customer the opportunity to evaluate whether or not the solution will meet their needs. For some companies, this might be a product demonstration, trial or proof of concept. It may also include reviewing preliminary pricing and confirming your solution fits the buyer’s requirements.
Building Consensus Think of this stage as an opportunity to equip the decision maker/champion/catalyst with the tools and information they need to gain approval. How? By addressing any objections to purchasing your solution. These can include determining final pricing, onboarding, modifications to the proposal, and finalizing details around implementation and project timelines.
In Contract Depending on the complexity and price point of your solution and the types of buyers you are targeting, his stage may also be referred to as “Awaiting Signature”. In many businesses, sales can close immediately after the proposal or price quote by signing a straightforward customer agreement while others may require the review of a contract. This stage may also include additional items such as red-lining contracts or further negotiating price with a procurement department.
The buyer sends you an executed agreement for service.
The buyer decides not to purchase your product or service.
The buyer has gone dormant and is no longer replying to calls, emails, or previously agreed-to timelines.
Of course, this is just an example and is not meant to serve as a universal template. You will need to consider all the factors that An important part of
building a solid, predictable
pipeline is to fully
understand how many
opportunities actually go
through the various stages
of your pipeline. could impact defining your sales pipeline, such as the length of sales cycle, the size of your deals, the complexity of buying committees, etc. An important part of building a solid, predictable pipeline is to fully understand how many opportunities actually go through the various stages of your pipeline. By understanding the percentages of deals that make it to the stages of your pipeline, you can use that information as a leading indicator of inefficiencies and coach salespeople to help drive the behaviors that will lead to winning more deals.
According to Hubspot, 72% of companies that had less than 50 opportunities in their sales pipeline did not reach their revenue goals
Every sales pipeline ends the same way: with either a Closed-Won, Closed-Lost, or Closed -No Decision outcome. If a deal ends with a Closed - Won or Closed - Lost, make sure you include a reason why you won or lost those deals for future analysis. If a deal is stalled and the client is not returning your calls or emails but you don’t know why, then it’s a Closed-No Decision outcome. It’s a best practice to move deals into the Closed-No Decision stage when a deal has been in contract for more than seven days with no indication further negotiation is needed or wanted.
If the deal is revived at a later point, it will likely be a new deal, otherwise it wouldn’t have stalled in the first place. This best practice tip will help force your sales reps to continue forward momentum activities with their pipeline opportunities and creates a built-in sense of urgency to secure the next steps in the process or they risk having that opportunity enter Closed-No Decision territory. The Closed - No Decision factor will help prevent deals from stalling in your pipeline and will significantly improve your forecasting predictions.
This is the relatively easy bit, particularly if you have pulled insights from past sales performance. All you have to do is reverse-engineer how many deals you need in your sales pipeline to achieve your sales goals. Here are the numbers and steps you need: What is your past or future average deal size? Look at historical numbers to identify how many average deals it will take to hit your sales goal. If you are a new company or launching a new product, you might have to estimate a little.
Average deal size
Sales goal (based on 12 months)
Estimated number of average deals
needed to hit your sales number
Admittedly, this calculation is a little too perfect as it assumes all 800 deals will close. Be sure to factor in your buffer of risk in your calculation (i.e., 20 percent of deals will not close). In this case, 1,000 average deals will be your target number of deals to achieve your sales goal (1,000 deals - 20 percent buffer = 800 deals).
What is your yield per stage? Now that you know you will need 1,000 average deals for the year to have a chance of hitting your sales goal, break it down further. Look at each of your stage yields as a percentage of conversion to understand how many deals you need at each stage to ensure you hit your revenue goals.
Contract Sent
Let's assume at this stage, 90 percent of deals will close. That means you’ll need 1,111 annual deals to get to this point in the sales pipeline.
Building Consensus
Assuming 75 percent of deals close at this stage of the sales pipeline, you will require at least 1750 proposals during the year to achieve your revenue goal.
Proposal
Assuming 50 percent of deals close at this stage of the sales pipeline, you will require at least 2,000 proposals during the year to achieve your revenue goal.
Discovery
If 25 percent of all deals that reach the discovery call booked stage close, you’ll need at least 4,000 discovery calls for the year.
Connecting
Assuming only 10 percent of buyers that have an initial conversation or inquire about your solution convert to a customer, your sales team needs to have at least 10,000 buyer conversations a year to help you reach your sales goal.
How do you ensure your salespeople aren’t inflating their sales funnel (i.e., the number of prospects and conversions in the sales pipeline) or wasting time with prospects that should no longer be in your sales pipeline? The answer is to build governance into your sales function.
Create a formal, standardized, and well-communicated sales process.
Spell out the sales activities and responsibilities that have to happen at each stage of the sales pipeline. This will increase the effectiveness of each stage. For example, prior to your Discovery stage, perhaps you must complete pre-discovery documentation in preparation for a successful meeting with the buyer. Once these actions are formalized and written down, they become your sales process. If it’s not written, it’s not real. If it’s not real no one will follow it.
Define the stages of your sales pipeline. Make sure your stages are factual, inspectable and buyer centric. Make sure you have the written rules defining what is required to move from stage to stage. What doesn’t qualify for any stage is a sales person’s gut feel, hope or excitement (i.e., “Everyone is excited about the opportunity”). An example of factual, inspectable, and buyer centric action is a booked meeting with the prospect.
Set time limits. One of the most often underutilized tools for building an effective, predictable pipeline is time. Defining how long a deal can remain in a particular stage of the sales pipeline before it’s moved to the next or removed altogether is critical to achieving predictability. If you have a history of pipeline performance, you can extract the average time that opportunities are in each stage to use as a helpful starting point. This strategy will create a sense of urgency for salespeople to keep forward momentum within their sales pipeline or risk having the opportunity removed.
There are going to be anomalies and exceptions to the timelines you set. So build a protocol that allows a salesperson to defend opportunities at any stage in the sales pipeline. This protocol helps reinforce the importance of really knowing and understanding an opportunity and holds salespeople accountable. Keep data accurate and current.
Speaking of accountability, it is a sales leader’s responsibility to ensure accuracy within the sales pipeline. One of the best ways to do this is to have weekly one-on-one pipeline reviews with your sales teams to discuss opportunities, deal size, and expected close dates. This way, you can reinforce what the expectations are when it comes to pipeline validity and viability
Now that you know how many objective actions are required for your sales team to achieve your results, the rest of your effort is to map everything down to the activity required by the sales rep by day, month, quarter, and year.
Your pipeline now becomes a very important tool for your sales organization to evaluate what parts of the sales process need work and support. Managers can use this information to coach salespeople and salespeople can use this information to help plan out the activities needed to achieve quota.
Yes, this is a simplified example and there may be other factors to consider when building your pipeline. Keep in mind that these are the main building blocks you can start with and then layer your unique needs on top.
You’ve now built a solid sales pipeline and hopefully you have a strong CRM platform (e.g., Hubspot CRM, Salesforce, Zoho CRM, Microsoft Dynamics), to help you manage it. Keep in mind it’s still not enough. If you don’t monitor the performance of your pipeline, it’s like having a gym membership to get healthy but never going to the gym.
So how do you measure and monitor the health and performance of your sales pipeline? The easiest way to see if a salesperson, team, product, segment, or entire sales organization is going to meet their sales objectives is by calculating the sales velocity for these groups.
The four key metrics that make up the sales velocity equation are:
The number of deals in your pipeline across all stages over the time period being measured.
The number deals in your pipeline divided by the total dollar amount of all of those deals.
The number of leads that turn into customers over the time period being measured.
The average number of days it takes to close a deal.
Multiply the number of opportunities
Average deal size and win rate for a given period
Then divide that number by the length of your average sales cycle.
Let’s say, you're a new startup with five salespeople on your team and they are creating 100 new deal opportunities per month. Let’s also assume that the average deal size for this example is $5,000, the win rate is 20 percent , and the average sales cycle length is one months (or 30 days). Your sales velocity would be calculated as follows:
Using the above example of your sales team’s daily sales velocity (i.e., daily revenue) is $3,333. Now, if you have a 10-person sales team and your sales goal is to close $40,000 in revenue by the end of the month, multiply your number of team members by the sales velocity then subtract by your revenue goal.
In this case your current sales velocity tells you that you’re going to fall short by $6,670 of your revenue goal. What do you do?
Each one of the four key metrics in the above sales velocity formula are levers that can be analysed and optimized for better outcomes. Let’s look at each of these levers to see how you can start to make changes.
Make sure you are focused on increasing the number of quality leads.
Get the sales and marketing team together and drive new campaigns to impact more inbound leads. Initiatives can include webinars, a free trial promotion, creating value-add guides and eBooks.
Get your salespeople energized by running sales contests for outbound leads.
Incentivize your channel partners or increase your channel partner reach.
Have marketing run paid advertising campaigns to drive traffic and convert new visitors into leads.
The average deal size lever can easily be modified by incenting clients in various ways.
Focus on your higher-valued solution offerings.
Adjust your focus to target prospects that have high value needs.
Offer bundled solutions to clients.
Increase prices.
Reduce discounts offered by sales.
I know, this sounds easy but it’s not always that simple to shift upstream with larger average deal sizes. You will need to take into consideration the balance of high-value offerings and low-value offerings so that you don’t negatively impact the length of your sales cycles. As long as you are prepared with a well-balanced approach to potentially slow down some sales cycles to increase your average deal sizes this lever can help you meet your short-term and longer-term sales goals.
Why aren’t you winning deals? Is it because your sales pipeline isn’t aligned to your buyer’s journey? Finding out why will help you improve your sales process, become the trusted advisor buyers are looking for and drive sales.
Why is a shorter sales cycle important? Because it means you can earn revenue quicker. It also equates to higher sales velocity.
Why aren’t you winning deals? Is it because your sales pipeline isn’t aligned to your buyer’s journey? Finding out why will help you improve your sales process, become the trusted advisor buyers are looking for and drive sales.
Move the needle on win rates by requiring your salespeople to rigorously qualify leads. (Be sure to provide them with the appropriate sales training to do so).
Work out conversion rates between sales stages to determine which stages are struggling. Then work out why and what you can do to improve.
Strengthen your customer relationships. This comes down to building trust by helping your buyer buy, instead of just selling. Share value-add content that will help them address their pain points and make the most of opportunities.
Why is a shorter sales cycle important? Because it means you can earn revenue quicker. It also equates to higher sales velocity.
Look for congestion in your sales pipeline. Are there specific stages where it’s taking longer than it should for opportunities to move forward? If the answer is yes, find out what the holdup is and make adjustments.
Automate when possible. Your CRM’s automation features can help build efficiencies into your sales pipeline and processes. This will help your salespeople work smarter and more effectively.
According to the Harvard Business Review, 44% of executives think their organizations are ineffective at managing their sales pipelines.
When business is good and you know you’ll hit your quotas, it’s easy for salespeople to take a relaxed approach in their search for new leads. Make sure you're monitoring how many deals are in each stage of your sales pipeline to ensure it stays healthy.
This is the quickest way to lose leads. Make sure your sales process defines how and when to follow up with leads at each stage of the sales pipeline.
Set time limits on how long any deal can stay in one stage. Use past experience (i.e., how long successful deals typically stay in a given stage) as your guide. This will allow you to clean up your sales pipeline by removing deals that won’t move forward and pave the way for a more accurate sales forecast.
A large number of leads can lead to a false sense of security that you’re going to reach your sales revenue targets. But it’s just that, false. The only way to be confident you’ll get there is to calculate and monitor your sales velocity.
Building a strong, regulated and predictable sales pipeline will enable you to take control of your performance. The process requires patience and diligence but in the end is hugely valuable to your organization. If done correctly, and with your customers in mind, you will be prepared for any bumps in the road ahead.
Using the pipeline management system in your CRM can help you and your team have one source of truth when it comes to understanding the health of your business. Our best advice is to take an iterative approach. Monitor performance and adapt, adjust, and improve.
A well-designed sales pipeline, governed by an effective sales process and visualized in your CRM are critical to understanding what you need to do in order to drive sales and grow.
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