Businesses consistently exceeding their revenue goals have an effective sales process with a growing sales pipeline. They always keep their pipeline full and have smart ways to turn data into valuable insights.
However, more than 40% of businesses fail to hit revenue goals. If you’re one of them, you need a better sales pipeline management system. Without visibility into the sales pipeline, you’ll miss crucial insights that lead to lost sales.
This guide dives into building and managing a sales pipeline to exceed your revenue goals. But first, what is a sales pipeline?
Sales processes are different for every company — and even for products within the same company. So you’ll need a unique sales pipeline that reflects a typical buyer's journey.
Each prospect moves through the sales pipeline at a different rate based on their level of interest, urgency, and amount of research they've done on a product or service.
Some prospects may even skip stages. For example, suppose an excited buyer reaches out through a referral and proactively introduces you to the budget authority before you ask. In that case, you'd move the deal straight from "initial connect" to "meeting with the decision-maker."
By determining what stage of the sales process prospects are in and projecting how many of them will close within a specific timeframe, the sales pipeline allows reps and managers to forecast revenue.
People often confuse "sales pipelines" with "sales forecasts," but they have different meanings.
For example, if a sales forecast anticipates missing your quota, you should double down on selling activities. But if it estimates a 150% growth compared to the last month, you'd want to scale back your efforts and start laying the groundwork for an equally successful next month.
Once you've started tracking your sales pipeline, that data can allow you to create a forecast using sales forecasting software like Sales Hub.
People also often use "sales pipeline" and "sales funnel" interchangeably.
However, a sales funnel suggests that the number of prospects you're working with will drop consistently as the sales process continues.
This leads to a false belief that you need three times as many prospects at the top of your funnel as at the bottom. A sales manager following this philosophy would ask his rep to connect with 300 buyers to close 100 deals.
Sales educator and expert Jeff Hoffman clears this misconception by calling a sales pipeline a wide-mouth cocktail glass instead of an evenly shaped funnel.
You may have a ton of prospects entering your pipeline, but the vast majority drops off after the qualification stage. After prospects have passed the critical point, most should become customers.
How long does it take to build and develop a sales pipeline? The answer depends on your product, base, sales team, and marketing resources.
Here are the basic steps to building a sales pipeline.
While the quickest way to define your sales pipeline stages might be copying a template, developing your own is worth the time and effort.
After all, the pipeline stages must match your prospect's buying journey to help you track progress and predict revenue effectively. However, customers undergo a typical process:
To illustrate, check out this hypothetical buyer's journey:
Note that this is a standard explanation, the more complex your product, the longer your sales cycle will take — and the more sales pipeline stages there may be.
You should know how long prospects spend in each stage — both across the board and for closed/won deals. For example, the average prospect may spend two weeks in the demo stage, while those who eventually buy spend three weeks.
You should also know the percentage of opportunities that advance to the next stage.
And it's critical to establish yield probability (or conversion rate) per stage. Perhaps prospects are 75% likely to buy in the demo stage and 90% likely to buy in the negotiation stage. Once you've assigned these percentages to each stage, you can develop monthly or quarterly revenue estimates.
Knowing these benchmarks will help your reps and sales managers predict which opportunities will likely close.
Now you can work backward to determine how many opportunities you need in each pipeline stage. Start with your target monthly or quarterly revenue divided by your average deal size, so you know how many deals you need to win.
Next, divide your target deal number by your yield probability per stage. If you need to win 135 deals, and your reps typically close 90% of deals in the negotiation stage, 150 opportunities must reach that stage in a month.
Repeat this process for every stage. Once you have total milestones, you can divide these goals by salesperson.
Here's an example from Bob Marsh, CEO of LevelEleven. Assume you need 2,000 deals per year to hit your target bookings.
If you have a 100-person team, that translates to:
Salespeople can use these benchmarks to measure their progress against the targets.
Keep in mind that every rep's conversion rates will vary by stage. For example, if one of your salespeople struggles to prospect but has an excellent demo-to-close rate, they'll need fewer initial meetings than their peers to meet the quota.
Next, pinpoint the common characteristics of opportunities that convert for every stage. These include the rep's actions (like sending a follow-up email) and prospect responses (agreeing to a demo).
Knowing these patterns will help optimize your sales process for better closing rates.
Create a sales process or update your existing one around these actions and numbers. A strong sales process helps reps consistently close deals by giving them a proven framework to follow.
By incorporating your sales pipeline data, you can shift your sales process to move your prospects and opportunities closer to close.
Establishing a sales process isn’t enough, though. As many reps aren't too big on prospecting, it's easy to end up with a dry sales pipeline once you build one.
Since many sales teams focus more on closing deals, they tend to forget prospecting for the upcoming month, and when the next month comes, they’re way behind their schedule.
In an ideal sales pipeline, you should always have more opportunities in the prospecting part than in the closing part. That's because the number of prospects in each stage progressively decreases while the probability of closing progressively increases.
Even if you have enough leads for a month, it’s good to have a diversified prospecting strategy, so you keep adding new leads for upcoming months.
It shouldn’t always include traditional methods like cold calling; you can encourage reps to try multiple strategies. For example, HubSpot research shows that social media effectively finds new leads for 56% of sales professionals.
Lead generation and prospecting tools can also help by aggregating potential leads and tracking their status. That way, you always know how many leads you've got and what stage they're in.
60% of prospects say no four times before saying yes. Still, nearly half of the salespeople never follow up. This indicates that you'll definitely lose leads if you don't establish a five (or more) step follow-up process throughout your sales pipeline.
Give your team a system for following up with leads, including timing, cadence, and contact method. Set clear expectations like:
A uniform follow-up strategy helps your reps maintain clean pipelines by telling them when to disqualify prospects. If a prospect hasn't responded by the last touch, they should be removed from the pipeline.
Cleaning up your pipeline is critical if you want an accurate sales forecast. That's because most forecasts use each opportunity's stage to determine how likely it is to close — not its age.
Suppose you sent a proposal for a $2,000 deal to the buyer one month ago. Since then, he hasn't returned any of your calls or emails, which suggests you're not getting his business.
However, since opportunities in the negotiation stage have a 90% close rate, your sales forecast would count this deal as $1,800 in potential revenue in the next month.
That means your sales forecast is $1,800 off. Similarly, every stale deal will further widen the gap between expectations and reality.
High-performing teams use sales pipeline reviews to keep the entire organization in sync.
Walking in prepared is essential so you don't waste valuable time getting caught up in the meeting itself.
Give them positive feedback (especially if you observe they've applied previous advice), then delve into their assessment. Ask questions to your sales reps during sales pipeline reviews:
When working with a prospect, you should know the next step they’ll take in their journey. Even if you close a deal, you should know who they’re working with next and what they should expect now that they’re a customer.
Add these steps to the CRM to keep your reps accountable and help them avoid a memory lapse.
Speaking of keeping your sales pipeline neat, here are our best tips for cleaning up your pipeline.
Based on your judgment, decide whether to remove a prospect.
For example, if you're working with your champion to get the deal through their unusually complex legal review, you wouldn't want to take that opportunity out — it might be taking more time than expected, but there's a strong chance it will close.
You’ll get one of these three possible responses: They're still interested, they’re not interested, or they don't respond.
In the latter two scenarios, remove them from your pipeline. Not entirely, as you can always add these contacts to a new list in your CRM, such as "Call back in one year."
Eight out of 10 deals are lost because decision-makers were changed. As a sales rep, you’ll need to keep tabs on your prospects and personnel changes in their business.
Suppose a critical stakeholder leaves the company before closing the deal. In that case, you might need to move the deal back to the qualification stage until you identify the next decision-maker. Always verify close dates to ensure they match your instincts.
Double-check opportunity dollar values as well. If these are too high, your sales forecast will be overly optimistic. Too low, and you'll think you're further from your goal than you really are.
Identify prospects who have gone radio silent, deals stuck in one stage for longer than normal, and opportunities where you've lost progress.
Although it can be tempting to let these linger in your pipeline "just in case," you're better off purging them. Not only will your sales forecast be more accurate — which will help you plan — it'll also be easier to focus on the deals you have a true chance of closing.
Do this exercise every week or month, depending on the length of your sales cycle.
To calculate this, you'll need to know the following:
Of course, with more historical data, your predictions will be more accurate, but it’s ok to make informed guesses.
For example, let's say you just shifted upmarket. Based on preliminary research, early sales, and talking to other companies selling similar products, you might predict your new sales cycle will last five months.
Luckily, a CRM can calculate these metrics for you and provide greater visibility into pipeline activities.
Luckily, a CRM can calculate these metrics for you and provide greater visibility into pipeline activities.
Suppose you have 50 opportunities in your sales pipeline. Your average win rate is 40%, and your average deal size is $10,000. And the sales process usually takes 70 days, from initial contact to the signed proposal.
Your pipeline velocity = 50 x .4 x 10,000 / 70, or $2,587.14.
That means approximately $2,587.14 is moving through your sales pipeline every day. Obviously, the higher your velocity, the better.
So, how can you increase the pipeline velocity?
You can pull four main levers, and unsurprisingly, they correlate to the four factors of the equation.
In addition to pipeline velocity, keep a close eye on your conversion rates by stage, so you know where prospects drop out of your sales funnel.
Suppose 60% of your prospects go from the presentation to the proposal. Think about why 40% of them drop out. It's normal to have attrition between stages, but you should investigate if there's a more significant problem.
Perhaps your salespeople aren't effectively conveying your product's value or haven't done enough needs analysis to tie their presentation to their prospects' pain points.
If you don't monitor and investigate these metrics, you might not uncover pressing problems in time.
When reviewing your pipeline, you should know some baseline metrics to help determine whether your pipeline is healthy. Use these metrics to gauge the health of your sales pipeline — and, from there, the health of your team, department, and business.
As your salespeople become more knowledgeable, your marketing team learns which channels to use to attract the best-fit prospects, and your business becomes more well-known, your sales cycle should decrease.
Overall, your pipeline value must increase. Average deal size, the number of deals, and conversion rates must go up. With this in mind, measuring pipeline velocity allows you to determine the health of your pipeline.
Based on the insight from pipeline visibility, reps can adjust pipeline volume and budget expectations for more accurate sales forecasting.
You can compare your team's current performance to previous months, quarters, or years and analyze each of your salespeople individually.
For example, maybe one of your salespeople has an impressive connect-to-qualification rate but a poor close rate - they might need coaching on negotiation. Meanwhile, if another salesperson struggles to prospect effectively, you should teach them to identify and contact potential buyers.
Both forecast reviews and pipeline reviews are critical to your team's success, but make sure you're not tackling them both in the same meeting.
A forecast review should focus on the deals likely to close in a given time period. This meeting helps managers predict whether their team will hit its quota.
The purpose of a sales pipeline review is to help deals move through the sales process as efficiently as possible. An effective sales pipeline review looks at fresh sales opportunities.
Sales managers often make the mistake of jumping in to help in the later stages of the sales process, but by this time, it's often too late for them to influence the outcome of a deal. If they truly want to make an impact, they should help reps strategize while the opportunity is still new.
Depending on the size of your team, the length of your sales process, and how quickly new opportunities enter your reps' pipelines, choose a bimonthly, monthly, or weekly cadence.
Each sales pipeline review should last approximately 30-60 minutes. You can either focus on the most important deals or review all opportunities in the beginning stages of the process — whatever works best for your team and structure
A sales pipeline template lets you set up your pipeline in a spreadsheet. Simply plug in each deal, its expected value, and the probability of closing, and you'll get the weighted average for that deal.
This sales pipeline template also has columns for the assigned salesperson, the prospect's contact information, and the next steps.
While you can manage your sales pipeline in an Excel spreadsheet, using a CRM is much easier. The HubSpot CRM gives you an up-to-date view of your sales pipeline, multiple ways to sort your deals, automatic activity tracking (so you don't need to log calls or emails manually), and detailed contact records for every lead.
The next step in managing your sales pipeline is creating reports. Using reports, you can predict when opportunities will close and get a clearer picture of the pipeline's health. But what should you include in your sales pipeline report?
Master your sales pipeline, and you'll master your results. The sales pipeline isn’t just a benefit to the sales team — when the entire organization is aligned around revenue goals, every team succeeds. Whether your business is disrupted by a new competitor, a major opportunity, an industry shift, or an internal strategic change, use these tips and the sales pipeline template to forecast your deals.
Editor's note: This post was originally published in August 2019 and has been updated for comprehensiveness.