How to use a sales pipeline to boost revenue
If you’re just winging it through your sales pipeline process without a steady stream of leads – and an understanding of how to move them through each stage – you’re leaving money on the table.
This process is crucial to your company’s success and keeps new opportunities at your fingertips. According to HubSpot research, 72% of companies with less than 50 new opportunities a month didn’t achieve their revenue goals, while only 4% of companies with 101 to 200 new opportunities in their sales pipelines didn’t meet their revenue goals.
But how do you create a sales pipeline that boosts revenue and makes a meaningful impact? Let’s walk through the process.
What is a sales pipeline?
A sales pipeline is a specific sequence of actions that a sales rep needs to take to move a prospect from new lead to paying customer. Once each stage is completed, the prospect is advanced to the next stage and inches closer to the closing process.
Sales pipelines are a powerful way to allow sellers to keep track of the status of every deal, and understand whether they have an appropriate distribution of deals to meet their sales targets.
Once the process is complete, a pipeline report shows the value and quantity of all deals in each stage of the pipeline at the moment the report is run.
Closing rate by sales pipeline stages
Though the structure of a sales pipeline can differ from company to company, you can narrow down the more common stages and the probability of closing at each:
1) Initial Contact. The rep takes the first step to identify and reach out to potential contacts. (0% probability to close)
2) Qualification. The rep asks questions to determine if the prospect has the need, budget, and authority to buy soon. (10% probability to close)
3) Meeting. The sales rep and prospect discuss the solution that would best fit the prospect’s needs. (30% probability to close)
4) Proposal. The rep sends the prospect a detailed quote laying out what will be provided, at what cost, and for how long. (60% probability to close)
5) Closing. Final negotiations are made, and contracts are signed. The prospect is officially a customer. (100% probability to close)
Here’s how it breaks down. For a weighted sales pipeline, your team can expect to have 3-4 times the value of your weighted target to make quota or 3 times more active opportunities in your sales pipeline than sales goals. Here’s how Sales Pop! uses the following example based on one opportunity valued at $1,000:
- Initial contact – 0 % x 35 opportunities = $0
- Qualification – 10 % x 20 opportunities = $2,000
- Meeting – 30 % x 10 opportunities = $3,000
- Proposal – 60 % x 5 opportunities = $3,000
- Close – 100 % x 2 opportunities = $2,000
Their calculation works out to $10,000 for the entire weighted value of their sales pipeline. Teams with a sales quota of $5,000 only need two times more than the recommendation.
Difference between a sales pipeline and a sales funnel
It’s easy to confuse sales pipelines with sales funnels, but there are fundamental differences that can impact how you conduct business and collect leads.
Sales pipeline and sales funnel both describe the flow of prospects through a sale, but there’s an important difference between these two terms. If you’ve been using “pipeline” and “funnel” to mean the same thing, you might want to pay attention…
Unlike a sales pipeline, which focuses on the set of actions taken by sellers, a sales funnel visually communicates the conversion rates of prospects through the pipeline stages. It’s called a “funnel” because of its shape: wide at the top as prospects enter, then increasingly narrow as they are disqualified or decide not to buy.
Unlike a pipeline report, which shows the value and quantity of deals at the moment when the report is run, a funnel report is based on a cohort. This means that a funnel report can tell you, for example, of the 100 leads you received last quarter, what percentage of them advanced through each stage of your pipeline.
A sales funnel report is important for sales leaders because it can help them forecast sales based on current lead volume and identify where deals are getting stuck so they can improve their process and better coach their team.
So when you’re thinking about the difference between a pipeline and funnel, remember this: a pipeline report gives you insights on what a seller does during the sales process, while a funnel report shows the conversion rates through the sales process. And when you use both together, you have a powerful resource to close more sales.
Sales pipeline management
Any seasoned salesperson will tell you that finding leads isn’t always the problem; it’s finding the right leads that fit your target market and are more likely to convert. That’s why you need to figure out a strategy for finding those leads. Study where the majority of your leads already come from, whether LinkedIn or word-of-mouth referrals and work to expand and grow your network.
Building your momentum
A sales pipeline alone won’t work without action behind it. Your pipeline needs several trigger points and a way to keep the up the momentum to move your deals along.
Sit down with your team and lay out the stages of your pipeline, from getting in touch with your leads to closing the deal. Think of each stage of your pipeline as an event that needs to push a lead to the next stage to see the performance you’re looking for. You can create a plan for how you will keep propelling those events, whether you’re crafting specific touch points and messaging, or following up with a lead.
Identify and measure the right data
A rock-solid sales pipeline and funnel can help close more leads, but you still need the data to manage them. When it comes to working with your sales data, your pipeline should be driven by measurable data to test your results. Your company may already have key performance indicators (KPIs) like lead generation from an email opt-in. But you should also be measuring things like the conversion rate of opportunities to closed deals, and the average size of deals won. If you’re not sure where to start, here are some sales pipeline KPIs to consider integrating into your company.
Sales pipeline KPIs
The number of deals in the pipeline – The number of deals in your pipeline will impact the odds of closing enough sales to hit your quota and pipeline’s value.
Close ratio – The closing ratio will reflect the number of deals you close in comparison to the number of opportunities or sales presentations given.
Average deal size – The average deal size compares the average of two sales. A salesperson who closes a $100,000 sale and a $150,000 sale will have an average deal size of $125,000.
Average sales cycle – The average sales cycle measure the length of time from the first touch point of a lead to closing the deal. Once you know this number, you can average across all of the collectively won deals.
These KPIs are crucial for staying on track and discovering which data has the biggest impact on your business, but it can also help you figure out your pipeline velocity. Insight Squared breaks down the concept of pipeline velocity and applies it to sales to figure out your metrics for dollars earned each day by your sales team. Here’s what that equation looks like:
(Number of open opportunities) x (win rate) x (average deal size)/average sales cycle
You can take the number you come up with to narrow down your average sales cycle and make tweaks to improve the process as needed. But speeding up the process too quickly could make your pipeline unsustainable and negatively impact your win rate, among other things.
Ask for and nurture referrals
There’s a big upside to amassing all of this data and figuring out your pipeline velocity. It’s not just about having the data to fine-tune the process. You can also identify ways to potentially speed up your sales pipeline and make it sustainable, such as asking for more referrals.
Satisfied customers are likely to be loyal customers who will sing your praises. Bonus points if they’ll do it regularly with their tight-knit business network. But there’s no shortcut to getting those referrals aside from doing outstanding work. If you’re doing that, then go ahead and ask your customers for referrals or a testimonial to create a fresh stream of leads in your pipeline.
It’s true that you can go out and attract leads and close sales without a sales pipeline in place, simply by intuition. But you’re also unlikely to scale your sales to the full potential of your business without data and a clear and transparent process in hand. And at the end of the day, boosting your revenue requires a strategic and intentional approach to closing more sales.
What are your tips and tricks for boosting your sales pipeline? We’d love to hear them in the comments below.