Understanding Your Sales Pipeline

sales funnel

Understanding Your Sales Pipeline


sales funnel

Your sales pipeline is made of each and every sales opportunity you are pursuing.  Think of it as a visual depiction of the business you are trying to win over time. The more opportunities you put in the pipeline, the more sales you will eventually realize.  In the above funnel illustration, you see it takes a lot of prospects to get a few good customers.  Bottom line, your future revenues are determined by what you are doing now.

In a lot of ways, your pipeline mirrors your sales process (discussed in post on Sales Processes and Management), but your sales pipeline can and should be quantified.  You want to know which prospects are at what stage in the sales process and measure results as they progress.  Then, when you have enough data, look for areas to improve on.

Let’s use an example in which you went after twenty (20) new builder prospects in an attempt to grow and stabilize your revenue stream.  Here is how the process played out.

  • Prospecting/Initial Contact – you made contact but only ten (50%) gave you any time.
  • Approach and Assess Needs – you engaged and initiated discovery but only five (50%) went to next level.
  • Present and Meet Objections – you presented and handled things well but only two (40%) said send me a best and final.
  • Gain Commitment and Agreement – you followed up and only one (50%) wants to do business.

In this hypothetical example, your goal was three builders, or a 15% close rate, but you achieved 5%. Questions to ask yourself involve lead quality and quantity, and sales process quality.  If you need three new customers, are 20 prospects enough?  What is your historical close rate for this type of prospect?  You need to learn the answers if you don’t know them.

If you experience a lower than normal close rate, what went wrong? Is this a competitive arena that is different than you are used to?  Your learning curve will effect your close rate but your close rate should continue to improve.

Over time you should really develop some solid probability numbers for each stage of your process. This combined with leads and sales estimates per lead will provide you with a good pipeline forecasting tool and a strong sales leadership and management tool.

There are industries that simply track every prospect, assign an estimated sales number and a probability to arrive at an expected value.  In our very simple, hypothetical example, 100 builder leads that close at 5% with the average builder doing $15,000 would amount to a $75,000 sales increase. Further, by evaluating each stage in the process, you can look for training and development opportunities for yourself and your team.

By quantifying a number in each each step of the sales process, you also begin to develop a baseline to use for reward and incentive opportunities for sales personnel (if you have sales people). For example, with our above close rate at 50% but 90% attrition at early stages, you may train on prospect quality and sales discovery and then reward incremental improvements.  The point is to learn where your strengths and weaknesses are and work on them.

Your sales pipeline is not only a key indicator of your future revenue, but it serves as a critical management and leadership tool.  If you have a good one in place, congratulations, but if not, spend some time on it.  Remember, in sales leadership, you get what you inspect not expect.


Share this post