The complete guide to building a sales pipeline

Leverage CRM tools to track leads, prioritize prospects, and automate communication for streamlined pipeline management.

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What is a sales pipeline?

A sales pipeline is a visual representation of your sales process that allows your team to track buyers as they progress through the different stages of the purchasing process. A sales pipeline shows you the number of deals your team is working on, where they are in the sales process, how much each deal is worth, and how likely they are to be won or lost.

Why is the sales pipeline important?

Visibility into your sales process is critical when it comes to hitting revenue targets and managing your sales team. Without a sales pipeline, your sales reps are flying blind.

Sales funnel vs sales pipeline

The terms “sales pipeline” and “sales funnel” are often used interchangeably, but they are not the same.

  • A sales pipeline is about deals: A pipeline refers to the steps in your sales process a sales rep takes while moving a deal from initial contact to close.

  • A sales funnel is about leads: The funnel includes the stages in the buying process your potential buyers move through before becoming customers.

What tools are needed to establish and maintain a healthy sales pipeline?

Finding the right CRM software is essential to establish and maintain a healthy sales pipeline. Modern CRM systems offer capabilities  that simplify lead and deal organization, featuring intuitive dashboards for clear sales stage visualization and advanced analytics for monitoring key performance indicators. These systems integrate sales analytics to identify trends and patterns, collaborative tools for team interaction and pipeline management, and lead generation capabilities to automate the identification of promising prospects. By centralizing these functionalities, the right CRM can streamline the sales process, enhance decision-making, and support strategic planning across departments.

6 stages of a sales pipeline

It’s important to design a sales pipeline that works best for your business. However, any business that follows a typical B2B sales process, is likely to have the following sales pipeline stages:

1. Lead generation

Before you can sell to them, potential customers need to know your business exists. There are many ways to generate leads for your business, including: 

  • Paid and non-paid campaigns on social media

  • Research through online searches and LinkedIn

  • Cold calling or cold emailing

  • Inbound marketing strategies 

Typically, sales leaders create an ideal customer profile with certain parameters and try to reach prospects who fit this profile. 

Let's say you're running a digital marketing agency that specializes in helping small businesses improve their online presence. Your goal is to find potential clients who are interested in your services. To generate leads, you might employ the following strategies:

  • Content marketing: Publish high-quality blog posts, videos, and infographics on topics like "Top 10 ways to boost your website traffic" to demonstrate expertise and provide value.

  • Opt-In offers: Offer free gated content, such as e-books or guides, in exchange for visitors' contact information.

  • Email marketing: Distribute newsletters with insights, tips, and digital marketing updates, including CTAs to explore your services or schedule a consultation.

  • Paid advertising: Use targeted online ads on platforms like Google Ads or social media, directing to landing pages for lead generation.

  • Referral programs: Create a referral program offering incentives for existing clients to refer new leads to your business.

  • Search engine optimization (SEO): Optimize website content with relevant keywords to improve visibility in search results, attracting organic leads.

  • Cold outreach: Directly contact potential leads through email or social media with personalized messages that reflect an understanding of their business needs.

2.Lead qualification

Qualifying a lead is another way of “finding out if a potential customer will buy.” This is a crucial step in the sales pipeline; you don’t want your salespeople wasting time and energy on a sales prospect who is unlikely to buy. To find the right buyer, you’ll need to find out a few things:

  • Can your product solve the buyer’s pain points?

  • Can your prospect afford your solution?

  • Does your contact have purchasing power, or should you be talking to their boss?

A couple of the most common examples of lead qualification methods include lead scoring and the BANT framework (Budget, Authority, Need, Timeline):

  • Budget: You determine whether the lead has the financial capacity to purchase your software.

  • Authority: You find out if the lead has the authority to make purchasing decisions within their organization.

  • Need: You identify whether the lead's needs align with the features and benefits you offer.

  • Timeline: You inquire about the lead's timeline for implementing a new project management solution.

If the prospect isn’t a good fit, that’s ok. Move on to a prospect who is more likely to make a purchase.

3. Initiate contact

At this point in the sales process, the sales rep attempts to contact the lead to understand their needs better.

Depending on your lead generation methods, this can look different. Here are some examples: 

  • Cold calling or emailing: After researching prospects on LinkedIn, your team may make contact with the most promising-looking potential customers by calling, emailing, or messaging them on social media. 

  • Warm calling or emailing: Using the information from inbound lead generation, your team contacts the prospects using information gathered when they sign up for a gated asset or webinar. 

The nurturing stage helps you map your business services against the lead’s needs, and it also serves as a way to start building the customer relationship. The nurturing process begins here.

4. Schedule a meeting or demo

After your initial conversation, if the customer is interested in your services, a sales rep might schedule a demo or a meeting with the primary decision-maker. These steps will help you negotiate the deal and move the prospect further down the sales pipeline.

Traditionally, this meant reps would travel to a prospect’s office to demo a product in person, but it’s much more common now for SaaS products to be demonstrated onlineThere might also be a product expert on the call to answer technical questions about integrations and system requirements.

5. Negotiation

The lead has expressed interest, they’re a good fit, and the decision-maker is willing to purchase from you. Now, it’s time to negotiate the deal. During this stage, your team works out the details, including price, services, conditions, and anything else that needs to happen to make the deal work for all parties. During this phase, you might connect the buyer with your help desk to work out software requirements, integrations, and whatever else is needed to make the product work for the client.

This step involves a conversation with a decision-maker who has the authority to make purchasing decisions. It may also involve working with a decision-maker on your end who can authorize deals, discounts, or other incentives. 

6. Closing the deal

This is what you’ve been working toward: the final stage in your sales process. It’s time for your rep to make the sale. 

If the customer isn’t yet ready to buy, don’t write them off just yet. Instead, mark them as ‘nurture’ and check back later. They may be ready in a few months.

How to build your sales pipeline in 6 easy steps

1. Identify list of prospective buyers and stages

As a first step, consolidate all your potential customers into your sales pipeline, and place them in different deal stages, depending on where they are in the buyer’s journey:

  • If a salesperson has sent out a promotional mailer to a prospect, that deal is in the initiate contact stage of your pipeline.

  • If a prospect has requested a demo of your product, the deal is in the schedule demo stage.

  • If a prospect has shown a willingness to buy, has responded to your emails, met your salesperson, and is discussing, that deal is in the closing the deal stage.

Identifying which stages each deals are in helps you visually categorize your sales opportunities.

2. Assign sales activities for each stage

Do you know which sales activities are likely to move your deals to the next stage of the pipeline?

Sales activities are the specific actions taken by your salespeople to make a sale. These include

  • Sending emails

  • Making calls

  • Tracking email metrics

  • Following up with a lead

Sales activities are most effective when they are done during a specific stage of the sales process , but many sales teams scatter their activities across different stages of the pipeline.

Organize your activities by assigning them to certain reps at different stages of the sales process. That way every salesperson knows exactly what they are supposed to be doing at every stage of a deal.

3. Define sales cycle length 

Your sales pipeline is heavily dependent on your sales cycle and how quickly your salespeople close deals. The length of a sales cycle depends on a number of factors, and often varies, based on the following factors:

  • Complexity of the product- The more complex your product is, the longer the sales cycle tends to be. With complex products, multiple people and teams are often involved in the sales process in order to help the prospect understand the product.

  • Customization: If your product requires customization, the deal will likely take longer because your team will have to tailor the product to your customer’s requirements.

  • Source of leads- What’s your sales strategy? If you rely on outbound sales techniques, like cold calling and email marketing, your sales cycle will typically be longer than a company that relies on inbound leads.

 By fine-tuning your product delivery, lead sources, and sales engagement, you can control your average sales cycle length. 

4. Decide ideal pipeline size

Knowing how many deals are in your pipeline (and finding the ideal pipeline size) is critical for achieving your sales targets and meeting your team’s revenue goals for the year.

You can determine your ideal pipeline size by working backwards: figure out how many deals your team needs to close for the year to hit your target. (Going after the target is not enough, as many deals rot over time, and may not convert to a sale. In fact, an estimated 24% of forecasted deals go dark.)

This might look something like this:

  • Your team needs 50 deals to close every month in order to hit your revenue targets.

  • For every 50 deals your salespeople pursue in a month, 10 or 12 deals may become stagnant over time.

  • Therefore your team should pursue 70 deals every month instead of 50 to realize your sales goals. 

You can use that information to determine monthly or quarterly sales targets for all your salespeople by dividing quarterly revenue by average deal size.

5. Remove stagnant deals from the pipeline

Unlike wine, deals don’t age well. As time passes, the likelihood of winning a deal diminishes, and the deal is likely to rot in your pipeline.

A pipeline full of rotten deals can distract your team from the opportunities that are likely to close. For this reason, you should keep track of the age of your deals; any stagnant deal that exceeds your sales cycle length should be on your radar. Check in with the prospect one last time, and then remove it from the pipeline.

This process will help you clean up your sales pipeline by getting rid of old deals that are unlikely to convert. It helps to have a CRM that automatically alerts your team to stagnating deals.

6. Define your sales pipeline metrics 

Sales pipelines are great visual aids for sales managers to track and monitor their salespeople. 

Pipelines constantly change, however. Monitoring specific sales metrics can help track the health of your pipeline on a regular basis. Tracking sales pipeline metrics on a regular basis will help you identify how many deals your team needs to bring in to meet targets and earn profits for the year.

What sales pipeline metrics should you track?

There are three different types of knowledge to gather:

Number of deals in pipeline

At any given time, you need visibility into the number of deals being pursued by your sales team. Knowing the number of deals in your pipeline gives you visibility into your team’s workload and a way to predict revenue.

Number of deals in pipeline = Number of qualified opportunities in the pipeline

Average deal value 

Every lead in the pipeline is worth a certain amount of business. While a deal’s value may change over time, an approximate deal value will help predict revenue. 

Don’t just focus on the biggest deals. Focus on deals where the prospect shows interest in your product and is willing to invest. Sometimes, a series of small wins is more profitable than one big win.

Average deal value = Sum of value of all deals won/number of deals won

Average win rate

Many opportunities find their way into the sales funnel, but how many actually convert into a sale? Tracking the average win rate for your team and individual sales reps will help you gauge this metric. The win rate is an important tool for a sales manager; it will show you which salespeople need more support to improve their performance.

Average win rate = Qualified leads/opportunities

Conversion rate or lead to opportunity ratio

Opportunities may be won or lost, but is your sales team able to convert them into leads? This metric is a way of showing how hard your team is working to develop leads.

A word of caution, however: While opportunity conversion rate is a good metric to track, it might give you the whole picture. If a salesperson is focused on bringing in new leads for next month, but their conversion rate for the current month is low, you may not realize how many valuable leads are in their pipeline. For this reason, conversion rate is a long-term metric, rather than a short-term one. 

Lead to opportunity ratio = Closed deals / total deals in pipeline

Sales cycle length

Sales cycle length refers to the amount of time it takes for a lead to move from initial contact to a sale.

For smaller deals, a typical B2B sales cycle is around 3 months. For larger and more substantial sales, a B2B sales cycle is more likely to fall between 6 and 9 months. Typically, your sales cycle length will be shorter if you’re selling to SMBs and longer if you’re selling to enterprises because of the number of gatekeepers and processes involved.

Pipeline value

The sum total of all deals in the sales pipeline refers to pipeline value. Pipeline value helps you predict revenue in the coming months and plan your bootstrap strategy. 

Pipeline value = Total value of all deals in the pipeline

What sales pipeline metrics should you track?

Number of deals in the pipeline

At any given time, you need visibility into the number of deals being pursued by your sales team. Knowing the number of deals in your pipeline gives you visibility into your team’s workload and a way to predict revenue.

Average deal value 

Every lead in the pipeline is worth a certain amount of business. While a deal’s value may change over time, an approximate deal value will help predict revenue. 

Don’t just focus on the biggest deals. Focus on deals where the prospect shows interest in your product and is willing to invest. Sometimes, a series of small wins is more profitable than one big win.

Average win rate

Many opportunities find their way into the sales funnel, but how many convert into a sale? Tracking the average win rate for your team and individual sales reps will help you gauge this metric. The win rate is an important tool for a sales manager; it will show you which salespeople need more support to improve their performance.

Conversion rate or lead to opportunity ratio

Opportunities may be won or lost, but is your sales team able to convert leads into opportunities? This metric is a way of showing how hard your team is working to develop leads.

A word of caution, however: While opportunity conversion rate is a good metric to track, it might give you the whole picture. If a salesperson is focused on bringing in new leads for next month, but their conversion rate for the current month is low, you may not realize how many valuable leads are in their pipeline. For this reason, conversion rate is a long-term metric, rather than a short-term one.

Sales cycle length

Sales cycle length refers to the time it takes for a lead to move from initial contact to a sale.

For smaller deals, a typical B2B sales cycle is around  three months. For more substantial sales, a B2B sales cycle is more likely to fall between six and nine months. Typically, your sales cycle length will be shorter if you’re selling to SMBs and longer if you’re selling to enterprises because of the number of gatekeepers and processes involved.

Pipeline value

The total value of all deals in the sales pipeline refers to pipeline value. Pipeline value helps you predict revenue in the coming months and plan your bootstrap strategy. 

Stagnant deals

By assigning reason codes to dormant deals and utilizing reporting tools within the CRM system, sales teams can gain insights into the factors leading to dormancy. Automated alerts can notify sales reps when deals have been inactive for a specified period, prompting proactive re-engagement efforts. 

Team performance

When assessing your team’s performance, conversion rates can highlight efficiency; win rates can demonstrate closing capabilities, and deal size can indicate the value of secured contracts. Additionally, activity metrics can offer insights into the team's engagement, while pipeline health and churn rates can reveal the overall robustness and retention of opportunities. 

Lost deals

Businesses can gain valuable insights into patterns that contribute to missed opportunities by documenting reasons for deal losses within the pipeline. Metrics may include a breakdown of reasons for lost deals, the stage at which most losses occur, and the average time spent in the pipeline before being lost. Analyzing these metrics helps identify common challenges and refine future sales strategies.

How can you continually build on and improve your sales pipeline?

Evaluating and refining your sales pipeline by tracking key metrics like conversion rates, lead generation, and pipeline coverage is crucial for optimizing sales processes and identifying bottlenecks. This approach enables businesses to set realistic, measurable goals, providing a clear view of the sales journey from initial contact to conversion. Establishing benchmarks at each stage promotes team accountability and continuous improvement, as it allows for the assessment of progress and necessary adjustments to tactics, ensuring the sales system operates efficiently.

A few key indicators to consider include:

Lead generation

Lead generation is crucial for identifying potential customers, laying the groundwork for sales. Tracking lead generation metrics helps assess marketing effectiveness and sales funnel health. A discrepancy between lead generation and conversion rates may highlight a need for strategy adjustments due to low-quality leads.

Deal progression

Deal progression involves moving opportunities through the sales process, with monitoring essential for understanding advancement and spotting hurdles. Metrics may indicate the need for pricing adjustments or more information to prevent deal stagnation, aiding in accurate sales forecasting and resource allocation.

Conversions

Conversion rates analysis across the sales pipeline highlights strengths and weaknesses, helping evaluate lead qualification efficiency. A drop-off at any stage suggests a bottleneck needing resolution.

Pipeline coverage

Pipeline coverage, the ratio of opportunity value to sales targets, indicates the likelihood of meeting sales goals. Adequate coverage suggests sufficient opportunities for target achievement, while low coverage signals potential revenue shortfalls. This metric aids in revenue forecasting and assessing sales team performance.

FAQs

Is a sales pipeline necessary for my business?

A sales pipeline gives you visibility into your team’s deals. It shows your team which deals are most likely to close, which need more effort from reps, and how much money you are likely to make when each deal closes. This helps you predict revenue. A pipeline also allows you to monitor the performance of each salesperson on your team.

What is the difference between the sales funnel and a sales pipeline?

A pipeline refers to the steps in your sales process a sales rep takes while moving a deal from initial contact to close. A sales funnel, on the other hand, is about the buyer’s journey;  the stages potential buyers move through before becoming customers.

What are the stages of a typical sales pipeline?

While no two pipelines are the same, a typical pipeline includes the following steps: 

  1. Lead generation

  2. Lead qualification

  3. First contact with prospective customers

  4. A meeting or demo

  5. Negotiating the deal

  6. Closing the deal or asking for the sale

How can I improve sales pipeline management?
  • Review your pipeline often: take a look at the deals in your pipeline to ensure none are stale or rotten.

  • Encourage collaboration: make sure many teams across the organization have visibility into your pipeline.

  • Embrace technology: Automate your pipeline using tools to eliminate manual tasks.

Can you recommend any tools for sales pipeline management?

Stay on top of all the deals in your pipeline with the help of CRM software, or customer relationship management software. A CRM can help you track the customer journey as well as your team’s sales activities.

Freshsales is an intuitive CRM that empowers your team to easily track deals, nurture prospects, onboard new users, create automated chatbot conversation flows, and personalize the customer experience for your prospects.