What Is a Sales Pipeline and How Do You Build One?

The lifeblood of any business is sales and therefore turning potential clients into paying customers is perhaps one of the most important tasks your business undertakes. To ensure this process moves smoothly and in line with your growth targets, it’s imperative that you have effective sales tools that help you to meet your goals. 

This is where a sales pipeline can help. In this article, we’ll look in depth at what a sales pipeline is and how you can build one.

What is a sales pipeline?

A sales pipeline is an organised way of visualising your sales process and tracking multiple potential customers as they move through stages of the sales cycle. With an effective pipeline, a sales and marketing team can see exactly where all of their sales efforts are and how close prospects are to purchasing. When juggling multiple leads, a sales pipeline can really make the difference between closing deals or letting leads drop off. 

Sales pipelines are often pictured as a horizontal bar divided into sections, with each section representing a stage in the company’s sales process. When prospects reach different stages of your pipeline, they are moved along the sections. For example, newly generated leads would be in an early stage in the process. These leads would then move along the pipeline into a lead nurturing stage before becoming qualified leads and ultimately customers.

Why use a sales pipeline?

Without effective and well functioning sales pipelines, it is estimated that 24% of forecasted sales go dark. However, by improving the sales pipeline and making it an integral and key part of the sales process, businesses can turn these figures around. 

A study found that organisations spending at least four hours per month managing each sales rep’s pipeline obtained 14% revenue growth compared to those spending less than one hour. It is therefore clear that sales pipeline development can truly support your business in achieving increased profits and growth. 

In addition to helping you convert prospects into customers, a sales pipeline is also a great tool for sales team management and improving overall processes. With the visibility that an effective sales pipeline provides, sales managers can see how effective their process is and which parts of their strategy are providing the best ROI. 

How do I build a sales pipeline?

When it comes to pipeline creation, you’ll need to collate certain pieces of information about your business. Below is a brief overview of the data you need to make your pipeline as effective as possible. 

A list of prospects

Any person who potentially wants to buy from your company can be included on a list of prospects, whether they are leads generated through email marketing or people who have submitted contact forms on your website. 

In your list of prospects, you should include as much information as possible, including contact information and how they got in touch with you. It’s also important to assign them a rough stage in the sales process. For example, did one of your sales team get in touch with them or are they already qualified?  

A defined sales process

A sales process is a set of repeatable steps that your team uses to move prospects along the buying journey and to a closed deal. A sales process is unique to your organisation and should be regularly reviewed to ensure it is working as it should be. 

79% of the highest performing companies have a defined sales process, and those companies that have one consistently outperform those that don’t. There are plenty of examples of sales processes online if you feel like you need to refine your company’s technique. 

Revenue targets 

It’s important to have a clear idea of your revenue targets to understand how many deals you need to be adding to your pipeline to achieve them. 

If you know how many of your leads already convert into customers, you can calculate the number of deals you need to close in an agreed timeframe and therefore how many leads need to be coming into the business.

What are the stages of a sales pipeline?

As with other business strategies, your sales pipeline should be tailored to your business with each step working to achieve your goals. However, there are certain stages found in most sales pipelines that you can use as a starting point. 

1. Initial contact

Before any sales can be made, every business needs a real life person who is interested in buying what they are selling. The sales pipeline journey begins when a potential customer learns about your business. 

Every organisation prospects for leads differently, from cold calling or email marketing through to content marketing and networking. However your company seeks out new business, the sales pipeline journey always starts with lead generation. 37% of sales people describe prospecting as the most difficult part of their job but having clear processes in place can help make this stage easier. 

2. Qualifying 

Qualification is the process of determining whether a lead has a high chance of converting into a sale. This is an important stage because successful qualification means your sales team doesn't waste time chasing leads which are never going to transform into purchases. 

Differentiating a promising lead from a cold one is key. To qualify a lead may require independent research or a conversation with the lead. This conversation needs to answer the following questions:

  1. Does the prospect have the budget for your product? 
  2. Can they make the decision to purchase or do they need to convince someone else? 
  3. Do they truly need your product? 
  4. Do they seem ready to buy now? 

An excellent qualifying process is key to ensuring that your sales pipeline drives up new business and increased profits.

3. Building relationships 

Sales teams need to nurture relationships with prospects which have been identified as potential customers from the first meeting through to closing the deal and beyond. This can be time consuming, which is why 65% of sales professionals lean on Customer Relationship Management (CRM) tools to help.

But, ultimately, the goal with relationship building is to gain trust and ensure your prospects feel comfortable buying from you and your company. Simply forwarding articles that relate to the prospects problem or having an honest conversation about their needs can go a long way in moving them through the CRM sales pipeline. 

4. Closing 

Having made contact and built a relationship with the customer, it’s time to close the deal. The only leads in this stage of the pipeline are those who have signed a contract or made a purchase. They’re no longer a potential customer — they’ve now become a paying customer.

5. Retention

The probability of selling to a new customer is between 5-20%, whereas your chances of selling to an existing client are between 60-70%. This perfectly illustrates how important customer retention is for your business and why the sales pipeline continues long after a deal has been signed. 

What is the ideal pipeline size?

To calculate the ideal size of your pipeline, the first thing you need to answer is how many deals you need to close every month to hit your sales target. 

To work this out, take your monthly target revenue and divide it by your current average closed sale revenue. For example, if your goal is £100,000 a month in sales, and your average order is for £500, you’ll need to make 200 sales a month to hit your target. 

RELATED: How to accurately forecast sales for your business

To work out how many leads you need to meet your target, divide your target for closed sales by the percentage of closed sales every month. 

Sales pipelines should work to continually generate a revenue pipeline, so regularly assessing your conversion rates and refining your processes is imperative for success. This can be made simpler by integrating a CRM system, like Keap, and ensuring your sales team are continually updating information as they receive it. 

For more inspiration on how to craft the perfect sales pipeline, take a look at one of the many online templates available for free.

RELATED: What is sales reporting and how do you do it? 

An effective sales pipeline leads to more business, growth and profit. It can also be a dynamic way to reinvigorate your sales activities and bring the whole team on board. So now you know how to build the perfect pipeline, find out the 11 best ways to manage your sales pipeline.

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Your complete business toolkit

Rovva puts everything you need for your business in one place. From an accountancy helpline to a drop-in business lounge - we've got everything covered.