What is a Sales Pipeline? And How Do You Build One?

By: Jen Gustavson
Writer, Salesblazer
September 19, 2023 | 13 min read

Sellers love the close. But focusing solely on the close is like a marathon runner trying to take a shortcut — you might get ahead, but you’ll be kicked out of the race. Like the best runners, the best sellers log the steps and embrace the journey to success. That’s where a healthy pipeline comes in. It gives you the structure and guidance to build solid relationships and secure consistent deal wins.

That may seem like quite a hurdle, but we’ll show you how to build a healthy sales pipeline step by step.

Table of Contents

• What is a sales pipeline?
• What is the difference between a sales pipeline and a sales funnel?
• Why is a sales pipeline important?
• How do sales pipelines work?
• What are the stages of a sales pipeline?
• How do you build a healthy sales pipeline from scratch?
• What tools do you need to build and maintain a sales pipeline?
• How do you evaluate your sales pipeline?
• 5 best practices for sales pipeline and lead management
• How do you take your sales pipeline to the next level?

A sales pipeline visually represents each prospect's position in the sales process. It helps sales managers and business owners identify the next steps and any roadblocks or delays to keep deals moving toward close.

Here’s an example of a sales pipeline from State of the Union using Salesforce:

In the example above, you’ll happen to notice that you can see a variety of activities with this sales pipeline dashboard, such as:

• Sales pipeline leads are divided into different stages: qualified, needs analysis, proposal/quote, and negotiation.
• Sales activities by sales reps.
• Month-over-month growth, forecasting, and a lot more.

A sales pipeline is separate from the sales funnel. Though the sales funnel and sales pipeline draw from similar pools of data, a sales pipeline focuses on where the prospect is in their buying journey, which helps reps determine what they should do to keep deals moving.

For example, a prospect still in the negotiation stage may need a change to the product price to move to the contract stage.

The sales funnel is also a visual representation of the sales process from the customer’s point of view. Think of it as the conversation in a prospect’s mind as the sales process progresses, underscoring their level of engagement and “buy-in.”

This ranges from awareness at the start of the sales process — “This is a cool new product” — to evaluation and negotiation towards the end of the process — “I have to make sure this product has all the features I need before I buy.”

A sales pipeline gives you a bird’s-eye view of where every deal stands in the sales process — and any obstacles that may hinder a successful sale. With this information, you can address roadblocks and increase the chances of closing the sale.

A sales pipeline also provides a clear picture of potential overall revenue, allowing you to create accurate forecasts. With these forecasts, you can see how likely you are to hit revenue targets and adjust your sales strategy to ensure you hit your goals.

Ultimately, a healthy sales pipeline is about keeping deals moving. Without one, prospects can get stuck in the sales process, and reps may know how to get them unstuck. This results in missed sales targets and lost revenue — not to mention a frustrated sales team.

A sales pipeline follows the journey prospects take from first contact to purchase. Once a lead has been deemed qualified (a good fit for the product), they enter the pipeline as a prospect, and reps track progress as sales conversations unfold.

When the prospect meets specific exit criteria (requirements needed to complete a pipeline stage), they move to the next stage in the pipeline. This progression is typically tracked using a customer relationship management (CRM) platform often built into sales software and displayed in a dashboard that visually represents the pipeline’s health and performance.

You can compare this journey to a free-flowing river. If there are problems upstream, there will eventually be problems downstream.

For example, let’s say you noticed deals stuck in the meeting/demo stage. In too many instances, prospects attend the meetings but don’t move forward, causing a bottleneck.

To tackle this, you can evaluate the effectiveness of your demo videos and refine the content as necessary, review the recordings of recent demos to identify areas of improvement, and offer additional training for your reps on how to lead effective demo calls.

Below, let’s explore the specific stages of a sales pipeline and how they help move a prospect closer to a sale.

The stages of a pipeline may vary slightly based on industry or sector. Still, they generally follow the same order: prospecting, lead qualification, sales call or meeting, proposal, negotiation and commitment, contract signing, and post-purchase.

Each stage helps you identify the next best steps based on where prospects are on the road to a sale.

1. Prospecting stage

Sales prospecting refers to the process of finding potential new customers. There’s outbound prospecting, which involves cold outreach to folks who match your buyer persona, and there’s inbound prospecting, which involves outreach to individuals and businesses who have already expressed interest in your product or company by signing up for an event, a newsletter, product information, or a demo.

Every organisation approaches prospecting differently. Some rely entirely on a marketing strategy and cold calls to generate interest. Some businesses combine digital marketing with networking and trade shows to drive B2B sales. Others rely on a content marketing team to create blog posts to help potential leads discover their products organically.

Regardless, the end goal of each strategy is always the same: to locate potential buyers who need what you’re selling.

2. Lead qualification stage

Not all potential customers are likely to close. Before you pitch your product, ensure your product or service is a good fit for the prospects you’ve identified. This is where lead qualification comes in.

First, a baseline of qualification criteria, like leads in a specific geographic location or industry, must be set. Many CRMs will let you set these and do automatic lead scoring, so you don’t have to review leads manually.

Expert tip: Create an ideal customer profile to act as a pre-screen, allowing you to filter out any potential buyer that doesn’t meet your baseline requirements. For instance, if you’re selling cybersecurity services, your target market might be mid-sized financial or healthcare institutions needing to prioritise legislation compliance.

Follow up on leads who meet your preset criteria with a lead qualification call. During this call, you gather important information like their needs, budget, timeline, and who can make purchasing decisions. The leads that best align with your product are more likely to buy and become qualified leads or prospects.

3. Sales call, demo, or meeting stage

At this stage, you’ve strategically filtered out leads that are not ready to buy and are zeroing in on those that are. This is when you start to go in for a sale. Schedule a demo or meeting to discuss product solutions to customer pain points.

Make sure everyone involved understands the goal of this meeting; having an agenda prepared ahead of time will help keep everything on track.

Remember: This is an opportunity to build a business case demonstrating how your product will help your prospect achieve their goals. It is also a chance to build rapport and those all-important customer relationships.

The choice between a sales call, demo, or meeting will largely depend on your industry. If you’re offering accounting software to small businesses, for instance, a detailed demo showcasing the benefits of your product could be highly effective.

Alternatively, an in-person meeting with key stakeholders may be better if you build an enterprise IT structure for a large corporation. A car dealer would likely replace this stage with a test drive. Fine-tune this section depending on your business model.

4. Proposal stage

This stage is when you make an official sales offer. Summarise how your company can help address the potential customer’s pain points, reiterate pricing information, and demonstrate how your product's business value more than offsets its cost.

Remember: Personalisation and perceived value are key. You want the prospect to know you understand their company inside and out, so ensure you’re not giving them a one-size-fits-all proposal but tailoring it to their specific pain points.

This should be based on understanding your ideal customer profile and the information you gathered during your initial sales call or meeting. Knowing your customer will help you build rapport, prove your product or service meets their needs, and close the deal.

5. Negotiation and commitment stage

If your lead is still interested after your proposal, it’s time to negotiate the deal. This involves working out every last detail, including the scope of services you’re providing, the price, and any additional considerations, to ensure the deal is suitable for everyone involved. You may also need to connect the buyer with additional teams to work out any technical requirements.

The prospect will likely have objections or additional inquiries that require renegotiating the initial proposal. To reach a final agreement, discuss expanding or shrinking the scope of work, adjusting pricing, and managing expectations.

Expert tip: If your customer decides they aren’t yet ready to buy, don’t give up on them just yet. Make a note to check in with the lead after a fixed time. Your CRM solution can help you keep tabs on cold leads so your sales leaders can reapproach them later.

6. Contract signing stage

Pop some bubbly because you just closed a deal. Make signing the contract simple using an e-signature service that allows your soon-to-be customer to sign and upload from anywhere. Now, you can move the deal toward order fulfilment.

7. Post-purchase stage

The close of a deal is just the beginning of the customer experience. The buyer will expect attentive service and will regularly monitor the account’s progress. At the right times, you can cross-sell existing customers on new services and upsell them on premium solutions.

You should also ask for regular feedback. This proves to your buyer that you care about their experience, supporting customer retention. Requesting feedback will also help you refine your sales pipeline for future leads.

“You need to take ownership of that account because if you aren’t doing the right thing if you aren’t following up, it’s up for grabs for someone else to take over,” said Galem Girmay, Revenue Enablement Manager, APAC & EMEA at UserTesting. “You want to protect what you’ve worked so hard for and make sure you’re always moving the conversation forward.”

A healthy pipeline must flow: Prospects must move from one stage to the next within a set time frame or be filtered out.

To ensure a continuous flow, reps should regularly bring in fresh leads, qualify those leads, and nurture leads to increase interest in a purchase and, ultimately, close deals.

Sales reps can track this flow in a customer relationship management platform (CRM). Regular pipeline reviews are also critical as they help you see which deals are stuck to determine what you need to do to get them moving again.

“You want to make sure your goals as a sales team are reflected in your CRM, so that means having accurate data and updating your pipeline consistently as a prospect progresses from one stage to the next stage,” said Girmay.

Here’s how you build a strong, healthy pipeline:

1. Create a list of prospective buyers

Before you build your sales funnel and start generating leads, you need to create a list of every customer who wants to buy your product or service.

Each company will have different criteria for what counts as a good lead. Many companies even use a lead scoring system to prioritise leads based on their likelihood of purchasing. For example, at Salesforce, our lead scoring system is powered by AI and automatically prioritises leads based on existing customer and marketing data.

The best practice for defining your criteria is to begin with a strong understanding of your target audience. This is an essential precursor before you start building your sales pipeline. Setting baseline criteria is of little use if you don’t know what kind of customers you’re looking for and, by extension, which kind of customers are looking for your product.

Once you understand your ideal buyer persona and have created your criteria for qualifying leads, you can input all potential candidates into your CRM solution to see all prospective leads in one place.

Expert tip: Struggling to find qualified leads? From our experience, LinkedIn is the absolute best way to network and discover qualified candidates for your sales pipeline.

2. Define your sales pipeline stages

Every sales pipeline is wholly unique, with its stages, processes, and goals. You can use the sales pipeline template above as a starting point, but consider adapting it to your needs. Your business model, the complexity of your product, and the source of your leads all impact the necessary stages in your pipeline.

For instance, if you’re creating a real estate sales pipeline, you’d likely decide to replace your sales call with a house viewing. Alternatively, if you run an eCommerce store, you might do away with the proposal and negotiation stages if they aren’t necessary. Decide on what works best for your business.

3. Specify activities and conditions for each stage

Once you’ve defined your stages, you should determine activities and conditions to be met for each one. Your sales activities are the tasks you will fulfil at each stage, such as sending an email or booking a call. Conditions are the criteria that must be met before a lead moves on to the next stage.

Here’s an example of your activities and conditions for each stage in common sales pipelines to show you how this might look in practice.

Prospecting

• Activities: Discovering potential leads through social media, networking, cold calling, and marketing.
• Conditions: Lead fits your ideal customer profile.

Lead qualification

• Activities: Contact your lead to collect information and decide who should advance in the sales pipeline.
• Conditions: Lead meets all of your predefined criteria for qualification.

Sales call, demo or meeting

• Activities: Scheduling and holding a discovery call with your lead to discuss their pain points and your value proposition. Sending personalised emails and product updates. Holding a follow-up sales presentation.
• Conditions: The lead expresses interest in the value proposition and moving forward with the deal. There is a clear alignment between the lead’s pain points and the product.

Proposal

• Activities: Preparing and delivering a tailored proposal based on the lead’s needs. Arranging a free trial for the lead to try the service for themselves.
• Conditions: The lead acknowledges the receipt of the proposal, shows clear sales engagement, and agrees to schedule a follow-up meeting to discuss the details.

Negotiation and commitment

• Activities: Holding calls to finalise terms, pricing, and contact details. Renegotiating terms to resolve issues and close the deal.
• Conditions: The lead agrees on the price and contract terms. Any remaining objections are resolved.

Contract signing

• Activities: Sending the contract, arranging a follow-up to ensure everything is in order, and coordinating with onboarding teams.
• Conditions: Contract is signed.

This is a general example, so we suggest creating one for your business and adding your metrics and specific goals.

By segmenting each stage in the sales pipeline and being precise with your activities and conditions, you create a checklist of tasks your team can follow. It shows them exactly where an individual is in the pipeline and what they need to achieve to move them to the next stage.

This to-do list of tasks is the key to ensuring your pipeline doesn’t become static over time. To improve efficiency, you can also assign individual team members to each segment based on their strengths.

4. Bring in leads that are likely to close

Once you’ve defined the stages of your sales pipeline, it’s time to start bringing in qualified leads. But more importantly, you’ll need to bring in qualified leads.

You’ve already worked hard by creating your list of ideal prospective buyers. In many cases, however, you’ll need to follow up directly with leads to ensure they fit well. Here are some common sales questions to ask when qualifying leads:

• What pain points or needs do you have?
• Do you have a budget for our solution?
• Are you in a decision-making position?
• What’s your timeline for purchase?

These questions ensure you don’t clog your pipeline with stagnant leads and throw off your sales forecast. Once you’ve determined your qualified leads, you can begin to nurture these leads to move them through the pipeline.

5. Nurture leads until they close

Nurturing leads involves developing and reinforcing prospect relationships by providing powerful insights that build trust in your solution. Nurturing, personalisation, and communication are the name of the game.

There are multiple ways to accomplish this, but a common one is email nurturing. It’s cost-effective and easy to automate with email templates and follow-up tasks, and it tracks with analytics often built directly into AI-powered CRMs for sales. You can send personalised content like blogs, videos, white papers, and e-books in your emails, delivering valuable information that addresses prospects’ unique needs. Other forms of nurturing can include direct mail, follow-up calls, or social media marketing.

You can use the activities and conditions you defined earlier to determine which strategies you use at which stage. However, no matter how you do it, keeping the water warm with consistent follow-up and outreach is essential since prospects typically won’t purchase their first interaction with you.

6. Maintain relationships to win future cross-sells and upsells

A seller’s job isn’t done when the deal closes, as you’ll need to nurture strong relationships with existing customers to win future cross-sells and upsells. By staying connected and offering valuable support, you can position yourself as a trusted advisor and increase the likelihood of providing them with relevant upgrades, upping their contract value, and increasing their customer lifetime value.

With a clear view of your sales pipeline, you can assess its overall health and take proactive measures (like those noted above) to address issues.

For example, if your pipeline is top-heavy and prospects get stuck in early sales conversations, you can focus on nurturing leads to move them closer to the final stages.

For a bottom-heavy pipeline, you can prioritise lead generation and prospecting to ensure a steady influx of new sales opportunities. It’s all about finding the right balance to maximise your revenue potential.

You need effective tools to track and propel deals through each stage to maintain a healthy sales pipeline. That includes tools to organise customer data, align team efforts, and provide clear visuals for reps to prioritise tasks. Here are some sales pipeline management tools to help.

Customer relationship management software (CRM): CRM software is critical for managing and organising customer data, tracking interactions, and monitoring the sales pipeline. It helps you centralise customer information, track leads, and automate tasks, improving efficiency and enabling better customer engagement.

These days, a CRM with AI functionality is key. It can automatically add data from different sources, such as emails, calls, and meetings, to deal records and identify the next best steps in the sales process to ensure you keep your deals on track.

Sales analytics and reporting tools: Sales tools provide valuable insights into key pipeline metrics like conversion rate, deal age, and number of qualified leads. This allows you to identify trends, measure current sales against key performance indicators (KPIs), and make data-driven decisions to optimise your sales strategies. Real-time data is key here, as it empowers you to adjust your strategy quickly to avoid potential pitfalls.

Communication and collaboration tools: Communication tools such as email clients, messaging platforms, and video conferencing software allow reps to connect with prospects remotely. Also, they allow sales teams to hold real-time conversations from anywhere, allowing team members to discuss leads, share updates, address customer inquiries, and coordinate activities. Real-time, collaborative messaging tools like Slack make it easy to share information, delegate tasks, and take quick action if a deal gets stalled in the pipeline.

Sales enablement tools: These interactive tools use content, coaching modules, and training courses to help reps onboard, improve their skills, and close deals efficiently. As the market and buyer needs change, sales enablement gives reps the tools to handle the latest prospect needs, addressing issues quickly and efficiently to ensure deals move quickly to a close.

A healthy pipeline is characterised by a swift progression of deals through each stage, leading to a high conversion rate (percentage of leads who buy). To evaluate and improve this, you need to track topline metrics like the number of qualified leads, conversion rate, and deal age to see how smoothly leads move through each pipeline stage.

Additionally, tracking deal signals like lead source, industry, and decision-maker role can help ensure you’re targeting the highest-quality leads.

Top sales pipeline metrics

To keep your data clean and deals moving forward, you can set up trackable metrics and prospect details in your CRM and review them regularly. You can track many metrics, but the most critical ones are tied directly to the number of deals in your pipeline and how they move from prospecting to closing. They include:

Number of qualified leads: As noted above, a qualified lead is a prospect whose needs align with your product solution and who has the intent and resources to buy. The more qualified leads you have, the higher your conversion rate will likely be.

Conversion rate: This metric measures the percentage of leads that convert into paying customers. It helps you evaluate your sales efforts' effectiveness and identify areas for improvement. If your conversation rate is low compared to previous quarters, for example, you might look at the quality of your leads to see if they’re really good fits for your product. You might also hear this metric called the average win rate or close rate.

Age of leads: The age of leads is how long it takes leads to move from the first stage (prospecting) to the final stage (purchase). Identifying patterns here is vital to seeing lags in your process. If you’re noticing a marked increase in the average age of leads — or an outlier — it could indicate that some of your prospects are stuck in the pipeline or aren’t likely to buy and should be removed.

Pipeline coverage: This is the total value and number of deals in your pipeline, which allows you to see if you have enough potential sales to meet your revenue goals. If your pipeline coverage is high, you can reach your targets because sufficient deals are in progress. If your pipeline coverage is low, you may need to generate more leads to ensure you have enough potential revenue to meet your goals.

Average sales cycle length: This is the average amount of time it takes to close a deal. It gives you a broader view than measuring the current age of leads in your pipeline and can be used to evaluate the overall efficiency of your pipeline. You can also use this metric to compare the sales performance of different marketing and sales reps to see if anyone needs to catch up and provide extra support where required.

Average deal sizes: The size of a deal is equally important as how long it takes to close. Assess each team member's average deal size to learn how much everyone contributes to revenue and drives business growth. This metric is also essential for calculating sales velocity.

How to calculate sales pipeline velocity

Sales pipeline velocity is one of the most critical metrics because it lets you forecast future sales. It tells you how fast a prospect moves through your pipeline and generates revenue.

To calculate this, we need four of the metrics mentioned above: The number of deals in your pipeline, average deal size, your win rate percentage, and the length of your sales cycle. Here’s the formula we use to calculate sales pipeline velocity.

(Number of deals in your pipeline X average deal size X win rate percentage) / average length of sales cycle (days)

For instance, let’s say you have 100 deals in your pipeline. Your average deal size is $20,000, and your win rate is 20%. The whole sales process usually takes 50 days. Let’s work out velocity.

Pipeline velocity: 100 X 20,000 X 0.20 / 50 = $8,000

In this example, around $8,000 goes through your sales pipeline daily. Naturally, the bigger that number, the better.

To improve this metric, you can focus on increasing your number of deals, average deal size, and win rate percentage and lowering your average sales cycle.

Other key pipeline signals

While essential, the above pipeline metrics may only tell part of the story of your pipeline health. Tracking a few additional deal signals gives you a deeper understanding of your ideal customers, what they like, and how successfully you’re bringing in leads likely to close.

Lead source: This is the origination point for your prospects. Where did they come from — through marketing efforts, direct contact, or cold outreach? Once you start paying attention to these sources, you might discover that some have a higher conversion rate than others. Lean into these prospecting sources to ensure higher-quality leads.

Industry: Buyers from various industries might be interested in your product, but is it more prevalent in specific industries? Tracking this metric will help you discover that.

Decision makers: Do you have a direct line to the folks who will ultimately sign contracts? If not, what decision-makers should you be targeting?

To round out this comprehensive guide, here are five best practices to build your ideal sales pipeline, close more deals, and close deals faster.

1. Refine your sales pipeline over time

An effective sales pipeline isn’t one-size-fits-all, and it most certainly isn’t static. To continuously improve, you need to regularly review and refine your pipeline to ensure no blockages are holding you back.

Use data analytics to track essential metrics, make informed decisions and optimise your pipeline. Ensure you maintain accurate sales data and regularly add it to your CRM. Remove any dead leads that are bogging you down. All these things will help you grow your sales pipeline and keep leads moving to the point of sale.

2. Check in with cold leads

Imagine a scenario where you’ve qualified a lead and scheduled a sales call, but your ideal customer tells you they aren’t ready to buy. What next?

While it might feel resourceful to write this lead off and move on to the next candidate, a cold lead doesn’t always mean a dead lead. Just because someone isn’t ready to buy right now doesn’t mean they won’t be in the future. Many prospects will say no before saying yes, yet 44% of sales reps give up after the first no/rejection.

Setting a reminder to check in with a prospect after a fixed time is essential. Circumstances can change, so there's no harm in trying to see if your lead has changed their mind. We also recommend noting why your lead isn't interested next to their contact information so your sales lead knows what to look for when they follow up.

3. Use sales automation where possible

The Pareto principle states that 80% of a business's revenue comes from the top 20% of its customers. Therefore, we should prioritise the 20% as they will drive our key sales.

We recommend automating the early stages of the sales pipeline as much as possible using CRM systems. These technologies can help you create lead-scoring systems, send email sequences, and set reminders to make qualifying and contacting leads more efficient.

This lets your reps focus their energy on prospects closer to the end of the pipeline while monitoring the leads at earlier stages of the process.

4. Keep your sales pipeline short

If you’re having trouble managing your sales pipeline or consistently struggle with leads going cold, it could be a problem with the length of your sales pipeline.

You can improve the efficiency of your sales pipeline and make the transition between sections as seamless as possible. In that case, you reduce the chance that your qualified lead will change their mind or end up at the doorstep of your direct competitor.

Here are some tips for reducing the length of your sales pipeline:

• Automate the lead prospecting and lead qualifying stages of your pipeline.
• Gather as much information about qualified leads as possible before you schedule a call and enter negotiations.
• Approach the topic of cost and provide a price quote at the earliest possibility.
• Deal with objections early on. Don’t wait until the final call when you’ve invested hours in a lead.
• Use an e-signature platform to close the deal faster and more efficiently for your lead.
• Reduce the length of time between follow-up emails to keep the water warm.
• Regularly review your pipeline and remove dead leads so your team can focus on high-value opportunities.
• Provide comprehensive staff training about your sales pipeline process.

Reducing your sales pipeline size isn't always possible, but it’s worth periodically reviewing your processes to identify opportunities for optimisation.

5. Assign staff to every stage of the buyer’s journey

Understanding the buyer journey can be confusing. If team members need to manage several customer segments simultaneously, this can lead to inefficiencies and communication errors.

Combine this concept with your sales activities and conditions to provide a checklist for staff in each segment. This will ensure every team member knows exactly what their responsibilities are and what criteria they need to meet to move a lead to the next stage of your sales pipeline.

Once you’ve got a healthy pipeline, the key is maintaining it, tracking your performance, and adjusting as needed to meet changing market conditions and buyer needs.

To help ensure you’re building strong relationships and establishing trust, make sure you effectively handle objections that pop up during the sales process and drive value from the first conversation to the close. With a solid sales process and strong sales pipeline, hitting those ambitious sales goals will be much easier — even in changing times.