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What are the Stages of a Sales Pipeline?
By Danny Wong
For some businesses, sales come naturally. Leads can arrive from various marketing campaigns or existing client referrals. Through a number of conversations, those prospects may later convert into paying customers. Among many small and midsize organizations, though, the sales process can be haphazard and unstructured. As a result, sales can be unpredictable.
To overcome this, companies can develop and analyze their sales pipeline. When leaders track the volume of leads coming into their funnel, the number that are qualified buyers, the percentage that make it to the proposal stage, and more, they gather valuable insights into where there are areas for improvement in their sales process. This can help them strategically grow their overall sales. In fact, managers can use their pipeline to develop a more disciplined and structured approach to sales, making it easier to determine larger business needs (such as hiring) and goals (such as revenue and cash flow).
In this article, we answer the question, “What is a sales pipeline?” and explore the various sales pipeline stages, as well as share how business leaders can build and customize their sales pipeline.
What is a Sales Pipeline?
When business owners dive deeper into the data from their sales pipeline, there are several insights they may discover.
- Anticipated revenue and cash flow. Only a certain percentage of your leads will convert into opportunities won. Knowing that, managers can forecast their sales to help plan budgets and human resources moving forward. This also makes it easier for them to adjust sales targets based on the performance of their current sales funnel.
- Resource gaps and overallocation. Within your sales pipeline, you may notice some salespeople are focused on leads who may never convert while unintentionally neglecting prospects who are eager to purchase your products and services and tend to sign larger contracts and deals. Find out ways to better utilize your team’s time to drive better results long-term.
- Sales cycle length. For some businesses, it can take weeks to close a deal. Among others, negotiations can last months. Use your sales pipeline to understand how long it typically takes your team to move leads from the top of the funnel through to the sale.
- Process bottlenecks and hindrances. You might find, for example, that the proposal stage regularly delays the sales process by a week due to the need for custom quotes. Armed with that information, you can search for solutions that can automate how you produce project estimates. Alternatively, you may discover that some prospects are unengaged with the collateral you share at the lead generation stage. In this case, trial new marketing assets to see how well they respond and if they are more likely to convert into opportunities won later.
- Sales rep success and skills shortage. A good sales pipeline also provides insight into which of your salespeople closes the most sales, has the highest ticket values, and needs more help and training to hit their quota. With this information, you can provide them with the assistance they need to improve their performance and get their sales numbers on track.
Companies that leverage a sales pipeline can develop a data-driven understanding of their current and future sales performance. Knowing this, they can make smarter decisions about hiring new staff, training existing sales reps, increasing or cutting their advertising budget, and more.
Next, let’s break down the most important sales pipeline stages every company should track and monitor.
The Seven Main Sales Pipeline Stages
Customers follow a process from discovery all the way through to sales and then beyond as they become returning buyers. The seven key sales pipeline stages include:
- Prospecting. Through ads, public relations, and other promotional activities, potential customers discover that your business exists. Often, you apply targeting parameters to deliver your message to potential buyers who fit the profile of your existing client base and ideal customer.
- Lead qualification. To move leads downstream, offer an e-book, white paper, webinar, or another type of lead magnet to determine if the prospect is interested in learning more about your products and services.
- Demo or meeting. Afterward, schedule a demo or meeting to introduce potential buyers to your offerings and solutions. At this point, you want to evaluate if there is a strong business case for the lead to receive a proposal.
- Proposal. Make your case by summarizing how your company can help address the potential customer’s needs. Demonstrate how the prices you propose deliver more than enough value to offset the engagement cost. At this stage, remember to state your competitive advantages to help differentiate your proposal from other vendors your customer may meet.
- Negotiation and commitment. Discuss expanding or shrinking the scope of work, adjusting pricing, and managing expectations to come to agreement on a mutually beneficial partnership.
- Opportunity won. Finally, you close the sale and move toward order fulfillment.
- Post-purchase. In business, the sale should be considered closed at the first contract signing. Instead, your reps should invest in providing exceptional service during onboarding and regularly monitoring the account’s progress. At opportune times, you can cross-sell existing customers on new services and upsell them on premium solutions. When the contract is about to expire, you can explore renewal options with them. Among your happiest clients, ask for referrals to other potential customers.
Between the various stages of the sales pipeline, sales leaders can often find better ways to engage customers and increase their likelihood of completing a purchase.
How to Create Your Sales Pipeline
First, make sure it covers the basics, including the separate sales pipeline stages but also important metrics, such as:
- Lead source. Determine how your prospects find out about your business. This could be through digital ads, print marketing, email campaigns, customer referrals, and any other marketing and sales methods. You may discover that a majority of leads from certain sources convert into paying customers at a higher rate than others.
- Industry. Your product works well among a variety of clients. That said, you may find that it is more popular among buyers in some industries, which you can target more often.
- Decision makers involved. Always count the number of client-side contacts you need to liaise with. Apply different strategies when you interact with the CEO versus the finance director, or even the CTO.
- Deal size. Some buyers are ready to spend $100,000 on your product, while others can budget $5,000. Segment them accordingly and personalize your pitches.
- Probability to close. Even if your sales team has hundreds of high-value leads in the pipeline, salespeople may not be successful in winning a majority of those opportunities. Estimate how likely each lead is to convert into a customer based on your team’s conversations with them, their current stage in the sales pipeline, and other criteria that signal their eagerness to strike a deal.
Design your sales pipeline to be flexible in order to accommodate different analyses and queries. Also, rework your template as needed to help surface data anomalies so you can either fix broken aspects of your sales funnel or exploit opportunities that can accelerate your sales.
To automate reporting and connect even more of the dots between each salesperson’s activity and overall performance, use sales management software such as a CRM platform. Teams armed with the right sales pipeline and dashboard generally are able to use the information and insights gleaned to improve their sales, cut costs, and outperform their goals.