Perseverance and hard work have brought your company to a good place. Your business is growing; you’re hiring new staff to handle brand-new clients; you see the future taking shape right before your eyes.
But it’s a long and winding road to success, and an even longer road — with potholes and steep drop offs and unexpected obstacles — to achieve sustainable growth.
When you were smaller, you and your team were agile by necessity. You had to bob and weave to tackle whatever came your way — whether you were ready for it or not.
Process was anathema to survival.
Now, with more clients and more staff and more moving parts and more complexity, process is the only way to survive.
Developing business processes and sticking to them across your functions is imperative to your organization’s continued success. Of all the processes that you need to develop and harness as you hit a growth spurt, few are as important as your sales process and — even more specifically — the development of a formal sales pipeline.
As a business owner or sales director, building out your first sales pipeline can be a daunting task as you try to juggle a client-first approach with taking care of your internal operations. We’re here to help you get started and inspired to take action. Let’s take a look at the fundamentals of how to build your first sales pipeline.
First, Let’s Define Sales Pipeline
A formal, documented sales pipeline (in contrast to one that’s anecdotal, implicit, or assumed) is used by your sales team (and also marketing) to understand the journey a lead takes from acquisition to closing. It’s important that each phase or stage has tangible, real-world actions linked to it. Your customer relationship management (CRM) program or Google Sheet workbook — whatever you use to track sales — must become an accurate mirror of your sales pipeline.
Every business and every industry is unique and there is no cookie-cutter formula that you can steal and apply to your business. We can generally define the term sales pipeline, but it’s up to you and your leadership to tailor that definition to your specific industry, market, and audience.
The Importance of a Defined, Documented Sales Pipeline
As you grow, operations become more complicated. Sales becomes more complex, too, because you likely have more leads and a larger team with variegated personalities, skill sets, and experience handling these leads. Here’s why a sales pipeline is critical to strong sales performance in a growing organization:
- A carefully defined and well-communicated sales pipeline helps you or your sales manager take control and bake in consistency
- It creates accountability among sales representatives and managers. The same pipeline structure is used for all reps and thereby all reps are judged within the same criteria and are using the same tools.
- A strong sales pipeline empowers better tracking and sales analysis, i.e., gaining a better understanding of why a deal closed, why a deal closed more quickly, or why a sales qualified lead (SQL) dropped out of the pipeline
- A solid sales pipeline will also enable your sales manager(s) to better project future revenue by identifying how many opportunities fall within each pipeline stage along with the likelihood of closing for each pipeline phase
Establishing a sales process, also known as sales enablement, is very important, for sure. But perhaps the most important sales pipeline benefit for a growth-stage company is more accurate sales projections.
Accurate sales projections allow company owners like you to mitigate risk. Specifically, the risk of growing too fast without the reliable revenue to support new hires. A well-defined sales pipeline helps a business more accurately anticipate future revenue, thereby reducing risk and fostering smarter growth.
How to Create a Sales Pipeline
Keep this in mind: Your sales pipeline is primarily a sales projection tool and is directly related to your sales process. When building out your sales pipeline, you want to work backward a bit to ultimately determine how many closed deals you need to generate in order to hit your revenue target. Then, you want to determine how many fresh opportunities you need to enter the pipeline to reach that goal.
You can reach the endpoint in a few different ways, but most experts agree the following approach works best:
- Define your sales lifecycle
- Analyze your sales history to determine the likelihood of a lead moving to the next section of the pipeline
- Work backward to project how many leads you need at each pipeline stage to hit your revenue goal
- Discover why leads converted by pipeline phase. What did your reps do or fail to do? What were the key actions that nurtured a lead to the next phase?
- Create a sales process that syncs up with your newly created sales pipeline. Or adjust your existing sales process so that it connects to your new sales pipeline.
What Might a Good Pipeline Look Like?
Remember, there is no one-size-fits-all sales pipeline solution. You can grab someone else’s template and then try to tweak it, but you’d be selling yourself short. Developing a sales pipeline from scratch is an invaluable experience that can uncover important learnings you might miss when applying someone else’s formula.
So, every pipeline is unique to the business deploying it. There are, however, certain best practices to follow:
- You need to understand how your buyers buy. In other words, the sales pipeline has to mirror your customer’s buyer's journey
- Don’t overcomplicate things. If your sales pipeline is 20 steps, it’s likely too long. Keep it as simple as possible for your specific service or product.
- Keep it clean. Building and executing your new sales pipeline is not a one time deal. The work is unending. And if you don’t clean things up consistently, things will get too messy and you’ll see a dip in accuracy and sales performance.
You now have your buyer's journey defined and have a stronger awareness of your sales process. What then are your pipeline’s most critical stages? Again, every business is unique, so the following example is a guideline, not a solution to your challenge.
- Stage One: Contact. A lead has engaged your company in some way and has now entered your database, spreadsheet, or CRM.
- Stage Two: Meeting Set. Your sales rep has secured a meeting (face-to-face or virtual).
- Stage Three: Meeting Completed. The meeting occurred and next steps were discussed.
- Stage Four: Service or Product Pitch. Your sales rep has pitched a solution that could solve their problem or alleviate a pain point.
- Stage Five: Sent Proposal. Your sales rep or business development team created and sent a formal proposal to a prospect.
What you are selling will determine the length and complexity of your sales pipeline. The example above represents some basic phases that you can use to frame your thinking.
What Sales Pipeline Metrics Should Be Applied?
Earlier in this blog, we emphasized that your sales pipeline’s most important benefit is in projecting future revenue and mitigating risk. To make these projections and limit the risk of growing too quickly, you need to apply metrics to the sales pipeline that will generate useful data. Here are a few metrics that could be applied to your pipeline:
- Deal Value. What is the average projected value of the deals currently in your pipeline?
- Sales Velocity. What is the average number of days a deal spends in your pipeline before they are closed?
- Open Deals. How many deals are currently in process and open?
- Total Value. What is the total value of all potential opportunities in your pipeline?
- Days Per Stage. How long does each deal remain in a given phase on average?
- Conversion Rate. What is the average deal-to-customer conversion percentage?
- Close Likelihood. What percentage chance does your sales rep attribute to a specific opportunity, e.g., "75% likely to close."
Building your first sales pipeline can be daunting. But it must be done for you to properly manage smart growth, mitigate risk, and empower your sales manager and sales representatives to maximize their efficiency, productivity, and revenue generation.
If your business is looking to build a formal sales pipeline, Illumine8 Marketing & PR can help. We’ve helped many businesses like yours build robust sales enablement programs — including sales pipeline development — that have really changed the game for them. Reach out. We’d love to hear more about your business and your goals.