In its most basic form, a sales pipeline is a visual framework that illustrates how deals move through the sales cycle. A quick glance at a company’s sales pipeline should illustrate all of the business it’s currently working to close and expecting to win over a period of time.
Seems simple, right? However, in a recent study conducted by Vantage Point Performance and the Sales Management Association, 44% of executives revealed that they believe their organizations are ineffective at managing their sales pipelines. This is because effectively building, maintaining and optimizing a sales pipeline is a lot more complicated than pouring leads in and getting wins out. Doing it right requires taking a scientific approach.
A sales pipeline is merely a representation of a much more complex underpinning sales process that outlines the exact steps reps must take to move a deal from one stage of the pipeline to the next. Having a clearly defined sales process in place leads to a series of consistent data points that can be measured to understand, predict and improve performance over time. In fact, research shows that there is an 18% difference in revenue growth between companies that define a formal sales process and companies that don’t.
There are three vital steps every business needs to take toward establishing a scientific, measurable sales pipeline and process that drives repeatable, predictable sales growth.
1. Define your sales pipeline stages
2. Establish pipeline stage requirements
3. Map your process to the sales formula
Define Your Sales Pipeline Stages
As mentioned earlier, a sales pipeline illustrates how deals move through your company’s sales cycle. It helps to visualize this pipeline as a funnel, with unqualified leads entering at the top or wide end of the funnel, and closed deals exiting at the bottom or narrow end of the funnel.
In between are various stages, or milestones, that represent the major steps it takes to progress sales prospects from initial conversation to close. These stages vary by company, and while defining them may seem like an exercise in naming conventions, it is actually a highly critical decision that essentially lays the foundation for your sales process.
To get the most value out of these stages, we recommend having 5 or fewer. The more stages you have, the harder it becomes to explain the specificities of each stage, which inadvertently shifts the focus from the customer and closing the sale to meeting internal requirements. It also increases the chances of deals jumping back and forth between various stages, making it difficult to accurately measure the success of your pipeline.
Here are some examples of stage combinations that make up a sales pipeline:
Establish Pipeline Stage Requirements
Now that you’ve defined the key milestones within your sales pipeline, how do you know when it’s time to move a deal from one of these pipeline stages to the next? Outlining these specific steps and exit criteria is the heart and soul of your sales process. While this may require you to initially rely on educated guesses, as you consistently follow and measure these steps over time, you will learn what needs to be adjusted – and it will be worth it. A formalized sales process leads to a 65% increase in individual reps hitting their targets and an 88% increase in companies hitting their goals.
Let’s go back to the first example pipeline we provided earlier and examine some of the information and steps that a company might require before moving a deal from one stage to the next.
The Prospecting stage is where all leads, whether inbound or outbound, enter your pipeline. Not all of these leads will be the right fit for your business, so you must establish that they meet your requirements before moving them to the Qualified stage. Asking the right qualifying questions will also prevent your team from wasting precious time chasing prospects that won’t convert.
While a business can certainly create its own unique set of qualifying questions, there are many existing and proven sales methodologies to choose from that can help. One of the most popular sales methodologies is BANT, which was introduced by IBM to help companies qualify and score prospects based on their Budget, Authority, Needs and Timeline. Other examples include MEDDIC, GPCT, CHAMP….you get the picture. For the sake of this exercise, let’s use BANT to list out some of the questions a rep might ask to help qualify a prospect.
Get the Free eBook
Want to learn how to establish requirements for the other stages of your pipeline? How about how to map your process to the sales formula? To finish reading, download our latest eBook, 3 Keys to Unlocking a Scientific Sales Pipeline, here.