What is a Pipeline?

A sales pipeline is a visual representation of how prospects move through the sales process. It specifies certain actions that must be taken before moving on to the next step and allows sales reps to see what stage a prospect is at.

It shows how many potential sales are currently in process, how long they’ll take, and helps provide valuable information on the effectiveness of a company’s sales process. Every company is different, and their sales pipeline should reflect their unique goals and objectives.

Sales Pipeline vs. Sales Forecast vs. Sales Funnel

Within sales teams, the terms “sales pipeline,” “sales forecast,” and “sales funnel” are used often, and while they sound similar, there are very important differences between all three. These terms shouldn’t be used interchangeably; it’s vital to know their distinctions.

As mentioned, a sales pipeline outlines the different stages a prospect moves through when considering and making a purchase. While they move through the pipeline a sales rep is focused on making a final sale, but it’s not guaranteed.

A sales forecast specifically refers to an estimated number of sales, or specific amount of revenue, to be generated within a set timeframe. Data gleaned from a sales pipeline can help determine a sales forecast.

And a sales funnel is similar to a sales pipeline – they both contain specific stages for a prospect to move through – but a sales funnel focuses specifically on the customer journey and assumes that some prospects will drop off if they aren’t a good fit. It’s referred to as a “funnel” because visually it looks like one: large at the top (full of prospects), but much thinner at the bottom (representing those who make a purchase).

Why are Sales Pipelines Important?

Every company should have a sales pipeline in place for their sales team to utilize. There are numerous benefits, including the following:

Visualize the stages a sales prospect must move through. A sales rep can use their sales pipeline to determine if a prospect has been qualified, contacted, or is ready to negotiate their purchase.
Identify where bottlenecks occur in the sales process. If prospects are always getting stuck at a particular stage, find out why. What is causing delays, and how can improvements be made?
Measure the sale cycle length. How long does it take a prospect to move through the sales pipeline? If it’s taking longer than it should, find out why. What issues are occurring, and how can they be alleviated?
Generate and analyze data. A sales pipeline will show how many prospects are being engaged, how many convert to customers, and how long it takes to close a deal. A sales team can use this information to help forecast, improve processes, and ultimately achieve their revenue targets.
Measure performance. Analyzing a sales pipeline will also show the overall performance of individual sales reps and the sales team as a whole. You can see who moves prospects through quickly, or who lingers in certain stages longer than they should.

Stages of a Sales Pipeline

The specific stages of a sales pipeline will vary between companies because it reflects their unique business model. However, every sales pipeline will contain the following stages:

Prospecting and qualification. First, sales reps need to get qualified prospects into the sales pipeline.
Meeting and product demo. Once a prospect has been qualified, a sales rep can reach out to set up a call, do a product demo, and discuss their needs.
Negotiation. If a prospect is interested in the product, they enter the negotiation stage.
Final sale. After negotiating, a sale is closed, and the prospect is set up to begin using the product.
Follow up. It’s important for sales reps to always follow up with their customers to ensure satisfaction and assist with any questions or concerns.