Sales is a core function of businesses and is especially critical for early stage businesses. Whilst larger organisations will have established sales teams, sales funnels and processes, it is important that small businesses follow a process for creating sales opportunities and maintaining their sales pipeline. This article explains what a sales pipeline is and shares best practices for growing one whether you're a small business or more established organisation.
What is a sales pipeline?
When a sales team prospects leads and accompanies them through the sales cycle, a prospect's likelihood to become a customer will evolve based on their interactions, the fit and their own readiness to buy. A sales pipeline sorts a business' potential customers' into stages based on their stage in the journey so that a sales team can allocate the tight type and amount of efforts to an opportunity based on their stage in the sales pipeline. A sales pipeline is also used by sales teams to measure the total number of deals and determine if a sufficient number of new leads is being created to reach sales targets and company wide revenue goals. Sales pipelines collect data which can be used to identify and improve inefficiencies in the sales process.
What are the sales pipeline stages?
The different stages of a sales pipeline will vary based on the market, the nature of the solution and the buying process. For example, SaaS might have a stage dedicated to a demo and another to a trial whereas some more established B2B sales teams might not offer trials. Regardless of the nature of the market or solution, the goal of the initial stages is to qualify opportunities. Qualifying prospects means determining if they are a good fit for your solution, have the budget and the ability to make a decision within a reasonable time frame. Marketing teams will often generate marketing qualified leads for the sales team which is why it is important the marketing strategy and sales strategy are aligned so that the qualification by the sales team is mainly focused on budget and identifying the right decision makers. Sales teams can also take part in lead generation activities in order to identify potential new customers.
After qualifying opportunities and personas for your target audience, the next stage is to convince the potential client that your solution is a great fit for their needs and pain points. This can be achieved through cold calling, conversations, meetings, demos and trials. After the client has recognised that your solution is suitable, depending on the complexity and price of your solution, the next stage will be to negotiate the terms via a proposal. If and when the proposal is accepted, the terms will be formalised into a commercial agreement. Formalising the terms can be quick or long depending on the nature of the agreement, and whether the client has their own procurement process or not. A procurement process might request additional information from solution providers in order to determine if they are suitable and trustworthy. A salesperson should check in with procurement regularly to ensure that they have all the information they need to progress the opportunity.
Finally, once the sales opportunity has cleared the contract negotiation stage, it will become a won opportunity as soon as the contract is signed. A won opportunity will then need to be onboarded to your solution in due course and supported throughout the agreement by the account management team. An account management team might have their own pipeline to help them manage customers and ensure the relationships are successful. An account management team might also try to generate new business opportunities within client accounts.
The chances of a potential customer falling out of the pipeline reduce at every stage. The likelihood of them progressing to the next stage will vary based on the market, solution and ability of the sales team to convert opportunities. It is therefore important for a sales pipeline to be structured so that you can collect data and set reasonable closing probabilities to help the wider organisation accurately forecast sales and growth. The data in the sales pipeline should also highlight patterns and factors which can help the sales team close deals.
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What is the difference between a pipeline in sales and a pipeline in marketing?
The marketing team's function is to create a market for the sales team. This means creating demand for the organisation's solution by sharing promotional information about benefits and ROI. This promotional material can include case studies, videos, adverts and any type of content which can collect "interested" prospects. A marketing funnel pipeline will therefore have stages based on the intent of the prospect. For example, a prospect registering for a demo is more qualified than a prospect registering for a webinar. Marketing teams will then nurture the higher funnel prospects with more content and hand over the qualified prospects to the sales teams. A marketing pipeline therefore needs to be aligned with the sales pipeline in order to ensure a smooth transition between the two which will in turn increase sales.
Choosing a sales pipeline template
A sales pipeline template can help structure your sales efforts and collect valuable data to identify and optimise inefficiencies. There are a number of free sales pipeline templates which can be downloaded online but the key thing is to choose a simple template to start with. Overly complicating a sales pipeline will create friction in the sales process and prevent you from understanding if the stages are the right steps. The following pipeline is an example 4 stage template:
- Lead: a prospect has been identified by marketing or sales.
- Qualified: a salesperson has qualified the lead through a conversation.
- Negotiation: the potential customer has had multiple conversations with the salesperson and has identified they need the solution. The terms are then negotiated and formalised in a contract.
- Closed: at the last stage of the pipeline, the contract is finalised and signed. The prospect has become a paying customer.
It is important that the template pipeline sets clear tasks before an opportunity can be moved to the next stage. This ensures for example that qualified leads are truly qualified. It is also important that each opportunity is properly assigned to a salesperson to ensure that no opportunities slip. Sales pipelines should provide indicative statistics of the average deal size and how long it takes an opportunity to progress to the next stage in order to benchmark opportunities.
Best practices for sales pipeline management
A sales pipeline is not static and needs to be managed properly in order to successfully convert prospects into paying customers. There are number of best practices which should be followed when managing your pipeline. The first best practice is to establish sales targets and use the right metrics in order to monitor them. For example, if your sales target is to close within a certain number of deals in a period of time then you should look at the amount of time it takes the average opportunity to progress to the next stage and the percentage of opportunities which get stuck in each stage. You need to have the right metrics to understand if your pipeline is mainly constituted of lots of small opportunities or a few large ones. Having the right metrics will allow you to accurately measure your conversion rate and your team's sales performance. Finally, it is important to make sure that you are constantly refreshing your leads and removing stale opportunities so that your metrics are not exaggerated. Opportunities which do not move can be parked in a separate pipeline to be revived at a later date.
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Choosing a CRM to manage the sales pipeline
Once you have determined your sales pipeline template and understand the best practices for sales pipeline management, you can choose a CRM to manage your pipeline. A CRM is a customer relationship management tool which can be as simple as an excel spreadsheet or as sophisticated as Salesforce. A CRM essentially stores a prospect's contact information and allows you to place leads into a sales pipelines. CRMs also offer visual representations of the pipeline which can help sales leaders make better decisions.
The type of tool you choose will vary based on the stage of your business and the types of opportunities you are securing. The key is to start simple and adopt tools progressively as the previous ones reach their limits. This will ensure that your sales reps are focused on sales activities as opposed to admin. Your organisation might be ready for a CRM if the sales process reaches a scale where patterns start to emerge. The patterns will help shape the template and the type of CRM you need. For example, if your sales process requires sending sequences of emails, choose a CRM which allows you to save email templates, send emails, follow ups and track activity. If your sales process requires making calls, choose a CRM which can make calls so that you can record and track activity. If your prospects are sourced from social media or LinkedIn, choose a CRM which has integrations with these platforms.
Choosing a contract management platform to boost your sales
CRM platforms help automate a lot of the admin work involved in sales process including the contract creation stage. Creating a contract with a CRM often involves generating a standard pdf with the deal terms which can then be sent to the prospect for electronic signature. Whilst this might seem like a time saving step for creating contracts, it will slow down your contracting efforts in the longer term. This is because the experience is not optimal for customers, especially when variations to the contracts are required, and contracts can't easily be managed in a CRM. A more suitable approach is to use a contract management platform which can easily integrate to your CRM. A contract management platform should store and maintain contract templates which your sales team can tailor to specific customer requirements. Using a contract management platform also means that other team members such as the legal and finance teams can access contract data directly without having to interfere with the sales activities. Customers can also access their contracts from the contract management portal which allows them to easily keep track of contract events without having to sift through their contract.
In summary, a sales pipeline organises your commercial opportunities into stages from prospect to paying customer. There is no one size fits all pipeline but it is important to choose a template which allows you to achieve your goals by monitoring the right metrics. A CRM can help you manage your pipeline and can be as simple as a spreadsheet or as complicated as Salesforce. It is important to choose a CRM which is right for your stage. However, a CRM should should be used in conjunction with a contract management platform to help you get the most out of your contracts and minimise the time they spend with your legal team. To grow your sales with lawyer-approved contracts on no legal budget, sign up to Legislate today.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.