A sales pipeline refers to one of the strategies or metrics in place to monitor and check if every business client lead actually translates to closed deals. This pipeline is also often used by sales representatives to study the particular steps to move from leads to transactions, and how to equate this with sales. A pipeline is one tool in business and marketing that shouldn’t be neglected or taken for granted. This article gives you the critical reasons on the importance of a sales pipeline.
The Importance Of A Sales Pipeline
Sales pipelines show the status and accounts of sales representatives.
A company’s sales representatives are often the front lines of the business. They are needed to reach your target market and new prospective clients as well. Hence, it is essential that you are also able to monitor the status and accounts of sales representatives. This action is possible through a sales pipeline management software, as this metric also shows how far along a particular sales representative is in reaching their quota.
Sales pipelines show the value and quantity of success in each stage of business dealings.
Not all business deals result in income for the company. Some business deals remain stagnant for a very long time, such as when a sales representative has reached a lead client and the client still hasn’t made their first order. Sales pipelines can identify this as well. In business, what matters is not just the quantity or number of closed deals, but also the quality of each contract in every step of the business.
The life cycle of a business dealing is as follows:
- Identifying your particular market or lead clients
- Validating these lead clients, through pipeline reports that show their quality, if these leads can result in business opportunities or not
- Closing the deal as successful or not
Sales pipelines allow the company to forecast the possible revenue.
As a company, it is vital for you to have a tool to forecast your possible revenue, be it monthly, quarterly, semi-annually or annually. A sales pipeline allows you to do the same by showing you areas in sales that may be close to their quota, or those that are still going far along as weak points. Forecasting possible revenues is significant because it can help you determine if you are still heading out towards reaching financial goals, or if you are slacking far behind and have to adjust your marketing strategies.
Sales pipelines give you a clear report on the critical financial metrics in business.
Operating a business means that you are highly dependent on numbers to double check and verify your standing in every lead client and opportunity. Financial metrics are crucial for you to check if goals are being met, if profits are soon available, or if the company is finding it hard even to close deals that translate to positive business opportunities.
Here are the metrics that are crucial in business that your sales pipeline can show:
- Number of deals that the company can close through its representatives
- Size of deals that the sales representatives can close, if these are big clients or these are the company’s smaller but regular clients
- The rate of deals that are successfully turned into profit-earning opportunities for the company
- Amount of time or the period it takes to close a successful, profit-earning deal
Sales pipelines give you an opportunity to evaluate your sales action as a company.
The sales strategy and action for every stage of the business cycle is different. For example, a sales representative needs to have different plans for identifying client leads and meeting with these clients. In turn, the actions are different, too, after meeting these clients, and the strategies that need to be taken to turn these into business opportunities rather than failed prospects.
Through your sales pipeline, you can successfully identify the weak and strong points in your business cycle. This identification allows you to evaluate the actions that are appropriate for the particular stage in the cycle that is weak or needs a lot of focus to improve on.
Sales pipelines allow you to score your leads.
Client leads refer to the possible clients for your business. This lead will comprise the list or the guide for the sales representatives of your company of whom to approach to sell your products or your services. In this stage, you are not yet assured that these client leads will really result in profitable opportunities for the company, or if these leads will merely stay stagnant in terms of profitability.
Through your sales pipeline, you can measure profitability, even at this very early stage when you meet with these clients. Hence, at this point, you can score your leads for you to determine if this is a particular client that you should be aggressive with in marketing your company, or if it is one that you can approach and close a deal with effortlessly.
In this manner, too, it becomes easier for you to push through and to be aggressive with the great leads, and to drop the dead leads. Dead leads refer to the client leads that are not bringing in anything for the company, meaning they have stayed stagnant for long, or that they simply just gave you a resounding “no.” Through your sales pipeline, you can better distinguish which among the leads are better than the others, hence you can easily let go of the leads that are merely causing death to the company. Without a sales pipeline in place, you may have been making the mistake of putting so much effort on dead leads while neglecting the great ones.
Sales pipelines give you benchmarks based on current trends that you can use for future projections.
Because of your sales pipeline, you can enjoy a well-defined system of metrics that are in place in your business that you can evaluate regularly. Trends in any industry are often steady and regular, lest there be a sudden change in the economy that you are evolving in. Hence, it is unusual to have any sudden changes in business trends. Whatever your current trend is for the year is one that you can measure through a sales pipeline.
For example: In the first quarter, your sales are low. In the second quarter, your sales suddenly shoot up, which maintains throughout the third quarter. Come the fourth quarter, your sales reach its peak. This kind of trend is better analyzed through a sales pipeline. This fact is called your current trend. If this current trend stays in the same manner for three years, you can use the same as a benchmark for future projections.
With this, you can more effectively manage the rise and fall of sales as you go about different periods in the year.
Sales pipelines offer better opportunities to assign the right leads to the right salespeople in the company.
A sales pipeline is a management mechanism for the company to properly evaluate every aspect of the sales transaction in a business, starting from identifying client leads until the very end when the deal is closed. Hence, through this sales pipeline, it becomes easier for your company to assign the right leads to the right salespeople in the company. For example:
- Because your sales pipeline allows you to track every salesperson in your company and every client lead, you will assign the most challenging client lead to the salesperson who has the highest reached number of closed deals in the month. Doing this means that this salesperson has better skills in dealing with clients, hence there are higher chances that the same salesperson can win the heart of that difficult client.
- Also, you can also assign a client in a particular city to the salesperson who lives in that city, or who is always in that city to meet with other clients as well. Doing this means that you can save on other costs in the company such as utilities and transportation expenses.
With a sales pipeline, your company operates more efficiently and effectively by saving more time and resources. By merely assigning the sales representative to the client lead that best matches their metrics, you have higher chances that this will move on to the next step of the pipeline, rather than just stay as a stagnant or negative client.
Sales pipelines help increase the productivity of your sales team.
Because you have a sales pipeline in place, your team can operate more effectively and productively. Remember that it is your sales pipeline that will conclusively show the quality of the progress in each step before a sale is closed successfully or not. Hence, the productivity of your sales team is improved because they have figures and metrics in place to show them answers to their questions. For example:
- Which aspect or department in sales is the weakest and needs the most effort?
- Which client is the most difficult but can translate to higher profits?
- Which client lead can the company afford to let go of because the efforts are not resulting in positive, closed transactions anyway?
Because of the presence of a sales pipeline, your workforce knows better which aspects to exert their most effort, where this effort is needed the most. In this manner, productivity is increased because every effort is not put to waste.
Sales pipelines translate to higher revenue growth for the company.
Today’s business world is becoming more digital and technically-advanced. Because of this, the demand for data-based metrics has also increased. With the presence of technology, it is no longer difficult to record, enter, and track data regarding each step of the sales process, as the company no longer has to do it manually. This makes the acquisition process of data faster and also easier.
Because of the convenient access to data, it has become easier as well for you as a company to track sales growth, or in reverse, sales regress. This fact can directly result to higher revenue growth for the company. When you have data right in front of you, speaking in a clear manner as to which areas need improvement can help you solve this problem easily. This situation is in comparison with companies who do not have a sales pipeline, hence, they will always have to make second guesses as regards their data. Because you can now focus on the areas that clearly need that extra push of effort, so can the whole sales system move effortlessly towards generating revenues for the company.
Sales pipelines make it easier for you to schedule follow-ups.
One way to improve productivity in a company is to regularly do a follow-up in each step of the sales process. When you do regular monitoring, it creates the effect of pushing your sales team to be more efficient and effective with the time that they spend in each step of the sales cycle. Through a sales pipeline, it is easier for you to schedule and to do regular follow-ups because you are more aware as to which areas in the pipeline need the most pushing. For example:
- It becomes easier for you to identify which of the client leads are not moving forward well despite so much effort put in by the sales representative, so you can easily follow-up this matter as well.
- If there is any team that has not reported back to you, be it a negative or a favorable report, you can quickly pinpoint the same as well, so you can schedule a follow up with this team easier.
More importantly, sales pipeline software have a mechanism that makes it easy for you to schedule meetings and follow-ups with any member of your sales team, and even with the client leads themselves.
With these in mind, it is now safe for you to conclude that, yes, as a part of your sales and marketing report, a sales pipeline is crucial. Without this tool, it is easy for your company to be deceived into thinking that just because you have numerous clients, this already results to profit when, in fact, it probably does not. Your sales pipeline is vital to the company because it measures and shows what you, the seller, through your sales representatives, are doing during the entire sales process to ensure that lead clients turn into business opportunities.