Why it’s important to understand and manage your sales pipeline

The sales pipeline is a valuable concept to understand in the small business world. Without it, businesses would have little idea about the revenues they can expect in the near future, and be unable to make strategic decisions to remedy potential shortfalls before they happen. So, what is the sales pipeline and why is it so important?

What is a sales pipeline?

The sales pipeline is a representation of the way sales occur – starting with initial contact with a potential customer and finishing with a deal being made. In between those two ends of the pipeline are a number of stages the prospective sale goes through before becoming an actual sale.

While a sales pipeline can include more stages, these are the four most often used:

1. Qualification – Your sales rep determines whether the prospective customer has the budget, authority and need for the product.
2. Meeting – A discussion is had between the prospective customer and your sales rep around the product and how it would suit the customers needs. This stage often includes demos.
3. Proposal – When the prospective customer has expressed solid interest in purchasing, a quote is created and sent to them.
4. Closing – The deal is done and a new customer is brought on board with your business.

With proper reporting and customer relationship management systems in place, you can see how many leads you have in each stage of the pipeline at any time.

Understanding your sales pipeline can help your business maximise its revenue.

Why is a sales pipeline important?

The sales pipeline is one of the data points that will allow you to forecast your revenue over the coming periods. If, for example, at the current moment you saw a lot of deals in the middle of the pipeline, but few coming in the top, you would know that eventually you're going to have a problem. Once all those mid-pipeline sales either come through or drop off, you're going to have a reduction in the flow of income.

This leads nicely into the second reason it's so important: it allows you to assign your resources better, before it's too late. For example, if a valuable lead looks to be in danger of falling through, you can allocate more resources towards it away from those that look to be on stronger ground. But without the data contained in your sales pipeline reports or CRM system, you would never be able to make those strategic decisions in time.

For more information on how we can help your business achieve success, contact the team at Wilson Porter today.