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    What is a sales pipeline and why should you care?

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    Almost every sales professional uses the phrase “sales pipeline” at least several times a week. But if you ask a room full of professionals to define “sales pipeline,” you’re likely to get a roomful of different answers.

    Is a sales pipeline the same as a sales funnel? Is it the same as the sales process? Does it include leads, opportunities, prospects, account plans, all of the above?

    Managers know that they need to understand the sales pipeline in order to forecast. They also understand that they will usually have to “massage” the pipeline to make those forecasts anywhere near accurate.

    But do sales managers and company leaders have a clear definition and understanding of the sales pipeline? And does it really matter?

    What is a sales pipeline, and is it the same as a sales funnel?

    At the simplest level, a sales pipeline is the aggregation of qualified sales projects (aka opportunities) quantified as a forecast of future business. The pipeline is often visualized as a Kanban board with the sales pipeline stages as columns and each project as a box. Or simply as a list grouped by value and closing date.

    A sales pipeline is the aggregation of qualified sales projects  quantified as a forecast of future business.

    The pipeline is sometimes referred to as a “sales funnel,” which is a different type of visual. The sales funnel shows a large number of leads coming in at the top of the funnel and then a smaller number coming out the bottom as “wins.” This metaphor likely comes from marketing, whose task it is to work in bulk with existing and potential customers.

    A funnel gives the impression that you simply dump a bunch of leads in the top, and presto! some of them come out the bottom by gravity alone. This may be true in a transactional sales environment with a very low-touch sales engagement but not valid in a more high-touch, complex b2b sales environment. The wore "pipeline" and "funnel" are often used interchangeably, which is a problem in a b2b sales environment.

    A sales pipeline is  more linear, and implies an expectation that a large number of those going in one end come out the other, with minimum leakage.

    By contrast, a healthy pipeline is much more than simply a place to dump leads and hope some of them make it to the bottom. It’s an active process that shows how the sales team must work with potential buyers to move projects forward in order to have them emerge as happy customers.

    But beyond this basic definition, there is a much more important question sales teams must ask themselves: Do we all agree on who goes into the pipeline and how they move through it?

    Defining the sales pipeline for your organization

    In many sales organizations, preparing forecasts is practically a full-time job all by itself. Sales managers must take the data from their sales team’s pipelines and massage it carefully to ensure it accurately reflects what’s actually happening.

    A big reason for this time-sucking activity is that sales teams don’t have a shared definition for their sales pipeline.

    Some organizations’ marketing teams dump every website conversion into the pipeline and call it an opportunity. Other organizations have salespeople who only initiate opportunities when they’re confident of winning them. Most create opportunities somewhere between these two extremes, but a common challenge is no one uses exactly the same formula - not even within the same sales organization, or team.

    Ultimately, this leads to inaccurate forecasting, difficulty managing the pipeline, and understanding sales pipeline KPI and win/loss data.

    Creating a unified pipeline definition for the entire sales team can help fix these problems and lead to better overall effectiveness.

    To begin defining your sales pipeline, you need to develop shared answers for questions like these:

    • Who initiates entry into the sales pipeline? Marketing? Sales? Strategic account managers? Customer success?
    • At what point does a sales project enter the sales pipeline?
    • By what criteria do we qualify a project into the sales pipeline?
    • By what criteria and when do we qualify a project OUT of the sales pipeline?
    • By what criteria do we weigh the percentage chance of winning a deal in the pipeline?

    Qualifying in and qualifying out of the sales pipeline

    It’s important that everyone on your sales team agree on qualification criteria. This includes the criteria by which it is determined to add a project to the pipeline, and criteria by which a project is removed.

    Too often, adding projects to the pipeline is left up to the gut of the salesperson. Unfortunately, everyone’s guts operate differently. Instead, organizations must agree on specific criteria that indicate the project is worth pursuing and therefore placing into the pipeline. Examples to qualify in could be:

    • Alignment with your Ideal Customer Fit (ICP,) which could be facts like industry, size, initiatives/triggers, etc.
    • Timeline - are they looking to make a change now, or in 3 years?
    • Next action booked, do we have a meeting with all the right stakeholders?
    • Current situation and competitive landscape - can and should we win?

    Just as importantly, take the time to understand which projects are not worth pursuing and create “qualify out” criteria. These criteria may occur at any point in the sales process, and should immediately trigger removal from the pipeline. Sample criteria may include:

    • Project where you can’t meet with the right stakeholders
    • Projects for which a particular competitor is in play
    • Project for which the potential customer doesn’t have a clear timeline
    • Projects that fit criteria you know to lead to unprofitable outcomes
    • Projects for which your company cannot provide a good solution
    • Projects that have been stalled in the pipeline for too long

    In Membrain, we promote the practice of disciplined qualification of prospects by salespeople before adding sales projects to the pipeline. This reduces the number of projects in the pipeline, and ensures that it focuses on those that are in fact qualified. It reduces the problem with “bloated pipelines” and creates more clarity in all your KPIs used for coaching and iteration of process and strategy.

    Our platform makes it easy to establish and reinforce the pipeline definition and qualification criteria, as well as the desired process and workflow.

    An example of workflows in complex b2b sales environments could be:

    • Salespeople proactively works their own prospecting campaigns (direct outbound efforts)
    • Channel managers work with partners to generate prospects (indirect outbound)
    • Strategic account managers and customer success teams engage with key accounts to identify new opportunities (account growth management)
    • Marketing generates MQLs (marketing qualified leads) and deliver these to sales for qualification (inbound)
    • Sales engages and qualifies prospects *before* creating a sales project (opportunity). This moment of qualification marks the beginning of the forecasted pipeline.
    • Sales projects are then either “won” or “archived” (we don’t refer to them as “lost” - here’s why) giving us cleaner KPIs for sales cycles, win rates, and deal sizes.
    • The sales cycle is measured from the start to the end of a sales project
    • Other process times can also be measured, such as first contact to MQL; prospect to sales project; MQL to won sales project, and won sales project to outcome achieved. Using any of these to compare sales cycles on your team would be problematic, as they would not share a clear qualification definition.

    How to get better forecasts

    Simply sharing an organization-wide definition of a sales pipeline will go a long way toward better forecasts. The next level in forecasting is to weigh your pipeline according to better criteria than simply what stage a project has reached.

    Instead, probabilities should be calculated in a dynamic framework that takes into account milestones and qualitative criteria such as stakeholder buy-in and engagement, project transparency, competitive landscape, and customer-aligned timelines. You may also need multiple pipelines and qualification criteria if you engage differently depending on customer type (public vs private sector) and size (SMB vs Enterprise), product lines, regional differences, etc.

    In Membrain, we make it easy to weigh pipelines accurately with our milestone-based workflow and qualification scorecards. Instead of seeing each opportunity and project as a static item in a stage-based dropdown box, our tools provide a dynamic view of the project’s progress against steps, milestones, and stages, with ongoing scoring over time.

    This allows leaders to see dynamic trends over time, as well as to quickly extract accurate forecasts from the software without a large amount of management tweaking.

    The definition of a sales pipeline can vary from company to company, but one constant is the need for a shared definition within your organization. A clearly defined sales pipeline improves your visibility, forecasting, and ability to improve your processes and coaching efforts.

    We’d love to show you how Membrain makes pipelines and forecasting easier. Schedule a demo today.

    George Brontén
    Published December 9, 2020
    By George Brontén

    George is the founder & CEO of Membrain, the Sales Enablement CRM that makes it easy to execute your sales strategy. A life-long entrepreneur with 20 years of experience in the software space and a passion for sales and marketing. With the life motto "Don't settle for mainstream", he is always looking for new ways to achieve improved business results using innovative software, skills, and processes. George is also the author of the book Stop Killing Deals.

    Find out more about George Brontén on LinkedIn