The Essential Guide to Healthy Sales Pipeline Stages in 2022

Table of Contents

The basis of all sales CRM software is the sales pipeline: the visualization of where your leads sit in your sales process.

Sales pipeline stages represent each step in a buyer’s journey, from when they’re first known to your sales team through to a closed deal. Each business has different sales pipeline stages to reflect their unique selling practice, but most companies find their sales pipeline stages fit a similar pattern.

Each sales CRM software solution has a slightly different way of providing sales pipeline management, but they boil down to the same core principles, quickly demonstrating to the user the condition of their sales pipeline and the leads within each stage.

In this guide, we’ll get to grips with the basics of your sales pipeline stages, and how customer relationship management software helps improve their visibility and utility.

In This Article, We’ll Explore:

What are Sales Pipeline Stages?

What Should Your Sales Pipeline Stages Look Like?

Typical Sales Pipeline Stages

What Can We Learn From Sales Pipeline Analysis?

Keeping Your Sales Pipeline Stages up to Date

Sales Pipeline Management

Looking for other great tips and tricks to optimize your CRM? then check out our Complete Guide to the Best CRM for Small business in 2022

What are Sales Pipeline Stages?

Sales pipeline stages are the way of measuring the progression of each of your prospects on their journey from fresh lead through to a completed deal.

Each individual sales pipeline stage may differ from other businesses–there are no standard sales pipeline stages for a one-size fits all solution–but what’s important is you have a set process through which you funnel your prospects.

One company might find new leads through online forms, then write a personalized email outlining the product and how it can help, which then leads to a video call, which in turn leads to a sales presentation before the deal is closed. Another may find new leads from off-site advertisements, send offers via email campaign and provide web chat support to close the deal.

It doesn’t matter what your process is; successful sales teams operate by having clear steps for how you intend to progress your prospects through the sales funnel to a completed deal.

Pipedrive sales pipeline
Source: Pipedrive

What Should Your Sales Pipeline Stages Look Like?

Think of your sales pipeline stages as a sales funnel, with the widest end at the start and a spout at the other end. Fresh leads represent the wide end of the funnel and make up the most populated part of sales pipelines. From there, each stage will lose some leads, either because the customer is no longer interested or because they aren’t a good fit for your product.

In this way, a healthy funnel will always have more leads entering it that in any other sales pipeline stage, with each subsequent stage holding fewer prospects than the one before it until you close deals with the remaining prospects.

Of course, you still want to have a good amount of closed deals! A funnel-shaped sales pipeline is only one of the healthy signs, but it’s a good rule of thumb to begin with—provided you’re making enough revenue, then a funnel-shaped sales pipeline is a good indication of either stability or growth.

Sales pipeline stages funnel icon

Typical Sales Pipeline Stages

All sales pipelines are different, but often they’ll be built around the following six to seven sales pipeline stages, expanding on some or collapsing others depending on the business’s particular product and process.

Prospecting and Lead Generation

The first stage of the sales pipeline is having your sales reps find leads to fill the funnel. You may already be generating leads through automation, such as web forms, newsletter subscriptions, and chatbots, to automatically add leads to your sales pipeline who have expressed an interest in your product.

Or, you could have powerful marketing and SEO strategies that mean your leads are attracted to you through the time they spend on the internet through organic behavior and targeted advertisement.

You may also be generating sales leads through third-party software that helps you compile lists of prospects who could benefit from your service. Having sales reps go through these lists to find the best candidates will help you bring new leads into your first sales funnel stage, and gives you a starting point for your sales team.

If your business does a lot of in-person events, such as trade shows, conventions, seminars, and so on, then the people who express an interest in your service there are prime candidates for your lead generation stage. You may find similar results over webinars too, provided you allow your audience to introduce themselves and provide their contact details.

Remember, this stage of the sales process is just about finding leads who might be interested in your product. Don’t have your sales professionals descend upon your leads just yet; instead, build up your bank of potential customers in preparation for the next part of the process, as this is where you’ll determine which of your new sales leads offer the highest chance of becoming paying customers.

Lead Qualification stage

One of the best ways to improve your sales conversion percentage while also saving time is to make sure your leads are properly qualified before you begin the rest of your sales activities.

It’s also worth noting that this doesn’t have to be a separate pipeline stage. It may make more sense for your business to bundle in lead qualification with your prospecting and lead generation techniques, so you can eliminate any weak leads from entering your pipeline altogether.

However, that might not be possible; contact information you garner from a trade show won’t indicate whether that person would make a great lead or not, so your sales team will have to do some research to determine whether they’ll be a good fit for your business.

But regardless of whether your sales team builds this into your lead generation stage, or uses it as a process to progress leads to the next sales pipeline stage, it’s a critically important part of your sales funnel.

If your business doesn’t already have a rough persona for your ideal lead, then now is the perfect time to make one. By identifying each aspect of what makes a lead the perfect fit for your product or service, your sales reps can use that information to assess your newly generated leads.

Leads that score well against your ideal customer profile should be prioritized. These valuable leads have the highest chance of converting into a customer, whereas leads that fail to match many of the important traits of your ideal buyer should be discarded, as the chance of them being a good fit for your company are very low.

By having your sales team qualify leads, not only do you increase their chance to convert leads they’ve highlighted as valuable leads, but you also reduce wasted time spent following up on leads who have very little chance of becoming a customer.

First Contact and Needs Analysis

The next step is to have a sales rep make contact with your leads. This may be the first time you’ve ever spoken to them, or it might be a follow-up to the initial meeting where you prospected them. Regardless, your first proper sales contact must hit the right tone out of the gate.

First contact can fall under a variety of communication types: cold or hot calling, cold or hot emails, social media messages, etc. Your sales rep should know the best way to reach out to your potential customer, and there’s no one right way to go about it.

If your company doesn’t have a set means of reaching out to your leads for your initial contact, then put yourself in your buyer’s shoes. You want to reach them in a form they’re comfortable with, that isn’t going to waste their time.

B2B companies might find calling and emailing the best way to reach their audience, as both aspects are integral to the day-to-day running of a business. But for B2C companies, a different approach, such as social media communication, may be a better option.

If your products rely on a personal bond between your customer and the product, then you might even want to reach out with a handwritten letter! It’s all about finding the right fit for your customer, and what they expect from your product.

Once you’re ready to reach out to your lead, make sure you’re treating them as an individual. One of the most off-putting things you can do is make your lead seem like just another way for you to make money. Instead, place the buyer and their needs at the center of the process. Demonstrate your empathy for their potential pain points, and how your service could provide a great solution for their particular needs.

Make sure you listen to what your leads have to say. Understanding exactly what their issues are is an enormous part of building trust between you and your potential customers, while also giving you an angle for your sales pitch, and demonstrating how your product can provide a real solution.

Lead Nurturing

In this pipeline stage, your job is to listen to what your leads have to say, and assure them that your product or service can solve their issues by demonstrating you understand their business and how you can provide a solution.

At this stage, it’s critical to follow up with your leads to keep them engaged and let them know that you care about them. Again, it’s all about getting your leads to realize that you’re providing a personalized approach to their particular situation. Over this stage, you’ll be building the trust necessary to convince your leads that your business can offer them a serious solution to their pain points.

Meetings, Sales Presentations, and Demonstrations

Once you’ve built up enough trust in your leads and convinced them that your business offers a valuable solution, it’ll be time to move onto the next sales pipeline stage, where you meet with your lead (and other decision-makers) to demonstrate what exactly your product can do for them, in more detail that you were able to do before over the phone or via text.

Again, you’ll want your pitch to be highly personalized to your prospective customers, as it’s all about demonstrating what your business can do for them. Grand general statements can make for great copy, but you need a pitch targeted to your leads’ exact situations if you want to make an impact in a presentation setting.

Once you’ve given your initial pitch, you may have to give another to decision-makers higher up in the organization if you sell B2B. You may want to break this stage up into several stages if you know you’ll have to go through several meetings to reach the next stage.

But provided you give enough information to your leads at this stage, they should be able to make an informed decision about whether to move ahead with your product or service and enter the final stage of the sales pipeline.

Closing the Deal

The final stage of the sales pipeline, although of course this can be broken down into smaller stages if that makes sense for your business.

This stage is all about finalizing the product or service you’ll be providing and the price your new customer will be paying for it. This could be as simple as sending an invoice, or it could involve negotiations, estimates, and quotations before a final price is reached.

Throughout this stage, you’ll want to make the process as simple as possible for both you and the customer. Consider using invoicing integrations with your CRM software to speed up the documentation process (while also reducing human error) and to make signing and paying for your customer a simple and quick task.

closing a deal

What Can We Learn From Sales Pipeline Analysis?

Despite the simplicity of the sales pipeline, there are several functions we can use to find useful information through sales pipeline analysis that can improve future selling numbers and budgeting.

There are specialized tools built into many CRM packages that can crunch the numbers in a host of interesting and insightful ways, but knowing the basics can help, especially when working with less feature-packed software.

Conversion Rates

Determining your conversion rates only takes some simple calculations, and can be incredibly informative.

We can work out conversion rates for the entire sales pipeline (i.e. what is the percentage chance of a new lead making it to a completed deal?) or for one stage progressing to the next (e.g. what is the probability of a cold email progressing to a sales pitch?) using the same formula:

Over a typical sales cycle, what is the percentage chance of lead in sales pipeline stage A progressing to stage B =

(Number of leads in stage B at end of sales cycle /Number of leads in stage A at beginning of sales cycle) x100

Say your sales pipeline has 100 leads in the first stage of your sales pipeline at the beginning of your usual three-month selling cycle, and by the end, you’ve managed to bring 20 of them through to won deals. That means you have a 20% chance for new leads entering your sales pipeline to be converted into won deals.

Or perhaps you have 40 leads in your cold emailing stage at the beginning of a one-month cycle, and by the end of the month, 15 of them have progressed to the sales pitch stage. That means the chance of a lead moving from the cold calling stage to the sales pitch stage is 37.5%.

Your Strengths and Weaknesses

Having worked out your conversion percentage for your sales pipeline, you can begin to analyze which areas your sales team is performing best in, and which you need to refine. If you’re only progressing 5% of your new leads from the cold calling stage to the arranged interview stage, then you’ll need to work on your reps’ scripts and up that percentage.

Sales Forecasts

Knowing how your current sales process affects the progression of prospects through your sales pipeline means you can predict how many deals your team’s likely to close by the end of a specified period.

Using the conversion percentage for each stage of your sales pipeline means you can determine the revenue your team is likely to bring in that cycle. Of course, this won’t be 100% accurate, but it’s a good estimate and allows your business to set better budgets for other departments based off predicted income.

smartsheet
Source: Smartsheet

Sales Reports

Armed with your conversion percentage and forecasts, you can measure your results against them to see how well your team is performing. Whether under- or over-performing, it’s important sales teams understand where the discrepancy in performance is and either adjust their conversion percentage or work on their techniques to make sure they meet targets in the future.

Sales Targets

Once you know how many new leads you’ll need per cycle (thanks to your conversion percentage) to reach your sales targets, you can work on making sure your team is performing enough of the right sales activities in the right sales pipeline stages to meet those targets.

Sales target icon

Keeping Your Sales Pipeline Stages up to Date

Remember, your CRM software’s sales pipeline is just a visual representation of your business’s sales process—it needs to adapt to the changes in your sales habits, not the other way around.

You should be looking at your sales pipeline stages every time you adjust your sales processes. The journey leads take through your pipeline should mirror their real-world experience, ensuring the data you gather on your process stays relevant.

Ideally, your pipeline will help illuminate where changes and improvements need to be made, and then give you feedback on how your new practices have affected your overall sales.

Sales Pipeline Management

Having explored how a sales funnel is made up of your sales pipeline stages, and what we can learn from it about our sales process, we can begin to understand the sales pipeline management it takes to make a healthy pipeline:

Having a funnel-shaped or top-heavy pipeline

Having enough leads in each stage to meet your expected number of conversions

Having enough new leads in the pipeline per cycle to meet your revenue targets by the end of the cycle

Having good conversion rates across each of your sales pipeline stages

Having a pipeline that mirrors your sales processes

Determining if your sales pipeline management is leading to a healthy sales pipeline is a good indication of whether you have a healthy sales department, or whether there’s work to be done to make sure the business meets its revenue goals.

By using the tips and techniques in this guide, you’ll have a better understanding of what a sales pipeline is and how to go about using it as the basis of your CRM software.

With a little work, you’ll be able to draw out powerful insights that shed light on your sales process and indicate which stages may be bottlenecking your sales.

sales funnel icon

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