Is This a Sales Pipeline or a Pipe Dream?

When I first began my career in B2B sales, and this was with a national company, we were not even asked to do forecasts. We were expected to write business at or above of our assigned quotas. Simple. Emphasis was placed on the word write. Written business was what was used to determine whether or not we met our goals and it was also used to publish branch, and representative, sales standings.

There was also something called billed business, orders that were actually delivered and invoiced, and this is what we were paid from. It was always entertaining to see the gap, often wide, between what an individual submitted as written business and what was actually billed out. This was my first introduction to the pipe dream.[Tweet “An accurate sales pipeline will help you to close more sales!”]

Depending on who you talk to, we might call our forecasts a sales pipeline, a funnel, or … the forecast. I have always viewed the pipeline in a funnel format where a lot of potential business gets dropped into the top of it and a few good opportunities drop out onto an order form. A forecast is a function of both, giving me a good idea of what I can expect to close during any given time period be that a month, quarter, or year. Regardless, it all starts with the pipeline.

A properly constructed and maintained pipeline is designed to show us …

The opportunities in progress, their anticipated dollar value, and their expected close date.

Where each opportunity is in the sales process and how long it has stayed at that stage.

Worked correctly, a sales pipeline can be an amazingly accurate tool that will allow both the salesperson and management to predict revenues and to identify problem areas. Additionally, since time began, commissioned representatives have struggled with paychecks that represent a roller-coaster from one month to the next. It is either feast or famine. A good pipeline will smooth out these peaks and valleys while allowing us to ride along at a decidedly higher elevation.

It’s about knowing exactly where you are at any given point in time and not turning around at the end of the month and going …”Hey! I’ve got nothin’!” Conversely, an improperly maintained pipeline will do more harm than good as both you and your company have been counting on sales that have zero hope of materializing when expected.

Define your pipeline

I have used pipelines for years and have done so largely on paper in the past. Today, I use Nimble, my Social CRM. Regardless, the same formulas continue to work and they work very well. Not only should you have an accurate picture of what you have working, you should also be able to know exactly how much business you will need to have in your pipeline consistently in order to meet or exceed your target goals.

Let’s get started!

Create your stages. You can create as many as you like but, no more than ten. Ten is a nice round number that lends itself well to the process and to …

Assign your percentage chance of closing to each stage. This will be used to determine the weighted value of each opportunity. For example, a $10,000 deal with a 10% chance of closing has a $1,000 weighted value. I use a 10% increase for each stage. The final stage is closed which is 100%.

My stages look like this (create your own!) …

Stage 1 – Too early to tell or unlikely to close – 10% chance of closing

Stage 2 – Initial discussion has been held – 20% chance of closing

Stage 3 – Second meeting held – 30% chance of closing

Stage 4 – They are deemed to be qualified – 40% chance of closing

Stage 5 – The solution has been presented – 50% chance of closing

Stage 6 – The customer likes our solution – 60% chance of closing

Stage 7 – The customer prefers us over our competition – 70% chance of closing

Stage 8 – A verbal commitment has been received – 80% chance of closing

Stage 9 – The final details being are being worked out – 90% chance of closing

Stage 10 – Sold! 100% chance of closing

Avoid these common mistakes

Opportunities that should not even be there. They may be leads but, they have not been qualified and elevated. Sometimes salespeople feel the need to fill up their pipelines with junk thereby creating a (faulty) sense of security.

Deals that are incorrectly placed in the wrong stages. Deals will move up (forward), down (back), or out (won, lost, or went away). Regardless, they need to move and be placed in their proper stage. Avoid the natural reluctance to move deals backward if needed.

Stages that really don’t mean anything. Your stages should reflect proven events that are designed to move your deal forward.

Improperly assigned percentage chances to close by stage. Presenting your solution is not worthy of an 80% chance of closing.

Letting your heart, your optimism, dictate the stage when the every thing that you see tells you otherwise. There is no evidence to support the stage that they are in.

No next step. What is your next step, what is needed, to move this deal forward. Then, when and how will you accomplish that?

No anticipated close date. It’s very difficult to create any kind of forecast without a realistic anticipated close date and this date will likely change throughout the process.

How management can help

This is the responsibility of both the salesperson as well as the sales manager.

Teach your people how to work a pipeline.

Identify and discuss deals that become stuck in a given stage or that never move.

At the very least, review and discuss pipeline status, deal by deal, weekly.

Assist the rep in calculating closing ratios.

Discuss why deals close and why they do not.

Identify problem areas where the rep needs help. For example, a pipeline that is loaded with great opportunities that never move and never close … something, maybe a lot of things, are amiss.

I have never (okay, never may be too strong of a word) felt that maintaining a pipeline was just another way for management to keep their foot on the back of my neck. The simple fact was that most of my managers never reviewed these in any detail which was much the same as with call reports. Bad on those managers. Rather, I did it for me and my pipeline soon became my best friend. How about you? Pipeline or no pipeline and why?

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Craig M. Jamieson

Managing Member at Adaptive Business Services

Craig M. Jamieson is a lifelong B2B salesperson, manager, owner, and a networking enthusiast. Adaptive Business Services provides solutions related to the sales professional. We are a Nimble CRM Solution Partner. Craig also conducts training and workshops primarily in social selling and communication skills. Craig is also the author of "The Small Business' Guide to Social CRM", now available on Amazon!