The 4 Stages of a Sales Pipeline

Sales Pipeline

Sales PipelineHow is your sales pipeline structured? Do you have too many stages? Or not enough? What “closing probability” does your pipeline have for each stage? And how do you measure the weighted value of your pipeline opportunities?

If you want to hit a specific sales target, these are the things you need to think about. Today, we’ll look at how you can plan your prospecting volume and meet your sales target using a four-stage sales pipeline.

Stage One: First Contact

Start off your sales pipeline with initial contact. For phone sales, this means cold calling your leads. Each stage of the sales pipeline is necessary to get to the next and complete a sale. You certainly won’t be able to close a sale if you don’t call any prospects!

But it’s less likely you’ll close a sale on the first contact. Usually, you’ll have to move prospects further into your pipeline to increase the “probability of closure.”

When you think about how many prospects you’ll have to get to each stage to make a certain number of sales, you’re now talking about the probability of closure. There’s a good summary of this idea on Clemens Czarnecki’s sales blog:

If you need to call 10 prospects in order to close one at the end of the sales cycle, you have a 10% probability of closure for that step.

In the example, just one in 10 cold calls will result in a sale. If you only call five new prospects, you haven’t done enough cold calling. Warm up your auto dialer and fill your pipeline to ensure you close enough sales.

While your numbers may vary, let’s assume you’ll close one sale out of 10, just from first contact, and move on to the follow-up call.

Stage Two: Follow-Up  

Once you’ve made initial contact with a healthy number of prospects, it will be time to follow up. You’ll send emails, leave voice mails, snail mail packets of information, or perhaps even schedule a face-to-face meeting.

You may qualify a prospect at this step, or it could come earlier or later. You may also ask a lot of questions to better understand the prospect’s needs and sales objections and answer those with product features and benefits that suit them.

But let’s return to Czarnecki’s probability of closure. You’ve gotten prospects further into your sales pipeline. That means these better-qualified prospects are more likely to convert at the end of your pipeline.

Let’s say your probability of closure increases to three out of 10 follow-up prospects.

Stage Three: Go for the Sale

Further into your sales pipeline, it’s time to ask for the sale. Already, you ask? Yes. You don’t want to belabor your sales process. Tire-kickers who won’t buy today won’t buy tomorrow either. You want to spend your limited time and resources as efficiently as possible and go for it.

Understand that the more stages you add to your pipeline, the more work you’re creating for yourself. You’re also not vastly improving the probability of a sale by splitting up your stages — you’re generally just splitting your probability as well.

Keeping with Czarnecki’s example, let’s say six out of 10 of your well-qualified prospects will buy at this stage.

Stage Four: Closing the Deal

Some prospects will go all the way through the pipeline before you close the sale. There may be questions or some back and forth at the end for the final few. Let’s assume all prospects that make it to the closing table will sign and close.

Next, let’s look at how that could work with all four stages together.

Your Sales Pipeline’s Closing Probability and Weighted Target

In our four-stage version of Czarnecki’s blog post example, the closing probability starts to look like this:

  • First Contact = 10%
  • Follow-up = 30%
  • Going for the Sale = 60%
  • Closing the Deal = 100%

Percentages are nice, but what we need now are some prospect numbers and weighted opportunity values. Your fill in your own prospect numbers and opportunity values, but here we’ll use Czarnecki’s prospect counts and an opportunity value of $1,000.

  • First Contact = 10% of 20 opportunities = $2,000
  • Follow-up = 30% of 10 opportunities = $1,000
  • Going for the Sale = 60% of 5 opportunities = $3,000
  • Closing the Deal = 100% of 2 opportunities = $2,000

Our four-stage hypothetical sales pipeline would yield $10,000 under these circumstances.

It’s not bad, but what target do you need to reach? If, say, you needed to reach $5,000 in sales this month, $10,000 as a weighted value for this sales pipeline wouldn’t be enough. Ideally, we’d like more of a cushion — perhaps three to four times our $5,000 target.

If we can’t increase the closing probability for each stage or the value of a sales opportunity, we’re left with one option. Get more prospects. This is something we can easily manipulate. We can add more prospects to this pipeline and increase the odds of exceeding that sales goal.

What to Do Next

This is a simple example with nice round numbers. I think this is a great idea that you should apply to your own sales pipeline to improve your sales figures. But, your percentages, prospects, and opportunity values will be unique to you. You might find your opportunity value changes depending on what products or services your prospect is seeking.

However, this chart’s best value is telling you if you have enough prospects to fill your sales pipeline and make your necessary sales quota. For many sales professionals, this is an area you could always improve. The more high-quality prospects you introduce to your pipeline, the more sales you can make.

If you work with aged leads, consider purchasing high-quality aged leads from the Aged Lead Store. You’ll be able to fill your pipeline with thousands of great leads at a significant savings. And with the right process, you’ll be able to enjoy a strong ROI. Visit the Aged Lead Store today to get started.

About Troy Wilson