How To Analyze Sales Pipeline? | Use these 5 Metrics

At the heart of most businesses is the sales pipeline. If the sales pipeline is healthy and effective, you can expect excellence in business performance. Sales managers focus on maintaining a quality sales pipeline. In fact, 72% of sales managers hold sales pipeline review meetings with sales reps several times a month. So, I thought of talking about sales pipeline analysis. In a previous post, I talked about building a sales pipeline. But building it isn’t enough. After building the pipeline, it is important to perform sales pipeline analysis to identify the positives and negatives. Today, I am here to tell you how to analyze your sales pipeline. Along with the steps of analysis, I will also provide a list of important metrics and sales pipeline management best practices.

What is a sales pipeline?

A sales pipeline can be referred to as a tool for converting leads into paying customers. It is a visual representation of the sales process comprising different stages that prospects progress through.

The sales pipeline portrays where your deals are in the sales funnel, where the deals get stalled, and which sales activities contribute to higher sales and bring most of the revenue. Without a sales pipeline, you may miss valuable insights about how effective your sales process is, what’s working in it, and what’s not. Through sales pipeline analysis, you can understand where you must improve your sales process to win more deals.

5 Questions to Ask Before Analyzing Sales Pipeline

I found something positive when researching the sales pipeline. With the rapid adoption of CRM systems, companies are now documenting their pipelines consistently. I love that companies now consider sales pipeline management with some seriousness. They effectively review pipeline reports with a mission to make improvements. But you must ask a few questions to ensure an effective sales pipeline analysis.Take a look at these questions you should ask to determine the quality of your sales pipeline.

Q1. How many opportunities do we have in the sales pipeline?

A pretty straightforward and obvious question to determine the sales pipeline quality. While the number of opportunities will differ by industry and company, it is better to have more opportunities than fewer. Also, tracking volume trend is also valuable.

Q2. What is the forecasted and the total value of the pipeline?

The forecasted pipeline value and current total value go hand in hand. The forecasted value is your estimation, while the existing total value is what you achieve in reality. Though several companies only track forecasts, I think it is healthy to track both forecasted and total pipeline values. To determine the total sales pipeline value, find out how much revenue would be created if every opportunity in the pipeline were to close successfully. I will tell you more about this metric in the next section. Stay tuned!Coming to the forecasted value, take an example for clarification. Say your estimated pipeline value is less than a third of the total value, then know that the pipeline has potential but with risk. If it is 75% of the total value, then you can be confident in the incoming revenue from the pipeline. However, you must also know that a few issues with the pipeline need your attention.

Q3. How well-balanced is the pipeline?

A healthy sales pipeline balances each stage – early, mid, and late stage. On a risk-adjusted basis, the three stages should be equally balanced. The early pipeline stage should have more opportunities of lower likelihood or probability. At the same time, the late stage must have fewer opportunities with a high probability of wins.

Q4. How many opportunities in the pipeline are with no action in the past x days?

This question gives you the number of opportunities lagging in your sales pipeline. If you have too many deals at rest, take immediate action. Remember that longer waits kill deals.

Q5. How many red flags per opportunity are in the late stage of the sales pipeline?

When you aim at winning deals, there’s always some risk involved. As an opportunity progresses through the pipeline, ensure that the number of red flags is reduced. They are either properly managed, or the opportunity gets removed from the pipeline. One problem with pipeline red flags is that there’s no defined process to handle these issues. If you track and get the solution to the red flags, your sales reps can stop wasting their time on leads that will never convert. A quality pipeline has very few red flags towards its end, that is, in the late stage.

How to analyze your sales pipeline?

After the Q&A session, it's time to know the steps involved in sales pipeline analysis. Make note of these steps. You can use them when performing sales pipeline analysis for your business.

1. Understand the different sales pipeline stages

A well-defined sales pipeline is necessary. When you can identify the different stages that deals pass through, you can understand the issues better. Though the sales pipeline stages vary by company, products, customer base, etc. the basic ones include prospecting, qualifying leads, initial contact, demo or meeting, proposal, negotiation, and closing.For instance, if the sales cycle is longer, you may have to add a nurturing stage or buy-in stage for different decision-makers.Want to know more about sales pipeline stages? 🤔 Check out here.

2. Point out the primary issues and set goals

Talk to your sales team, and hold review meetings about the issues in the sales pipeline. One of the main aspects of sales pipeline analysis is to find out where most leads are falling off. For example, if your conversion rates from newsletters and blogs are declining, maybe it’s time to know your subscribers and followers better. Learn more about them and create content that they want to read about. Once you identify the issue, you’ll know your goals to achieve. What do you want to achieve? How will you use the available data to achieve the goals?For example, for the above-mentioned problem of declining conversions, you can set a goal to study and create customer profiles with more information. It will help you customize email and social media campaigns.

3. Access sales data

Sales pipeline analysis requires pipeline data. Collect the data from your sales records, CRM systems, financial reports, etc. You can also collect marketing and customer success data for more details. For first-hand data, conduct surveys and interviews, and talk directly to your customers via lead capture forms.

4. Cleanse data

Before you start your data analysis, cleanse the data. Identify inaccuracies or incomplete data. If you use CRM software, you do not have to cleanse your data manually. CRM systems improve data quality by cleansing them. Also, getting data cleansing tools like GoogleRefine can help you. Regardless of your tools, ensure that your data is clean before sales pipeline analysis. Else, it may lead to bad decision-making.

5. Analyze and interpret the sales data

Now comes the main step – sales pipeline analysis. Interpret the data and analyze important metrics like the number of visitors, website traffic, engagement rate, bounce rate, sales cycle, length, conversion per stage, average deal value, number of opportunities, deal drop-off per stage, etc. **I have mentioned five critical metrics in the next section that are a must-track in sales pipeline analysis 😎**Measure these metrics and identify what’s working in your favor and what’s not. You can also narrow down a list of important metrics considering your primary goal for the sales pipeline analysis. What problem are you trying to fix? What information do you need? Is it a one-time snapshot, or do you want to track trends over the past years?Get these details to make your sales pipeline analysis easier and more well-defined.

6. Note down the insights and take action

Once you have found patterns, discuss these insights in-depth with your sales and marketing teams. Ensure you have a solid plan to review and discuss raw data and churn actionable insights.Start with aligning teams over a set of goals. Once everyone knows the goals, you can start discussing the roadblocks, find solutions to address them, do more of what’s working, talk strategies, engagement, friction in the pipeline, and much more. When discussing ideas and solutions, ensure to take feedback and suggestions. Implement the best solution in hand.

5 Important Metrics to Analyze in Sales Pipeline Data

Before I get into the ‘how’ of sales pipeline management, you must know the must-track metrics in sales pipeline data. One of the most vital steps of sales pipeline analysis is tracking progress through important metrics. So, let’s know the metrics first, then I’ll tell you the sales pipeline management process and best practices.

1. New Qualified Leads per Week

Start your sales pipeline analysis by tracking this metric. You cannot achieve more sales if you do not have enough qualified leads in your sales pipeline. Qualified leads are those who are ready to buy your product or service. These leads can help you achieve your target conversion rates. An effective sales pipeline has new qualified leads every week. By tracking this metric, you’ll know how many qualified leads you can secure per week. This metric can provide you insights and helps you find the answers to these vital questions.

Is the current lead volume enough to achieve the revenue goals?
How effective are your sales activities in generating new leads?
Are your sales reps focusing on lead quantity instead of quality?

2. Conversion rate per stage

The conversion rate in each stage of the sales pipeline determines the health of the pipeline. Since the sales cycle consists of many stages, one must know the conversion rate at each stage to determine the pipeline's overall health.Most CRM software calculates the conversion rate per stage. It measures the percentage of deals that move from one stage to another. For instance, a sales rep made 100 opportunities that made it to Stage 1 of the sales process. Out of 100, 75 of those progressed to Stage 2. Then the stage conversion rate for Stage 1 would be 75%.By tracking this metric, you can understand the performance of your sales pipeline. Also, this metric can help you identify upcoming potential shifts of existing customers in your sales pipeline.

3. Sales Pipeline Velocity

The sales pipeline velocity informs how much money passes through your sales pipeline every day. The value of sales pipeline velocity depends on how fast your leads convert into paying customers. This metric can help you understand the health of your sales pipeline. Also, you can identify the leads that take longer to convert. Sales pipeline velocity = (Number of deals in your pipeline x Average size of the deals) / Average sales cycle length in days.Say you have 100 sales deals in your pipeline. The average size of the deals is $1500, and your average sales cycle is 25 days long. Then, your sales pipeline velocity would be, {(100 x 1500)/ 25} = $6000. That means, every day, $6000 passes through your sales pipeline. Remember that the higher the sales pipeline velocity, the better.

4. Sales Rep Pipeline Performance

This metric tracks how each sales rep performs and how much they contribute individually towards the overall sales pipeline health. With the help of this metric, you can also identify the sales reps who require assistance or motivation to perform better. Say, you have a sales rep who is an expert in lead generation. The sales rep brings new leads every day. But the conversion rate achieved by this sales rep is very low. That means a very low number of leads generated are actually getting converted into customers. Thus, you can provide more training to the sales rep to improve their conversion skills. To identify this metric, you need to calculate each sales rep's conversion rate per stage. Only then can you know how each of the sales reps performs individually.

5. Overall Pipeline Value per Stage

You can find the overall pipeline value per stage by adding up the total value of each deal in a specific stage. This metric represents the total pipeline value of the sales pipeline. Track this metric regularly as it offers several revenue generation opportunities. The higher the value of the sales pipeline, the better.However, remember to calculate the value on a stage basis because all the sales deals would not close on the same day. You can break down your sales cycle into stages like opportunities, leads, and the number of meetings scheduled. As you move towards the end stage of the sales pipeline, you will find the sales pipeline value to be declining. But that’s okay! It indicates that your leads are getting close to signing deals and becoming paid customers.

5 Best Practices for Healthy Sales Pipeline Management

A healthy sales pipeline management is all about following certain sales management best practices. Let’s look at a few of these practices.

1. Don’t miss out on follow-ups

Without follow-ups, your prospects may be quick to switch to a competitor. A decade earlier, it took 3.68 sales calls to close deals. And today, it takes more than 8 sales calls!See the difference? 😥Most salespeople give up after the second call. But the best ones follow up with leads until they secure a win.

2. Prioritize the best leads

Find out the best leads – the ones that are ready to buy, high-value, the most sales-ready leads. When you find them, focus entirely on securing these deals before you get distracted by other leads. If you use lead scores and sort the dashboard from high to low, you’ll find the most valuable leads for your business. Also, you can track the sales activities of each lead. Then identify the most engaged ones and then focus on converting them.

3. Stop wasting time on dead leads

Learn to let go of dead leads. I understand you want to keep a glimmer of hope alive and continue nurturing them. But that will only waste your precious time. Consider them invalid when you realize that the lead isn’t responding after months of following up. They can’t be pushed to the next stage of the sales pipeline. Learn to identify these leads sooner than later. And focus on bringing in new high-potential leads.

4. Track pipeline metrics

Your sales pipeline changes all the time. Monitor the key sales metrics regularly to stay updated on the sales pipeline's health. Check out the metrics list I have shared above, and keep an eye on them no matter what. Set aside time to review these metrics and how effectively your sales pipeline performs.

5. Shorten your sales cycle

B2B sales cycle can be really loooong 😶In fact, 75% of B2B sales take at least 4 months to close, with 18% taking 12% or longer. This makes the long sales cycle one of the biggest roadblocks to sales effectiveness. The longer your sales cycle, the more time your leads get to change their minds. Hence, keeping your sales process as short as possible is important.

5 Quick tips to improve your sales pipeline

Got a messed-up sales pipeline? Don’t worry! It happens. Here are a few quick tips for breathing a new life into your sales pipeline. Check them out!

Know customer pain points

To offer better solutions, locate the customer's pain points. Talk to them directly and understand their situation and their challenges. Take feedback, read reviews on social media, observe their queries, etc., to know what they are trying to overcome. Then use the information to position your product as the ideal solution for your customers.

Clean and update your sales pipeline

Another way to improve your sales pipeline is to clean and update it regularly. Eliminate the dead leads and update it with the newfound information. After you tidy up your pipeline, monitor it regularly to ensure there are no more stuck-up leads of data creating roadblocks in conversion.

Shorten your pipeline if needed

If your pipeline does not yield the best results, you can think about cutting it down. A long, inefficient, messy, and underperforming sales pipeline will result in low conversions and sales. Hence, ask your team about shortening the sales pipeline when you perform sales pipeline analysis. Use specialized analysis tools and see which stages aren’t necessary. Optimize the areas and eliminate the not-so-important parts to create a new and improved sales pipeline version.

Wrapping Up

A sales pipeline stands at the core of a business. So, sales pipeline analysis is one of the major activities that you cannot (and should not) miss out on. Even if your business performs well, ensure conducting a sales pipeline analysis at regular intervals. Monitor the metrics regularly, update the pipeline on time, and keep it healthy. To ensure a sales pipeline full of high-value leads, partner with platforms like RevenueHero. The inbound lead conversion software can help you capture, qualify, prioritize leads and schedule more meetings in no time. Interested? Take a tour of the platform!

How To Analyze Your Sales Pipeline?