A sales pipeline is a visual representation of sales prospects and where they are in the purchasing process. Pipelines also provide an overview of a sales rep's account forecast and how close he is to making quota, as well as how close a sales team as a whole is to reaching quota. This enables sales reps and sales managers to forecast the number and dollar amounts of deals that will close in a given period of time.
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In some ways, a sales pipeline aggregates individual customer sales funnels into a composite picture that measures the health of all sales prospects. The sales pipeline also visualizes the lifecycle of various customer prospects, from initial interaction to deal close. These steps include the following:
- Gathering incoming leads.
- Qualifying a prospects into a marketing-qualified lead (using methods such as lead scoring), then a sales-qualified lead.
- Validating a qualified lead into a sales opportunity.
- Registering the deal as closed, on hold or lost.
The health of a sales pipeline is often reflected by the following four metrics:
- The number of deals in the pipeline.
- The average size of a deal in the pipeline.
- The close ratio, or the average percentage of deals that have been closed.
- Sales velocity, or the average amount of time it takes to close a deal.