As a young or aspiring entrepreneur, you must have heard a lot of people talk about business sales and how it determines the fate of a business, that is, whether it stays afloat or not, and how much revenue it generates.

Truthfully speaking, this aspect of your business should be kept a top priority. One of the best approaches to this is by building a solid sales pipeline while also regularly performing sales pipeline analysis.

Advancements in business technology have led to the existence of Customer Relationship Management (CRM) systems and the development of useful metrics and key performance indicators (KPIs).

These instruments are all very much applicable when talking about a sales pipeline - and this article will walk you through sales pipeline analysis and the key metrics associated with the analysis.

Just so you know, metrics give a breakdown of the effect of individual activities whereas KPIs provide a holistic view of performance and standing in regards to set out goals.

What is Sales Pipeline Analysis?

Sales pipeline analysis can be blandly described as analysing a business’s sales pipeline. Assuming that you already know what a sales pipeline is, you may want to ask what the purpose for the analysis is.

The purpose of a sales pipeline analysis is to understand the factors that influence a customer/buyer’s success or failure at closing a deal.

Bearing this in mind, we can go over our definition of a  sales pipeline analysis to be the process in which a business pictures and clearly understands a buyer’s journey through a sales pipeline, as well as the factors influencing their success.

Understanding Sales Pipeline Analysis

To get the full picture of a sales pipeline analysis, we will like to start with outlining the different pipeline stages from top to bottom, describing the possible analysis for each stage, and then moving on to list out useful metrics for a sales pipeline analysis.

We should also say that a sales pipeline analysis is done with the goal of helping businesses create a more responsive pipeline.

Sales pipeline analysis is sometimes erroneously interchanged with sale funnelling which is a different concept that involves customers naturally becoming aware of a product, developing interest and making the move to purchase and renew.

Sales pipeline stages and analysis include:

Prospecting:

The prospecting stage is the point at which a business makes its first contact with people who eventually turn out to be customers.

Obviously, there is a huge mix of individuals here including people who would later change their mind about purchasing your products and even competitors who are attempting to understand and replicate your business.

Sales pipeline analysis at this stage involves monitoring statistics from your targeted ads, newsletters, website landing page, and other outreach mediums. Ads and social media platforms that are performing the most will prove to be a good focus point to bolster sales pipeline entries.

Lead qualification:

Lead qualification gives an idea of who is interested in learning about your products and services. This can be measured by how much attention you recieve from a customer and how long such attention lasts.

A customer’s interest is one of the major drivers of a purchase action. It first of all prompts them to take notice of your business activities and then to follow up by participating wherever possible.

Sales pipeline analysis at this stage involves making use of a set outline or yardstick to define and then to measure lead qualification.

Meeting or Demo:

Meeting with prospective customers gives you the opportunity to outline your services and products and all the benefits it holds. In a similar manner, a demo gives them a simulation of what it feels like to use your services or products or to even be your customer.

A demo or meeting serves to convince the potential customers that there is a strong business case.

Sales pipeline analysis at this stage involves tracking user requests for demos or meetings as well as their response and participation during these activities.

If there are lots of requests for demos, for example, a business might be receiving a signal that prospective customers want more interaction with the product or service, or a better feel of it.

Proposal:

Issuing a proposal brings the details of your solution, method, and price all together. It puts you in front of your potential customers as a business that wants to solve their needs. Your business proposal should further reveal how you stand out from the competition.

Sales pipeline analysis at this stage involves counting how many proposals you issue out in a single sales cycle. Typically, issuing an increased number of proposals will mean that your business received more leads into the sales pipeline at some point in the past.

This could help you pinpoint a sales strategy or a contact medium that works better than others.

Negotiation:

At this point, a potential customer would have expressed their willingness to patronise your business. You will both discuss the process, set standards or protocols, agree on how contributions will be made, settle on a price, and get a mutual agreement in place.

There are a number of critical things to learn from a sales pipeline analysis at the negotiation stage. The first of these is probably the words or phrases that convey your message clearly, especially considering your type of audience.

Deal Outcome:

A positive or negative deal outcome is the final stage in a sales pipeline. Customers who begin negotiating but then change their mind about closing the deal and those who lose interest from the very beginning all create a negative deal outcome.

On the other hand, customers who follow through from the prospecting stage to purchasing a service or product create a positive deal outcome.

It is important to realise that customers who reach the end of the sales pipeline but do not go on to make a purchase could still be considered as potential customers. They could be kept aside and later reintroduced into the sales pipeline when a suitable opportunity arises.

Sales pipeline analysis in this stage could offer insights to how many positive deal outcomes and how many negative deal outcomes are recorded in a sales cycle.

How to Assess the Health of your Sales Pipeline

Here are four key metrics used to assess the health of a sales pipeline.

New Qualified Leads per Week

One of the first metrics you could measure in a sales pipeline analysis is how many new qualified leads you’re getting per week. The concept of a sales pipeline is centred around a lead, and by “qualified” leads, we mean customers that are more likely to purchase a product or close a deal.

These set of people show all the signs of conversion.

That being the case, taking a close look at the number of new leads and then at the number of suitable or possibly beneficial leads will help project the general effectiveness of the pipeline.

Specifically, a business will understand whether it’s sales initiatives are productive, whether it is having as many leads as expected, whether its leads are quality or not, and finally, whether its revenue target will be met with the available leads.

Conversion Rate per Stage

Conversion rate per stage is a metric that puts a picture on how much conversion happens in each stage of a sales pipeline. From the sales funnel vs sales pipeline image above, we see that a sales pipeline is made up entirely of six stages.

All these stages are relevant if a business is to attain its customer goals. In that vein, tracking satisfactory actions across every single stage will reveal where a customer is finding it difficult, where they tend to lose interest, and all of that.

Sales Pipeline Velocity

Sales pipeline velocity does not relate to a physical calculation. Instead, this particular metric reveals the speed at which money flows through a sales pipeline. The action of a customer in purchasing a product or closing a deal has a direct impact on this metric.

That is all that matters here. In fact, the number of times in which customers close a deal within a specified period and the amount of revenue this brings to the company are the factors used to calculate this sales pipeline velocity.

Sales pipeline velocity formula = [Number of deals occurring in your sales pipeline X Average size of each deals in your  sales pipeline] / Length of sales cycle calculated in days

Overall Pipeline Value per Stage

Each stage in a sales pipeline can be valued. Once achieved, the overall worth of the sales pipeline is then derived by adding up the individual values of the stages. There is no need saying that a higher overall pipeline value translates to effective sales initiatives, positive customer alignments, and increased deal closure.

Overall pipeline value may not always turn out as high as expected because closing a deal sometimes takes time and deals don’t always get closed on the same day. It is, therefore, left for businesses to understand this in order to better appreciate and to keep up with their sales efforts.

Other Sales Pipeline Metrics

Asides the four key metrics above, you could go deeper into the health of your sales pipeline by looking at more metrics such as the sales rep pipeline performance, the average sales cycle, and the customer lifetime value metrics.

Sales Rep Pipeline Performance

Another key metric for a sales pipeline analysis is the sales rep pipeline performance metric. This simply grades the performance of your sales representatives based on their activities, results, and the ease at which they successfully carry out their tasks.

Having such data provides insights on sales representatives who are performing up to expectations. Secondly, it lets you determine who needs help or some form of assistance with their job.

Average Sales Cycle

A sales cycle refers to the number of days it takes for a business to reach a sales deal with a particular customer. Basically, the sales cycle timeframe begins from the very first moment a business comes in contact with a buyer. That is, when they are still being regarded as a potential customer in the prospecting stage.

The average sales cycle metric is extensively useful. First, it helps a business to understand how many days a typical customer spends in their journey through the sales pipeline.

This means that sales representatives don’t have to feel unnecessarily pressured. You might ask yourself why. Well, the reason is that through this metric, businesses realise that the difference between a slow deal and a no deal lies in how long it usually takes for a deal to mature or materialise.

Customer Lifetime Value

Customer Lifetime Value or CLV is a metric that expresses the value or contribution of business customers throughout the time when they patronise such business.  The presence of insights from this metric allows for segmenting customers as low, medium, and high-end spenders.

Businesses can move to prioritise customers and develop suitable programs, for example, encouraging premium membership or promoting similar products.

Conclusion

A quick recap of this article is that a sales pipeline visualises the purchase process at a business and a sales pipeline analysis brings more meaning into it. Key metrics exist to aid the analysis process.

These are the new qualified leads per week, the conversion rate per stage, the sales pipeline velocity, and the overall pipeline value per stage metrics.

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