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A mismanaged sales pipeline with poorly defined stages can jeopardize a high percentage of your deals. Bad pipelines drag a large proportion of opportunities into late sales cycles, only to lose them abruptly at the end. Because sales processes vary so drastically by company and industry, it can be a challenge to determine the ideal pipeline organization that is the best fit for you. Here are three features to ensure you have well-defined pipeline strategies:

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1) An appropriate number of stages

Most industry experts agree that having 2 pipeline stages is insufficient, while anything more than 6 becomes diluted and does not provide any sort of analysis value to management. Having between 3 and 5 pipeline stages, with a meaningful drop-off at each one, is the ideal pipeline model.

Simply having two pipeline stages – say, going straight from leads to conversions – will not provide managers with any helpful information for analysis. The pipeline helps answer the question of how a lead evolves from being a prospect to a customer. Clearly, the sales cycle requires more than two stages from the initial cold approach to signing a contract.

Sales Pipelines in InsightSquared

The argument against having too many different pipeline stages is that there is no distinct drop-off or change between stages. If a particular pipeline features nine stages, with only the most minute changes from one to the next, managers will not be able to gain any meaningful insight into where opportunities are losing or the likelihood of a win at any stage. There has to be stringent exit criteria – clear achievements that must be reached – before progressing from stage 1 to stage 2 and onward.

2) Workflow synched to the buyer’s process rather than the seller’s

Many companies structure their pipeline from the perspective of their sales reps and cycles, typically pushed into this direction by their CRM software which focuses on internal tasks. The truth is that the stages of your pipeline should map directly to the buyer’s perception of what the obvious next step is, with well-defined conversion points. Are they more likely to buy at the third stage than they were at the second? How about at the next one? The answer to these questions should be yes, assuming that your pipeline matches a clearly defined workflow of the buyer’s process.

Thinking like a buyer vs. thinking like a seller

Buyer’s Process

Seller’s Process

Initial Interest

Initiate

Education

Educate

Transfer of Ownership

Validate

Rationalize

Justify

Decide

Close

3) The right gradation or shape of your pipeline

Many sales pipelines naturally become funnel-shaped, reflecting the progressive drop-off of prospects as they travel through the various pipeline stages. Consider the image of a staircase with a natural gradation through each level. Too dramatic a distance between each step could result in serious injury.

Sales Funnels in InsightSquared

Similarly, pipelines with stages that take up too much time in the middle would ultimately yield a barrel- or block-shaped pipeline. It is important to regularly monitor your pipeline to maintain this shape and to spot potential bottlenecks that might be inflating and altering the shape at certain stages.

The aforementioned keys will help you maintain a well-managed and well-defined pipeline. Determine your buyer’s workflow and align it to your sales pipeline to produce more meaningful sales analytics and a more accurate sales forecast. Look for redundant stages that can be combined to produce a more dramatic drop-off before the next one. Above all, ensure that your pipeline works for you and lends meaningful insights to managing your sales team.

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