A healthy sales pipeline is critical for having a smooth flow of sales into your business. This article explains sales pipeline and how it is best managed.

Think of a real pipeline supplying water to a fountain. Unless the pipeline is full of water at all times there will be no fountain display. In the same way, if you want a constant flow of sales into your business then your sales pipeline will need to be filled with sales opportunities.

The difference with a sales pipeline is that sales opportunities go through a conversion process as they flow through the sales pipeline. Raw opportunities flowing through the pipeline have to go through various stages of conversion before the sales gush out the other end. For example, along the way your sales opportunities may require a sales meeting, followed by the delivery of a sales proposal. Just like in a pipeline, each opportunity must flow through one stage before flowing onto the next.

A well run business will manage their sales pipeline and want to measure the quality and quantity of sales opportunities at each stage of the sales pipeline. This is so they can predict the sales they can rely on in the months ahead. This, in turn, has a big impact on cash flow into the business.

Some sales opportunities never make it all the way through the pipeline. They ‘leak’ out for various reasons and the leakages need to be factored in when planning for the amount of sales required at the other end of the pipeline.

The way in which sales pipeline is best managed is through a CRM system. Most good CRM systems have the facility to track sales opportunities. As each opportunity reaches a new stage you update the opportunity in the system with the ‘Sales Stage’. You can use the default stages or most systems allow you to edit them so that it better reflects your sales process. You should be able to produce a report at any time showing the value of sales at each stage of your sales pipeline.

Some good systems, like Oracle CRM on Demand, allow you to track both the whole opportunity and the monthly revenue which is essential for forecasting sales of most service based businesses.