What is a sales pipeline & how do you build one that drives revenue?

Understanding what works and what doesn't within the sales process can be complex for any sales team. The complexity has intensified significantly in recent years. Gartner research shows 77% of sellers struggle to complete their assigned tasks efficiently, despite significant investments in sales enablement. 

To gain an accurate picture of progress and better manage performance, organizations need an efficient, predictable sales pipeline. Here, we’ll take a deep dive into pipeline management in sales, answering questions like: What is a sales pipeline? Why is it valuable? How can you build one that can make a real impact?

What is a sales pipeline?

A sales pipeline is a powerful tool that enables you to visualize various potential customers as they move through different stages in the buyer’s journey. It's a highly organized means for tracking and managing sales activities, with details about each prospect, deal, and even money.

Sales pipelines are essential for uncovering key insights that drive efficiency, effectiveness, and, ultimately, your bottom line. Today's buyers operate differently than ever before. McKinsey research shows that B2B customers now evenly split their time between in-person, remote, and digital self-service interactions. This "rule of thirds" fundamentally changes how sales pipelines must be structured and managed.

Forrester predicts that more than half of large B2B purchases will be processed through digital self-serve channels by 2025, making traditional linear pipeline models inadequate for modern revenue teams.

And because salespeople already have a lot on their plates (e.g., prospecting, interacting with clients, preparing reports, closing deals, and more), they need instant, seamless visibility into granular details on buyer progress. If your sales management operation doesn't utilize a pipeline tool, you’re at risk of key information falling through the cracks.

We can’t discuss what a sales pipeline is without also diving into what it isn't, particularly because it's commonly confused with other sales terms.

A sales pipeline is not a sales funnel

Though the two are very similar and closely related, it’s important to note the distinctive qualities of each. A sales funnel revolves around leads, operates from the prospect’s perspective, and illustrates conversion rates at each stage of the sales process. The sales funnel acts as a general visualization for the overall lead qualification process, with many sales leads entering the wide top of the sales funnel, and very few making it to the bottom as actual customers.

A sales pipeline, on the other hand, centers around revenue opportunities, operates from the seller's perspective, and illustrates which sales activities are needed to meet quota or revenue targets. It visually demonstrates the stages of your sales process (like prospecting, needs analysis, proposal, negotiation, and closing) and the distribution of revenue opportunities across those stages.

A sales pipeline is not a sales forecast

A sales pipeline is not a sales forecast, but you need both to accurately predict future revenue, understand lead conversion ratios, and make smart decisions that improve your team's performance. Think of a sales forecast as just a small piece of your broader pipeline, which can be used to predict expected revenue in a given time period.

Precise forecasts are calculated when an opportunity reaches the fully qualified stage in your pipeline. They require reps to predict what deals will close, often based on weighted percentages, categorizing deals, or the total number of sales they've committed to for a specific period of time. Some revenue teams leverage revenue intelligence software that helps them build these forecasts based on their sales pipeline. 

AI-powered revenue intelligence has moved beyond emerging technology to become a proven implementation with measurable ROI. Salesforce research shows 81% of sales teams are now experimenting with or have fully implemented AI, with teams using AI 1.3x more likely to see revenue growth. Organizations investing in AI sales tools report 13-15% revenue increases and 10-20% improvements in sales ROI. 

HubSpot data shows sales professionals save approximately 2 hours and 15 minutes daily using AI tools to automate manual tasks, allowing them to focus on high-value activities that actually move deals forward.

These tools then help them identify where, exactly, they need to adjust the pipeline to hit their revenue goals.

Your sales pipeline should show all of your opportunities, giving you a clear view into everything from newly identified opportunities all the way through to opportunities that are ready to close. Whereas your pipeline helps you understand and strategize each step in the sales process, your forecast acts as a projection based upon more specific assumptions within that pipeline.

What is pipeline management? 

At the big picture level, a sales pipeline is a visual tool, illustrating how revenue opportunities are distributed across sales process stages. Sales pipeline management is the process of managing that tool through identifying and assessing deal quantity, quality, and maturity to ensure sellers have enough coverage to deliver on their goals.

Sales teams are in a position where they can’t just address current revenue needs; they must always think ahead to the next month, quarter, and year. Effective pipeline management looks at the complete picture and ensures that sales pipeline health and movement are such that teams can hit their number now and in future periods. 

Of course, sales pipeline health is not always sunshine and roses, which is why an excellent pipeline management strategy is so important. The challenge extends beyond just having data. Gartner research found that 84% of sales leaders agreed that sales analytics has had less influence on sales performance than leadership expected. 

This gap between data collection and actionable insights is where systematic pipeline management becomes crucial. The key is not just tracking metrics, but creating frameworks that convert pipeline analytics into specific actions and interventions. This way, if something is going wrong, sales teams can take corrective action to fill coverage gaps and qualify deals to get back on track.

While there's no secret formula for managing a successful pipeline, there are a few tactics that can help:

Define metrics to evaluate progress 

You should set key metrics that help you consistently measure overall pipeline health and sales performance. These might include:

Pipeline velocity has become the most critical metric for modern sales teams. This metric combines average deal size, number of opportunities, win rate, and sales cycle length to provide a comprehensive view of pipeline health and predictive power. Research shows that B2B companies systematically tracking and optimizing pipeline KPIs shorten their sales cycles by 28% and increase win rates by 23% within 12 months.

For comprehensive guidance on tracking these metrics effectively, including frameworks for monitoring deal health visibility, analyzing conversion rates by stage, identifying coverage gaps, and measuring key pipeline metrics like win rate and pipeline velocity, see our detailed sales pipeline management best practices guide.

The stages of the sales pipeline

Before you can benefit from the transparency and operational efficiency that a sales pipeline offers, you must first understand the stages it's comprised of. It's important to note that both the specific industry in which your organization operates and your unique business model can affect the actual stages.

Here, we'll take a look at some common stages that are often included in a sales pipeline:

1. Prospecting or lead generation

Before customers can start buying your product and service to resolve their pain points, they need to first discover that it actually exists. In this stage, sellers identify and contact potential leads who fit the profile of an ideal buyer.

Pipeline generation has evolved significantly in terms of team structure and expectations. Our 2024 revenue data analysis shows that 26% of organizations expect account executives to generate 21-30% of their pipeline, while in $250M-$1B companies, 37% expect AEs to generate 41-50% of their pipeline. Meanwhile, industry benchmarks indicate that outbound SDRs generate 30-45% of sales pipeline, with a median pipeline contribution of $3M per year. 

Understanding these benchmarks helps organizations structure their prospecting efforts appropriately.

Prospecting often includes activities like sending outbound emails, cold calling, messaging through LinkedIn, and other promotional activities. If your organization relies on inbound marketing techniques to generate leads, it might refer to this stage as lead generation.

Regardless of what you call it, this stage is crucial, as 82% of buyers say they're willing to accept meetings with sellers who proactively reach out. And since a company loses a portion of its customer base each year from gradual attrition, your team likely can't afford to ignore the benefit of attracting potential customers whom they can convert into buyers. 

Remember: acquiring more customers helps mitigate the risks of lost sales, so it works to your advantage to create a strong prospecting strategy.

2. Qualification

Not all prospects are viable in terms of becoming actual customers. Even if they fit the profile of your ideal buyer, it doesn't necessarily mean they're going to move forward in the sales pipeline. The average lead-to-opportunity pipeline conversion rate for SaaS companies is around 12%, highlighting the critical importance of effective qualification processes.

Without a qualification process, reps risk wasting valuable time chasing leads who can't or won't ever actually buy your product or service. Worse yet, they could end up buying a solution that doesn't solve their pain points, which causes issues in attrition and customer service in the long run.

Qualification is essential for distinguishing between hot and cold leads, so make sure your pipeline includes a research process that answers these questions for each prospect:

By offering insightful resources to prospects (and determining if they're interested in learning more), sales reps can more accurately uncover truly qualified leads. Make sure your sellers are empowered with a strong strategy for handling objections, which can help warm up those initially cold leads.

3. Contact

This stage of the pipeline is pretty straightforward: once a rep has determined that a lead is qualified, they can reach out to actually engage with that prospect.

62% of buyers want to hear from sellers when they're actively looking for a solution to their problem. By contacting qualified prospects with a tailored message, sales reps can get ahead of their competition and nudge leads in the right direction. It's important that reps first research buyer pain points and build a strong case for how your product or service resolves those pain points, then contact the lead (whether by phone or email) while it's still hot.

4. Relationship building

Building meaningful relationships with customers is crucial for closing more deals and closing them faster. Strong relationships (created by a customer-centric approach) can help you sell 4 to 8% more than competitors who don't prioritize a high level of engagement.

Modern buyers have specific expectations that must be built into your pipeline stages. McKinsey's research reveals that 78% of B2B buyers want performance guarantees offered during the sale, 74% want product availability shown online, 72% want real-time/always-on customer service, 72% want consistent experiences across all channels, and 72% want the ability to purchase from any channel. These expectations require pipeline stages that accommodate both digital self-service and human touchpoints.

Your customer relationship management strategy should ideally extend across the remaining stages of the pipeline, too, as building rapport and enhancing trust isn't a one-and-done kind of gig. Through effective listening, expertly-crafted content, sharing your company's mission, personalizing each interaction, and collecting and addressing feedback, reps can cultivate strong bonds that ultimately increase conversions.

5. Meeting, demo, sales call

Once a rep has established a relationship with a prospect, it's time for them to actually set up a meeting. This is where sellers present (and often demonstrate) your product or service in an effort to prove its value to the prospect.

58% of sales meetings are not valuable to buyers. That's a staggering (and scary) number, but there are best practices reps can follow to ensure success at this stage in the pipeline. Making a great impression and influencing buyer decisions in a positive way requires:

• Focusing on the specific value that your product or service can provide to the buyer
• Collaborating with the buyer to develop a mutual action plan (MAP) that takes their input into consideration
• Educating the buyer with new perspectives and ideas
• Understanding the unique challenges within the buyer’s market or industry

Conducting successful sales meetings can be time-consuming and burdensome for busy managers and reps. They must often spend the entire time scrambling to take accurate notes, which is distracting, error-prone, and challenging.

Modern sales organizations rely on virtual assistant tools that help improve their meetings without sacrificing rep productivity. These technologies provide conversation intelligence, real-time coaching, live transcription and notes, and actionable data, so sales teams can focus on the customer during meetings (and still have accurate notes for follow-ups).

6. Deal closing

Closing a deal requires more than just a handshake. You must first send a detailed proposal, which outlines how your product or service will address the buyer's needs, how the value of your offerings justifies their cost, and how your company offers a distinct advantage over competing vendors.

The customer will likely then negotiate these terms, perhaps several times, until you both come to an agreement on the scope of work, price, and managing expectations. This can sometimes be a complex, lengthy part of the sales pipeline, as both sides must be willing to compromise until they reach a mutually beneficial agreement. 

And since salespeople say that effectively resolving objections and driving consensus among various stakeholders are among their biggest challenges when closing deals, it’s paramount that your reps know how to successfully negotiate without crumbling.

Once these negotiations have been completed, it's time to (finally!) close the deal. For some businesses, this stage includes signing a contract, while others simply facilitate a transaction.

How to generate sales pipeline

There's no doubt that using a sales pipeline can empower teams to become more efficient and effective. But building a pipeline that's specific to your unique business needs, sales process, and customers can be daunting.

Here, we've outlined some basic steps to help you get started with building a sales pipeline that can help your team improve performance and drive more revenue:

Determine your ideal buyers

Start by identifying to whom you want to sell your product or service. You can develop your ideal customer profile (ICP) by studying direct competitors, which should help you understand the types of businesses and personas that might benefit from your solutions.

Make a comprehensive list of target companies and key decision-makers. This could be a pretty lengthy list, so use a tool to help you keep track of all the details (like company, contact information, and any interactions you may have with them).

Other organizations rely on their CRM to track these details, as it centralizes, analyzes, and updates all of their information about prospects, leads, and clients. This is a much stronger option than, say, Excel, but it still leaves much to be desired as your company grows.

Some smaller companies choose simple tools, like spreadsheets, to manage this information, but it's important to note that this method doesn't offer the functionality needed for larger businesses or businesses that are looking to scale.

Competitive sales enterprises have started investing in AI Revenue Workflow Platforms, which fill in the gaps left behind by their CRM. AI Revenue Workflow Platforms automate repetitive tasks, clean your data, and leverage machine learning, so managing and engaging the contacts in your pipeline is a breeze, no matter how quickly your business grows.

Define and set up stages

Reps are busy, and the stress of achieving their goals can lead to burnout and employee turnover. Your pipeline should take some of this burden off their shoulders by effectively measuring and managing all of the daily activities they need to execute to reach those goals.

To determine the stages in your pipeline, outline all of the daily activities your reps must complete. Be sure to highlight those that you believe have the most impact on your sales, then assign each activity to a stage in your sales cycle. The stages above can help guide you, but this should really reflect your business's specific sales process, so don't be afraid to make it work for you.

Traditional sales tools (like a CRM) can help with defining your stages, but they really don't offer all the necessary capabilities for total visibility and pipeline optimization. That's why more and more teams have implemented sales pipeline management tools, which make building your stages an easier, more effective task. Sales pipeline management software helps you visualize which activities provide the best outcomes and helps you create a pipeline that makes your team more effective, productive, and profitable.

Refine your stages

Remember that your pipeline is a living, breathing tool, so it shouldn't be set in stone. Once it's up and running, you might notice that some activities or conversation types garner better results. This could mean that those activities or conversations should actually become an individual stage in your pipeline. Others might need to be removed if they're ineffective.

As you refine your stages, make sure that your team has a shared definition of each stage. It can help to use a roadmap for this, as it captures the customer journey and establishes a defined sales process for reps. Look for a roadmap that covers the following for each stage:

1. Activities
2. Time spent in stage
3. Sales questions
4. Exit criteria

If you use key insights to modify your pipeline over time, you can more accurately predict revenue moving forward. But this data can be difficult to string together if you use disparate systems, manual tools, or a basic system of record for managing your pipeline. This means issues are often missed, and you're always at risk for unexpected slippage and losses, especially as market conditions shift.

Some businesses are instead leveraging more robust tools that provide a single view of pipeline health and buyer engagement signals, so they can easily build accurate forecasts. What's more, these systems include warning signals that help teams fix pipeline issues even before they show up on a forecast. That means you can proactively tweak and resolve problems before it's too late.

How to choose sales pipeline management software?

Sales leaders today must run a predictable revenue organization that removes pipeline uncertainty for maximum forecast accuracy. To do so, you need to implement the right tools for support. Advanced AI Revenue Workflow Platforms seamlessly tracks each activity in your sales process and determines how they influence your pipeline and impact attribution. 

The investment in systematic pipeline management delivers measurable returns. Research indicates that resilience programs in B2B sales typically achieve an ROI of 3:1 to 5:1, while companies that systematically track and optimize pipeline KPIs achieve an average customer acquisition cost reduction of 23% within 12 months after implementation. This way, you can identify which activities are actually moving the needle in terms of revenue.

Outreach's AI Revenue Workflow Platform offers intelligent tools for seamless pipeline management, enabling leaders and sellers to assess and improve pipeline quality, quantity, and maturity in real time. Plus, built-in modeling provides leaders with everything they need to identify risks early and still ensure proper coverage quickly.

Frequently asked questions about sales pipelines

How does a sales pipeline differ from a sales funnel, and why is this distinction important?

A sales pipeline and a sales funnel are distinct frameworks within the sales process, with each serving unique purposes. A sales pipeline represents the seller's view, charting every step from prospecting to closing a sale. It outlines the stages of action a sales team follows to convert prospects into customers, focusing on operational tasks, performance metrics, and strategy development. In contrast, a sales funnel is designed from the customer's perspective, focusing on the journey from awareness to purchase. It illustrates how leads decrease through each stage, emphasizing the conversion process of turning prospects into customers.

Understanding this distinction is vital because it aids in optimizing different aspects of sales management. A sales pipeline provides detailed insights into the efficiency of sales activities, helping teams improve workflows and predict future revenue more accurately. Meanwhile, a sales funnel highlights the effectiveness of the selling strategy in engaging and converting customers, allowing businesses to refine their marketing and communication efforts. Recognizing these differences ensures that sales teams can better allocate resources, align strategies, and ultimately enhance both sales performance and customer experience.

What strategies should be used to effectively qualify leads in the sales pipeline?

To effectively qualify leads in a sales pipeline, it is crucial to implement a structured qualification process that evaluates prospects based on certain key criteria. Begin by defining your ideal customer profile (ICP) to ensure that potential leads align with your business goals. Use tools such as customer relationship management (CRM) systems to gather and analyze data about leads, including their purchasing power, decision-making authority, and specific needs. Additionally, consider adopting lead scoring techniques, which can help prioritize leads based on their likelihood to convert, current interest level, and engagement with your brand.

During the qualification process, incorporate targeted questioning to ascertain whether prospects have the necessary budget, urgency, and authority to make purchasing decisions. Employ frameworks like BANT (Budget, Authority, Need, Timing) or CHAMP (Challenges, Authority, Money, Prioritization) to evaluate the viability of leads systematically. Regularly update and refine qualification criteria based on changing market dynamics and feedback from sales teams to ensure alignment with overall business strategies. This methodical approach helps in efficiently narrowing down the list of potential customers to those most likely to result in sales, thereby boosting conversion rates and improving the sales pipeline's effectiveness.

How can sales pipeline management software enhance the accuracy of forecasts and overall sales performance?

Sales pipeline management software enhances forecast accuracy and sales performance by providing a consolidated view of all sales activities, opportunities, and buyer interactions. With features such as real-time data analysis, these tools give sales teams precise insights into pipeline health, enabling more accurate revenue predictions. Advanced software leverages artificial intelligence to identify patterns and provide recommendations, optimizing the allocation of resources and prioritization of deals that are most likely to close.

Additionally, these platforms help in automating repetitive tasks, ensuring that sales reps can focus on engaging with prospects and closing deals. The software also provides alerts for potential risks and opportunities, allowing teams to address issues proactively and adapt strategies to changing market conditions. By integrating CRM data and providing analytics on key performance metrics, sales pipeline management software helps sales leaders ensure consistent alignment with business objectives, ultimately driving enhanced overall sales effectiveness.

What are the key stages in a sales pipeline, and how should these be tailored to fit specific business needs?

A sales pipeline typically consists of several key stages that can be tailored to fit specific business needs. These stages often include prospecting, qualification, contact, relationship building, meeting, demo, and deal closing.

To effectively tailor these stages, businesses should first identify their ideal customer profiles and understand their specific industry requirements. This involves segmenting the pipeline stages according to buyer behavior and product fit. For example, in industries where decision-making is complex, an additional stage for stakeholder consensus building might be necessary. Companies should also continuously refine their stages based on feedback and performance data. This involves analyzing which actions tend to yield the best outcomes and adjusting the pipeline to incorporate new strategies or remove inefficient steps. Customizing the sales pipeline in this way ensures that it supports both strategic goals and operational realities, enhancing its effectiveness as a management tool.

What role does AI play in modern sales pipeline management, and what benefits does it offer to sales teams?

AI plays a pivotal role in modern sales pipeline management by streamlining and automating processes, providing actionable insights, and enhancing decision-making. AI technologies can analyze vast amounts of data quickly, identifying patterns and trends that might be missed by human analysis. This capability allows sales teams to understand buyer behaviors more comprehensively and predict future trends more accurately.

In terms of benefits, AI helps prioritize leads based on the probability of conversion, ensuring that sales teams focus their efforts on the most promising opportunities. It also assists in managing sales activities by automating routine tasks, such as data entry and follow-ups, freeing up sales representatives to devote more time to strategic efforts. Furthermore, AI can personalize buyer engagement by tailoring messages and recommendations, increasing the likelihood of a successful sale. Overall, AI enhances the effectiveness and efficiency of sales teams, leading to increased revenue and improved customer relationships.