Sales pipeline: how to manage it and which KPIs to use

What a sales pipeline is

Every opportunity has a customer, an estimated value, an expected close date and a stage, which says how much road is left. The pipeline is the sum of the open ones, split by stage. It is not the same as a list of quotes: a quote sent is one stage of the pipeline, and a healthy pipeline starts much earlier, with qualified contacts, and ends after the order.

A pipeline is worth as much as the order that comes out of it. The CRM knows what is in negotiation; the ERP knows what has been ordered and invoiced. As long as the two do not talk, the CRM's won value and the ERP's revenue diverge, and the sales meeting starts from two different extracts. That is why the section on CRM and ERP matters more than the formulas.

The typical B2B stages

Stages depend on how you sell, but they need a rule to enter and a rule to leave, or they depend on the salesperson's mood. A common sequence for a B2B sale is the following; the probabilities are an example starting point and should be replaced with those measured on your own history.

Two rules keep the pipeline clean: every opportunity has an expected close date that is kept up to date, and an opportunity stuck in the same stage beyond the normal time for that stage is reviewed or closed as lost. A pipeline full of dead deals makes everything look healthy.

Sales KPIs with formulas

The indicators below use a single example, whose numbers we give once: in a quarter 60 opportunities were closed, 18 won and 42 lost; the 18 won are worth 540,000 € in all and took 1,620 days in total from creation to close. They are example data, not a customer's.

The win rate changes enormously with the definition of «opportunity»: if generic contacts are counted too, it falls; if only quotes sent are counted, it rises. It must be set once and always used, like the planned stops in OEE. A second risk is calculating the sales cycle on won deals only: it is right for the time it takes to sell, but it hides the deals that drag on and then are lost.

Weighted value and close forecast

The weighted value multiplies each opportunity's value by the probability of its stage and adds up the results. It is the pipeline's expected value: the average of what would be collected if the probabilities were exact and the deals repeated over many quarters.

How to read it: the pipeline is plentiful (over three times the target) but the expected value is just below it, at 93%. A coverage of 3× or more is often quoted as a rule of thumb for long cycles, but the right number is the one that comes out of your own history: divide a past quarter's target by the pipeline open at its start, and you have your historical coverage.

The weighted value is an expected value, not a forecast for a single quarter. With a few large deals the real result is far from the average: if there were only one 100,000 € deal in negotiation, that stage is worth 100,000 € or zero, never 50,000. That is why the largest individual deals should always be shown next to the weighted value.

To work with your own numbers, the calculator starts from the example above.

Joining CRM and ERP: real orders, not just quotes

The CRM says an opportunity is «won» when the salesperson closes it. The ERP says whether an order has arrived, for what amount, with what discounts, and whether it has been delivered and invoiced. Putting them together allows three checks that the CRM alone does not make:

• Won without an order: opportunities closed won for which there is no order in the ERP. They are usually early closes to make the month, and they inflate the win rate.
• Orders without an opportunity: customers who order without going through the pipeline are the recurring part of revenue, and the pipeline ignores them.
• Amount sold against amount ordered: the difference between the CRM value and the real order measures the discounts granted at closing. If the won deals are worth 540,000 € and the orders recorded for the same customers 522,000 €, the gap is 18,000 €, 3.3%.

The real work is the key that ties the two worlds together, usually the customer code: it must be present in the CRM, otherwise the join is done on company name and goes wrong. With Muvia Salesforce, HubSpot and Dynamics 365 come in through their connectors, and orders and invoices are copied incrementally from the ERP database; each source becomes a table and the tables are joined in a query. The use case on sales and the sales pipeline describes the complete path, up to the alarm on the customer who orders less.

A pipeline does not end with the order: it ends with the payment. How long new customers take to pay is measured with DSO, and where receivables get stuck with aging.

Example weekly report

A single page, the same every Monday, read in five minutes. With the example's numbers:

• Open pipeline: 490,000 €, of which 139,500 € weighted, against a target still to reach of 150,000 € (coverage 3.27×, weighted 93%).
• What changed: opportunities entering and leaving each stage, and the value moved forward or back during the week.
• Closed this week: won and lost, with the reason for loss (price, timing, competitor, no decision).
• Stuck for too long: opportunities in the same stage for longer than the normal time, with the salesperson responsible.
• From CRM to ERP: won in the period and the matching orders (540,000 € against 522,000 €).
• Customers ordering less: the list of long-standing customers whose orders are falling, because the costliest risk is not in the pipeline.

Muvia's scheduled PDF reports bring the page to the sales management's inbox every Monday morning, already calculated, without anyone preparing it. The definitions (what an opportunity is, when a stage is overdue) are yours and should be written on the page itself.