Pipeline Management vs Forecasting: Investigate the Differences

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Pipeline Management vs Forecasting: Investigate the Differences

Most businesses rely on two primary tools to monitor the sales team productivity: pipeline management and forecasting. The highly efficient sales manager should know the difference between the two.

Pipeline Management vs. Forecasting: What are the Distinct Impacts?

If you are asking about the likelihood and timing of the sale, you are forecasting. When investigating the health of the pipeline and discuss how to close more deals, you are managing the pipeline. The pipeline and forecast are almost always intertwined; it is crucial to distinguish them and know the purpose in your sales process.

Pipeline Management: Definition of Business Integrity

Technically, pipeline refers to each opportunity a sales rep might be working. The approach is a core of sales process and consists of the possibilities at all phases of the sales cycle. It describes the individual steps the salesperson takes at early stage introducing the organization, discussing the product or service, conducting the presentation to making the proposal. The pipeline management shows how the rep handles the relationships with the clients during their sales journeys.

The sales pipeline consists of some stages that depend on the length of the sales cycle. You can have over 7 steps to walk the prospect from the start to closing, but it might be time-consuming. An average business may limit the process to 5 steps:

  • Initial contact
  • Qualification
  • Meeting
  • Proposal
  • Close

Note: every sales step obtain a different weighted value within the sales cycle. This probability of closure describes the likelihood of winning that prospect as a paying one.

Sales Forecasting: Prediction of Winning Deals

The cornerstone of the successful business is the prediction and measurement of the market demand. A sales forecasting is an estimation of the future sales that an organization is planning to attain for a period of time. An accurate sales forecasting helps you indicate the probable volume of sales and make the informed business decisions. You may quickly adjust the supply and demand for the product and eliminate the possibility of undertaking or overstocking. Furthermore, this measuring rod helps identify the efficiency of the sales managers’ performance. Discover 3 types of the sales forecasting:

# 1 Short-run or operating forecast is covering a maximum of one year. It may also be half-yearly, quarterly, monthly and even weekly. This type provides working capital and establishes the sales quotas and fast moving factors. Besides, it facilitates the management to improve the policies of marketing activities, inventory or purchasing.

# 2 Medium-run forecast can make the estimation from more than 1 to 2 or 4 years. It helps predict the future profit and control over budgets, expenditure, etc.

# 3 Long-run forecast can build the prediction from 1 to 5 years depending on the nature of the company. This type pays attention to the population changes, economic boom, innovations, etc. It is a great choice for adding the new products and dropping the old ones.

Pipeline Management vs. Forecasting: Guard Against Confusion

The lack of understanding the differences between two approaches can lead to insufficiency of your sales reps to develop the deals further back in the pipeline. In case the issue keeps growing, your sales team will spend time on the forecasted deals and neglect the opportunities in the pipeline. Accordingly, this brings up another problem: a decline in sales that reach the “forecasted” status in the following quarter.  

Fortunately, the situation has a solution; you can manage the pipeline in a practical way:

  • Take advantage of the cadence approach; it is based on the length of sales cycle mapped against a defined sales cycle. To be more specific, you should monitor the opportunity progress and identify the time spent for closing a deal. Managing the forward pipeline with cadence approach makes it easier for you to provide the effective coaching.

  • Implement CRM system to keep track of what’s going on in your pipeline. CRM platforms enable you with clear visibility of the sales cycle: follow the prospects through every stage. You can not only gather and report the information but also collect and keep the data to analyze. Some companies feel the lack of the functionality options and forecasting possibilities; they tend to migrate to more advanced solutions. If the thought of transition crosses your mind, take advantage of the automated migration process Trujay.

Sales is a challenging and lasting process. Clearly, understanding of the distinction between the pipeline management and forecasting is one of key aspects of the successful business performance.

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