The Importance of Choosing Pipeline Management Over Forecasting Explained

Key Takeaways

• Pipeline management and sales forecasting are often confused – they’re closely related, but not the same.
• Sales pipeline management is about changing today’s activities, whereas forecasting focuses on predicting future results.
• Accurate pipeline management can help drive both short-term and long-term forecasting.

Sales pipeline management and forecasting are two terms that are commonly thrown around interchangeably in a sales force. They are significant to any business, and most companies invest big in the latest tools and technologies to manage these two activities. 

However, pipeline management outshines forecasting when it comes to business growth.

Before we find out the top reasons why organisations should focus on pipeline management, not the forecast, let’s discuss the difference between them.

Pipeline Management vs Forecasting: The Difference

Sales pipeline management is tracking and managing incoming sales leads across the different stages of the leads’ journey until the deal is closed.

Forecasting, on the other hand, is the act of predicting future business activity/outcome. It is based upon specific assumptions, such as a defined sales strategy or targeted prospects.

The Importance of Focusing on Pipeline Management

Your sales team has the potential to double the current revenue they are currently generating. 

All you need to do is ask your sales managers to hold an additional meeting focused on pipeline management along with their regular data scrubbing meetings. This helps the sales team members evaluate the leads in their pipeline, retain the good deals, and release the bad ones.

Here are the top 5 reasons why it is important to focus on pipeline management and not forecasting:

1. Enables You to Know Your True Opportunities

Pipeline management encourages better conversations between your sales manager and sales reps. 

Your sales force can go through the pipeline and understand what opportunities came in new, what left the process, and what opportunities are where in the process stages. This will enable your team to better understand the sales reps’ activities and ensure the right actions are performed to close deals.

Related Read: Manage Your Sales Pipeline Efficiently with These 4 Must Have Tools

2. Calculate Metrics Easily

It is easy to calculate metrics such as sales closing ratio, cycle length, etc. if you have an effective sales pipeline which is being tracked and managed with a defined set of steps. 

The data thus collected will help your organisation understand the current quarter’s closures and foresee future quarters, helping you make better business decisions.

3. Build an Accurate Forecast

With pipeline management, you can easily and accurately forecast the lead conversion probabilities based on current and past data.  

Pipeline forecasting is a comprehensive approach to revenue forecasting that considers every factor of each potential deal. Sales pipeline forecasting calculates a deal’s probability, based do how long it has been in the sales pipeline compared to an average sales cycle. 

Not only does this help predict future sales, but also helps improve pricing, marketing strategies, and product development.

4. Nurture Leads

Using information gathered from a sales pipeline, it is considerably simpler to guide potential clients through the various stages of closing a deal. 

A sales representative has greater freedom to create more tailored interactions with leads based on their requirements, wants, and interests when they have information about them. The added bonus of this is that sales representatives can establish rapport more easily.

5. Provides Marketing Direction

Most organisations are implementing automation processes to keep their contacts warm until they become active leads and to keep existing customers engaged by providing customer success and upsell opportunities – this will help the sales teams actively work the prospects in the pipeline. 

A well-defined recession-proof sales growth strategy with a clear pipeline management system helps define the requirements and provides direction for marketing and relationship management automation.

Wrapping Up

Managing a pipeline is not as difficult as you imagine. 

It can be a cost-effective and profitable business strategy. Some businesses rely on a healthy pipeline to succeed, expand their revenue and attract more customers.

Therefore, follow these best practices to build a robust sales pipeline and ensure it is in the finest shape if you want your company to triumph when it comes to outselling rivals in the sales game.