The sales pipeline is a ledger of all of the prospective sales opportunities of the firm. The combination of the sales pipeline and revenue backlog allows the firm to forecast the future demand for its services. That forecast enables a reasonable prediction of near-term billable utilization, billable hours, and revenue. The forecast is instrumental in proactively managing the delicate balance between supply and demand in a professional services firm. Thus, the pipeline is crucially important since the revenue forecast is predicated upon it.

So, what are the components of a sales pipeline? With modern Customer Relationship Management (CRM) systems, companies can capture virtually any information related to their sales opportunities. But there are common data elements that every professional services firm should capture. These are summarized below:

• Opportunity Name – A short description of the opportunity.
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• Prospect Name – The name of the client.
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• Opportunity Summary – A brief overview of the potential project and client needs.
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• Stage – Many companies associate a stage with the probability of the deal closing. For example, a stage of “Qualifying Opportunity” might have a 5% probability to close while a stage of “Negotiating Contract” might have a 90% probability to close.
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• Probability – The likelihood that the opportunity will be won, expressed as a percentage. As mentioned above, some firms set this automatically based on the opportunity stage. This is usually done to create a more objective pipeline. But basing the probability solely on stage can also reduce accuracy.
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• Size ($) – The dollar amount of the opportunity.
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• Estimated Hours – A rough estimate of the number of hours that it will take to deliver the project.
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• Source – The origination of the opportunity. Tracking the lead source can help identify the most effective marketing tactics or lead generation personnel.
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• Type – The type of project. If a firm delivers several types of projects that require different skills, it is important to identify the project type for resource forecasting purposes.
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• Expected Close Date – When the deal is expected to be closed/won.
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• Expected Start Date – When the project is expected to start. Sometimes this will be immediately upon contract signature, but usually it will be some number of weeks later.
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• Duration – The number of weeks that the project is expected to take. The duration helps the resource planners understand how the volume of hours will be delivered. Will the project require 10 people for four weeks or four people for 10 weeks?
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While you can track many additional fields, the ones above are the most important.

The Gross and Weighted Pipeline

No two pipelines are created equally. Pipelines with the same total revenue potential can ultimately yield wildly different dollar amounts. This happens because there can be a significant difference between the dollar value of the “gross pipeline” and that of the “weighted pipeline”.

The gross pipeline is simply the sum of the deal size associated with each opportunity in the pipeline. If there are 10 opportunities in the pipeline that each have a $20,000 deal value, then the gross pipeline is $200,000. But the gross pipeline figure isn’t very helpful in determining how much billable work is likely to be generated. To understand that, we need to look at the weighted pipeline.

The weighted pipeline factors in each opportunity’s probability to close. For example, if a $100,000 opportunity has a 5% probability to close, that opportunity only counts $5,000 to the weighted pipeline. The weighted pipeline gives you a much better indication of the likely revenue that will be generated. A $10M gross pipeline with high quality opportunities could easily produce more revenue than a $50M gross pipeline full of unlikely deals.

Pipeline Management

One of the more important functions in a sales organization is pipeline management. A senior leader in the firm should be responsible for continually validating the accuracy of the data in the pipeline. This requires daily attention in order to maintain a valid pipeline and revenue forecast. At a minimum, sales personnel should update their pipeline opportunities on a weekly basis to adjust key fields or to provide commentary on recent activity. When a pipeline becomes stale, it grows increasingly inaccurate and eventually becomes harmful to the management of the firm.

In addition to keeping opportunities up to date, it is important to focus the firm’s energy on closing the high-probability opportunities. While there may not be a lot that the firm can do to accelerate a 10% probable deal, there are ways to get a 90% probable deal over the finish line. The sales and delivery leaders of the firm should meet weekly to review each high-probability opportunity. The goal of this meeting is to ensure that every effort is being made to win these deals. Possibly, there are incentives that could be extended or your CEO could call the sponsor to express your firm’s commitment to the client. The key is to apply maximum senior-level energy to the deals that have the potential to close soon.