Pipeline

What it means

A pipeline lists open deals arranged by the stages they pass through: first contact, qualification, proposal, negotiation, close. It shows not a single number but how future revenue is distributed over time.

Each deal carries a value, an expected close date and a probability by stage. The weighted sum of those is the simplest revenue forecast a company can have.

A pipeline holds only deals not yet closed. Signed orders waiting to be delivered and invoiced are already a backlog: they belong in capacity planning and the budget, not among probabilities. Mix the two and the company treats certain work as a risk and uncertain work as done.

How it works in practice

It lives in the CRM and its usefulness depends on discipline: a deal with no next step and no date is a wish. Stages are defined by what the customer did, not by how the salesperson feels.

Three things are read from it: whether there is enough opportunity to hit the plan, where deals stall, and how long the average cycle runs. The first relates to leads, the second to conversion.

For a small IT company weighing up another developer hire, we combine the weighted pipeline with invoice payment terms into a cash flow plan. A deal closed in March and paid two months after delivery helps with payroll only in the summer, which is a different answer from the bare total in the CRM.

What to watch out for

An inflated pipeline full of deals older than the average cycle is worse than an empty one - it manufactures false calm. So it needs regular cleaning and a clear rule for when a deal is closed as lost.

When one salesperson enters amounts with VAT, another without, a third the annual contract value and a fourth the monthly one, the pipeline total says nothing. A rule for currency, VAT and the period a value covers has to be set before any KPI or bonus is calculated from it.