What is a sales pipeline (and how is it different from a funnel or a forecast)?

What is a sales pipeline?

Our definition: a sales pipeline is every open deal, one row each, with its stage, its value and its expected close date.

Vendors describe it the same way, in slightly different words. Salesforce calls it "a visual representation of where each prospect is in the sales process." HubSpot calls it "a visual snapshot of where your deals are in the sales process." Both are describing the board you see in a CRM: columns are stages, cards are deals.

Notice what a pipeline holds. Deals, not people. Money, not just counts. And only things that are still open. Won and lost deals leave the pipeline.

What is the difference between a pipeline stage and a deal?

A deal (many CRMs also say opportunity) is one potential sale to one buyer, with a value. A stage is a step in your process where a deal can sit. Many deals share a stage. A deal sits in one stage at a time.

Our rule for stages: define each one by something the buyer did, not something you did. HubSpot's guide makes the same point: if you can't point to a buyer action, it isn't a stage, and each stage needs an objective exit criterion, such as discovery completed with the decision maker. "Sent proposal" is a seller action. "Buyer reviewed the proposal and named a signer" is a buyer action.

A workable five-stage set for a small B2B team (ours, adapt it):

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What is pipeline value?

Pipeline value is the sum of the dollar values of your open deals. That is the unweighted (or raw) total.

Weighted pipeline value multiplies each deal by a probability and adds the results. Pipedrive's help center gives the formula: total value x deal probability / 100 = weighted value. In Pipedrive, a deal's probability is the likelihood that the deal is marked won, and weighted values feed its forecast view.

The two numbers answer different questions. The Pedowitz Group, a revenue marketing firm, says raw deal value is useful for capacity and coverage, while weighted value converts the pipeline into expected revenue. Raw is the right number for planning how much you need; weighted is the better starting point for guessing what you'll get. Neither is a promise.

What does a worked pipeline look like?

Our example, invented numbers. A small team has eight open deals. The stage probabilities below are made up to show the arithmetic. They are not benchmarks, and yours should come from your own closed deals.

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The arithmetic: $40,000 + $25,000 + $36,000 + $30,000 = $131,000 of pipeline value. Weighted: $40,000 x 0.10 = $4,000; $25,000 x 0.25 = $6,250; $36,000 x 0.50 = $18,000; $30,000 x 0.75 = $22,500; total $50,750.

Now compare to a target. Say you still need $60,000 this quarter.

• Coverage on raw value: $131,000 / $60,000 = about 2.2x.
• Weighted value vs target: $50,750 / $60,000 = about 85%, which is $9,250 short.

That's the trap. The raw total is more than double the target, so it feels safe. Weighted, it says you're short. Neither reading is the truth; the point is that the raw total hides how much of the money sits in early stages.

What is pipeline coverage?

Coverage is pipeline value divided by the target it has to produce. Salesforce's pipeline page lists coverage as a check on whether the total value or number of deals in your pipeline is enough to meet your revenue goals. In our example it was 2.2x.

Whether 2.2x is enough depends on how often your deals win. The formula, with a worked table, is on our pipeline coverage ratio page. To measure how often you win, see what a good B2B win rate is.

How is a pipeline different from a funnel?

A funnel counts people through stages over time. A pipeline lists deals now.

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Our example, invented numbers. In one quarter, 200 contacts were reached, 40 booked a meeting, 16 became opportunities and 4 were won. That's a funnel: 200, then 40, then 16, then 4. Each step is a rate (40 / 200 = 20%, 16 / 40 = 40%, 4 / 16 = 25%). It tells you where the leak is. It does not tell you which deals to call tomorrow. The pipeline does.

Vendors split the two by viewpoint. Salesforce says the pipeline is the seller's perspective and the funnel is the buyer's perspective. HubSpot's guide cites sales trainer Jeff Hoffman, who compares a pipeline to a wide-mouthed cocktail glass rather than an even funnel: many prospects enter, most drop out at qualification, and most of those who get past it should become customers. Our test: if you're counting people over a period, it's a funnel. If you're listing open deals with dollars, it's a pipeline.

How is a pipeline different from a forecast?

A forecast is a prediction of the revenue that will close in a set period. HubSpot defines a sales forecast as "a prediction of what sales will be for a set time in the future," and notes that most lightweight forecasting methods rely on knowing how many opportunities are in the pipeline and how likely each is to close.

So the pipeline is today's inventory, and the forecast is a call about the future. In our example, the pipeline is $131,000 and the weighted total is $50,750, but the forecast is whatever you decide to commit to, such as "we'll close between $35,000 and $55,000 this quarter." That call should also reflect close dates (a deal that can't sign this quarter doesn't help), your history and your judgment.

Two warnings. First, weighted value is not a forecast, it's an input. If the weights come from a tool's defaults or a hunch, the decimals are fake precision. Fix that by pulling your own won-and-lost history by stage. Second, a forecast is only as good as the data under it. Wrong stages and wrong values in the pipeline flow straight into the forecast.

To sort deals by how sure you are of them, see commit, best case and pipeline. To see how fast a pipeline turns into revenue, use the sales velocity formula.

How do you build a pipeline that stays honest?

1. Write stage exit criteria that a buyer has to meet. If a deal can't show it, it doesn't move.
2. Put a value and a close date on every deal. No value, no pipeline.
3. Clean it weekly. Close out deals that have had no buyer reply for a long stretch you define. Stale deals inflate coverage.
4. Fill it on purpose. If you're short, work backward from opportunities. Plug your sending volume into the Pipe Playbook calculator, which estimates sends, replies and meetings; the share of meetings that turn into deals is yours to measure. See also how many meetings it takes to close one deal.

Any CRM that shows deals by stage with values does the job, and a spreadsheet works at small scale. Our comparison is on the best CRM for founder-led sales.