By Tibor Shanto

Many people use these terms interchangeably when there are real differences between the two, mixing them up has specific impact on your sales and selling.

Pipeline speaks to all the opportunities you are currently, or have definitive plans to be engaged with. This often needs to be separated into an active pipeline, and a leads funnel.

A leads funnel is where you manage and nurture your leads, either new leads that are not at the point of being ready to be engaged by sales; or those prospects that did not go through to close but show potential of re-engagement.

The "active" pipeline reflects those opportunities that are moving through the sales process in a timely and predictable manner. All too many sales professionals don't create this separation and put everything into one pool they call the "pipeline". You can see the serious issues that arise if you use this common pool as a basis for forecasting. Forecasting based on active prospects can be difficult enough, but when you add leads (of all level of qualification), it is a recipe for disaster.

There are a number of reasons people are reluctant to break their sales into three groups. First it requires the development of clear definitions. What is ready to be forecasted, what is a (active) prospect, what is a lead? In our world we define active opportunities as prospects, anything else is either a lead or a client. As a result, by calling someone "prospect", we know that it is active, progressing through the cycle in a timely way while conforming to specific attributes, and that there is a clear next step that both the rep and the prospect are aware of and is designed to move the sale forward. Anything else is a "lead" and is relegated to the "leads funnel".

This still leaves us with the question of how much of your pipeline can or should be forecasted. Forecasts by nature are short term, visibility with certainty declining the further out the time frame is. As a result the longer your sales cycle, the less precise it is to accurately predict or assess which opportunities may go through to close. So assuming you have a sales cycle longer than 60 days, the value of a forecast longer than 30 days becomes questionable, even while the same opportunity is active and viable from a pipeline perspective.

While I understand the desire to have quarterly forecasts, anything more than a month out is there for decoration and ego rather than any practical utility. Just look at the experience of those companies that use the 90 - 60 - 30 day approach (or variations like 180-90-30); look at two specifics. First, how many times have members of your team committed to a prospect to the 30 day category before it actually closes. Usually it is at least three times. It shows up, then slips for any number of reasons. "But it is there now boss", you hear the second time through, and then it stalls for some other reason, before it actually does close in 30 days of the last time in.

While we can talk about the reps role in this, the reality is that reps are encouraged to play this game to satisfy the needs of their manager. The other is that the closing ratios are all thrown out of whack because reps are trying to please unrealistic expectations set by their organizations. One company I know has the following expectations: 20 X your goal in the 90-day pool; 10 X your goal with the 60-day pool; 5 X goal in the 30-day pool, (in some cases the managers don't even define if the multiple should be based on annual or quarterly goal).

Never mind that these should be presented as guidelines, and expectations should be based on actual conversion ratios, they are just an invitation for a disastrous forecast. The rep is trying to please the manager by having a whole bunch of names and numbers to cover the 5 to 1 "spread". Therefore, if you know that half of the names are there for decoration, and you have a closing ratio of 1 in 5, your forecasts will always be off.

The most effective way to navigate this is to focus on executing the sales in your pipeline, including having a clear understanding of how long something should be in the pipe before it should either close, be deemed dead or put back into the leads funnel. This will ensure that those within 30 days of your average close can be forecast with a degree of certainty; those over 30 days with much less certainty, over that 30 day mark, they are at best an indicator.

What you will find is that when you first adopt the discipline of forecasting based on actual sale cycle points, rather than an arbitrary 90-60-30, your forecast will come up short, not because it is not accurate, on the contrary it is, but because you have less things in your pipeline. Realizing this and working on filling the pipe with real opportunities will increase accuracy and reduce stress and workload. The discipline comes in how you decide to fix this. Some will work hard to bring in more real active opportunities; others will work on their selling skills and improving their closing ratio to make up for the short fall. Unfortunately, most will just add some more names to the short end of the pipe increasing the numbers, improving the optics around the ratio, and in the process throwing the forecast further out of whack.

What's in Your Pipeline?

Tibor Shanto, Principal with Renbor Sales Solutions Inc., and author voted #1 by readers for top article of 2009 by Top 10 Sales Articles. Renbor has helped dozens of organization with sales execution - - from filling their pipeline with real prospects - - to driving real revenue. You can read Tibor's blog The Pipeline at www.sellbetter.ca/blog.

For more information on helping your team sell better, write to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , or call 416 671-3555. You can also follow Renbor on Twitter http://twitter.com/renbor.